Duty cut on aviation fuel, another blow to oil refiners

Mumbai: India's oil refiners say they could lose potential revenue of as much as Rs 1,000 crore over the next 12 months because of the government's decision to remove customs duty on aviation turbine fuel (ATF). This, coupled with accumulated losses from the high cost of crude oil imports until recently, could crimp their ability to invest in expansion, they say.
The Government has scrapped the 5-per cent import duty on ATF, announced a 90-day credit period for fuel purchases by airlines and a freeze on landing charges at airports. Though, Minister for Civil Aviation, Praful Patel, denied that the set of measures is a bailout for the loss-making airline industry, observers have called it a 'helping hand' at least.
"Oil companies are already bearing the cost of extended credits, softer repayment of dues for the airlines. Removing duty protection for the oil refiners is an additional charge," Spokesman of Indian Oil Corporation N Srikumar told Network18.
Since local prices are set on parity with tax-included import costs, the duty was bringing in 5 per cent additional revenue on ATF sold locally too. Its removal will now eat away that revenue.
The Government's help for the airlines coincides with the unprecedented challenges being faced by refiners. After absorbing losses through the crude price rally until July 2008, the companies have declared record losses of nearly Rs 13,000 crore for the fiscal second quarter to September.
06/11/08 Cuckoo Paul/Forbes-Network18/IBNLive.com

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Categories: Indian Aviation- In General Nov 2008