Oil firms increase jet fuel price by 3.70 percent

November 30th, 2011 - 11:09 pm ICT by IANS  

New Delhi, Nov 30 (IANS) State-owned oil marketing companies (OMCs) Wednesday increased the prices of aviation turbine fuel (ATF) by 3.70 percent, effective from Dec 1.

The ATF at Delhi’s IGI airport goes up by 3.70 percent at Rs.64,622.34 per kilo litre from 62,310.33 per kilo litre.

This is the second such increase in November. The OMCs had increased jet fuel prices by 1.95 percent on Nov 15.

The latest hike is expected to further burden the industry, which has seen many airlines reporting losses owing to the high cost of jet fuel.

The ATF cost accounts for nearly 50 percent of the operating cost of any airline. Jet fuel prices also vary from state to state which levy sales tax on the ATF in the region of 22 to 35 percent.

The OMCs revise ATF prices on every 1st and 16th of the month based on the average international crude oil price during the fortnight.

The rise came even as Civil Aviation Minister Vayalar Ravi Wednesday informed parliament that the cash-strapped Indian airline sector is being troubled by rising air turbine fuel (ATF) prices caused by high sales tax and other levies.

“Various taxes imposed by government on ATF is one of the reasons of higher cost of domestic aviation fuel.”

Jet fuel prices have increased by 30 percent since December 2010, and domestic airlines are expected to lose Rs.3,500 crore in the first six months of this fiscal. The fuel comprises 50 percent of the operating cost.

On average, sales tax on jet fuel is in the range of 22 percent to 35 percent depending on various states.

Vijay Mallya, chairman of the cash-strapped Kingfisher Airlines, had said they were planning to directly import jet fuel to cut costs.

“We have applied officially to the ministry of commerce for direct import of fuel, and if we import fuel directly for our own use we become an actual user, and therefore, we don’t pay sales tax,” Mallya had told a press conference in Mumbai.

Owing to high jet fuel and interest costs, three major airlines — Kingfisher, Jet and SpiceJet — have reported heavy second quarter losses.

Kingfisher Airlines alone reported a net loss of Rs.468.66 crore, owing to higher fuel costs and low yields.

The company’s net loss stood at Rs.230.81 crore in the corresponding period of the last fiscal.

Jet Airways reported a net loss of Rs.713.60 crore in the second quarter from a net profit of Rs 12.40 crore in the same period of the previous fiscal.

Even budget airline SpiceJet lost Rs.240 crore in the quarter under review. It had a net profit of Rs.10 crore last year.

Flag carrier Air India and its subsidiaries owe Rs.1,563.67 crore to Indian Oil Corp, followed by Rs.409.82 crore to Bharat Petroleum Corp and Rs.337.16 crore to Hindustan Petroleum Corp.

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