New Delhi: The price of kerosene for domestic use is controlled under the Administered Pricing Mechanism (APM) with a large subsidy. The subsidies are paid for, in part, by artificially hiking the price of aviation turbine fuel (ATF). ATF is precisely the same substance as kerosene – the only difference is that it is used to power jet engines rather than household kitchens.
So, the logic is, one set of users (the aviation industry) shoulders part of the burden for another set (households availing kerosene under the Public Distribution System).
An additional burden for the aviation industry is that there are central and state taxes imposed on ATF. Different states charge different rates of excise, leading to significant differences in price across states.
This can lead to absurdities where airlines deliberately keep seats vacant on certain sectors in order to save on fuel costs.
ATF costs are an important component of airline costs everywhere. In India, the fuel costs averages out at about 40 per cent of all operating costs. This is much higher than the global average of around 22-25 per cent. It is one reason why the entire Indian aviation sector is sick.
05/04/12 Devangshu Datta/Business Standard
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