Cash-strapped airlines got another breather when state-run oil companies cut jet fuel prices further. The airlines, however, remained non-committal on slashing their fares.
NEW DELHI: Cash-strapped airlines on Monday got another breather when state-run oil companies cut jet fuel prices further. The airlines, however, remained non-committal on slashing their fares.
State-run oil firms cut jet fuel prices today by up to Rs2,100 per kilolitre on top of the 17 per cent reduction announced last week. Jet fuel, or aviation turbine fuel (ATF), in Delhi, will cost Rs44,965.70 per kilolitre from Monday midnight, a 4 per cent cut over the present Rs47,017.93, an industry official said.
On November 1, the oil companies had cut ATF prices by 17 per cent, following which the government granted exemption of 5 per cent customs duty.
Airlines did not, however, say immediately if the overall reduction (Rs11,482.10 per kilolitre) in ATF prices in three days would result in a lowering of fares. A few airlines said they were “studying” the impact.
The airlines had reacted the same way when from November 1, Indian Oil, Bharat Petroleum, and Hindustan Petroleum cut their prices in Delhi by Rs9,429.87 to Rs47,017.93 per kilolitre. This was in line with the fall in international oil prices.
The decision to scrap customs duty to reduce the base price of ATF was one of the demands that leading private players Jet Airways and Kingfisher Airlines had put forward to overcome their financial woes. High fuel cost and the economic slowdown had cut deeply into their profitability, leading to defaults in the payment of fuel bills.
Aviation fuel in Mumbai, home to the nation’s busiest airport, will cost Rs46,518.85 as against Rs48,656.59 per kilolitre at present, the official said. The price cuts this month come in the wake of similar reductions on September 1 and October 1.
Cumulatively, prices are down close to 40 per cent from the peak reached in August. The price of ATF was first cut to Rs59,650.17 effective September 1, then to Rs56,447.80 from October 1, and Rs47,017.93 per kl from November 1.
The price of domestically produced fuel is based on import price parity factoring in the basic customs duty. This is calculated by taking the average international price of jet fuel during a fortnight and adding 5 per cent customs duty to arrive at the landed price. Over this an 8 per cent excise duty, local sales tax, or VAT too are levied.
The customs duty exemption resulted in lowering the base price of ATF and, consequently, the incidence of excise duty and VAT, giving substantial relief to the aviation sector.
Till now, the three companies fixed prices once a month, but from November they are expected to fix them fortnightly, on the 1st and 16th of every month. The next price revision is expected to take place on November 16, the official said.
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