A group of ministers (GoM) on Tuesday allowed individual airlines to import aviation turbine fuel (ATF). The Cabinet will take a final call on the issue later.
A green signal will help cash-strapped airlines save on taxes.
But oil companies and experts said that’s easier said than done.
“The sales tax that airlines save will be offset by extra cost accrued in transportation, terminalling and inventory,” said R K Singh, CMD of Bharat Petroleum Corporation.
“It will be difficult for airlines to carry imported fuel to remote destinations, too,” he said.
D Lilly, director - finance, Chennai Petroleum Corporation Ltd, said a lot of modalities have to be ironed out before airlines can actually start importing fuel.
“Where are the tankages available to store fuel at airports and what will be the mechanism to bring the fuel to the airline operator?,” she asked.
Vishwas Udgirkar, senior director, Deloitte India, said direct imports could help airlines save around 20% to 25% on fuel cost theoretically.
“Given that fuel cost on an average contributes more than 40% of the total operating cost, one could save 6% to 7% of the total cost of operations of an airline,” Udgirkar estimates.
The development, nevertheless, lifted the shares of the three listed airlines by 10-12%.
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