Policy on import of jet fuel silent on logistics: Experts

February 7th, 2012 - 7:59 pm ICT by IANS  

Pranab Mukherjee New Delhi, Feb 7 (IANS) Airlines welcomed the decision of a ministerial panel to allow direct import of fuel, but aviation experts said several questions remained unanswered, particularly on logistics, as airports don’t have private fuel storage facilities.

“The news is very positive for the airline industry. But we have to see how the airlines will import the fuel. Do they have the cash to do so,” said Sharan Lillaney, aviation analyst at Angel Broking, reacting to the decision Tuesday.

“There are other questions as well: Where will they store the fuel? Will they use the infrastructure of oil marketing companies? Will oil companies allow that? So, there needs to be clarity on these things first,” Lillaney told IANS.

A group of ministers headed by Finance Minister Pranab Mukherjee Tuesday decided to move the cabinet with a proposal to allow airlines to directly import aviation turbine fuel to help them save on taxes and thereby cut their operational costs.

Several airlines have been facing one of the toughest times and wanted the government to help them out by permitting direct import of jet fuel that was now accounting for close to 50 percent of their operational costs.

“We have applied officially to the commerce ministry for direct import of fuel. If we import fuel directly for our own use we become an actual user. Therefore, we won’t have to pay sales tax and other levies,” Kingfisher Airlines chairman Vijay Mallya had said.

According to Amber Dubey, director aviation at global consultancy firm KPMG, airline companies may initially need to depend on oil marketing companies for infrastructure and expertise, since the business of jet fuels is a complex one.

“Plus, an airline cannot get into trading business and sell the same to other airlines. We are likely to see new models of collaboration between airlines, oil companies and providers of logistical service providers in the near future,” Dubey told IANS.

At some airports like in Mumbai, there is no scope for private firms, or airlines, to set up additional facilities to store and vend jet fuel due to space constraints. But land is available in some others like in Hyderabad and Delhi, experts said.

At present, the government’s foreign trade policy holds jet fuel as a restricted item for private import, which can only be brought in through authorised companies. It was also not clear if domestic oil retailers can sell jet fuel at international rates.

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