Govt mulls fuel rate cut after airlines toe line

New Delhi/Mumbai: In a quid pro quo of sorts, the government said it would consider a rationalization of jet fuel prices if the country’s airlines, bleeding under the cost of fuel and slowing passenger traffic, do not lay off employees.
Statements hinting that a cut in the cost of jet fuel or aviation turbine fuel (ATF) was in the offing, and that the oil companies would go slow on recovering dues from airlines for fuel sales were made by the civil aviation minister Praful Patel and petroleum and natural gas minister Murli Deora, and came a day after the country’s largest airline by passengers flown, Jet Airways (India) Ltd, reversed a decision to lay off 1,900 employees, a move that provoked outrage among the workers and evoked strong reactions from politicians, including the Union labour minister.
“I told him (Naresh Goyal, the chairman of Jet Airways) that until and unless you create an atmosphere for the government to consider your demand (of rationalizing ATF prices), we cannot be pushing it. A committee headed by the cabinet secretary (K.M. Chandrashekhar) is looking at it. Everybody has to understand that industry is in trouble,” Patel said.
Independently, Deora and a senior member of the parliamentary standing committee on transport, tourism and culture, who did not wish to be named, confirmed that a move was afoot to rationalize ATF prices.
“There is a chance of rationalizing ATF prices. It will be worked out between the ministries,” Deora said. Key Opposition parties said the move had their conditional support.
Sitaram Yechury, a member of the Communist Party of India (Marxist) said: “It (ATF price rationalization) should be neutral to all players. However, first the prices of diesel and petrol should be brought down, which should be followed by ATF price rationalization.”
India’s airlines, including Jet, are expected to end this year with aggregate losses of around $2 billion (Rs9,740 crore), up from last year’s losses of around $1 billion.
A paper released by consulting and research firm Deloitte, on 16 October at the Hyderabad Air Show, said rising fuel prices affect an airline’s profitability and have a cascading effect on the other support services. Government levies on ATF work out to around 35%, including an import duty (20%) and an excise duty (8%). Recommending a uniform tax, Deloitte said one option would be to reduce the excise duty to 4% and to undertake measures to remove the disparity in taxes levied by states.
Kingfisher Airlines Ltd is in talks with Reliance Industries Ltd and other state-run oil marketing firms to import ATF.
18/10/08 Liz Mathew, P.R. Sanjai and Utpal Bhaskar/Livemint

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Categories: Indian Aviation- In General Oct 2008