Domestic carriers may get to import ATF

New Delhi: The Directorate General of Foreign Trade (DGFT) has sought a no-objection certificate from the petroleum ministry to permit domestic carriers to directly import aviation turbine fuel (ATF).
The move, which will help domestic carriers save 25 per cent on their fuel cost and probably get them in the black, comes after the Federation of Indian Airlines(FIA), the association of Indian carriers, approached the DGFT, which is a part of the Ministry of Commerce.
At present, domestic carriers buy ATF from domestic oil companies, whose rates are much higher than the international prices. Oil companies, which sell other petroleum products at subsidised rates, peg ATF rates higher to reduce their losses.
Airlines will also save on the high sales tax on ATF if they import the fuel directly for their own use.
Fuel at present accounts for around 45 per cent of an airline’s total operating cost. Airlines are estimated to make cumulative losses of Rs 8,000 crore during 2008-09. However, a sharp reduction in fuel costs will help them get back in the black if they keep their fares at the present levels. This, combined with an expected sharp fall in global ATF prices, could help the airlines get out of the severe financial strain much earlier than imagined.
If a domestic carrier imports fuel directly for its own use, it does not have to pay sales tax. The only tax it pays is 5 per cent import duty. The savings in tax are substantial. Sales tax on ATF varies from 20 per cent in Delhi to as high as 29 per cent in Chennai.
Experts said the Indian airlines, which currently pay around Rs 60,000 a kilolitre, would save up to Rs 9,500 per kilolitre if they imported ATF from abroad.
17/09/08 Business Standard

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Categories: Indian Aviation- In General Sep 2008, New Sep 2008