As the government mulls allowing Kingfisher Airlines to import jet fuel or aviation fuel (ATF) directly, three state-owned oil companies led by Indian Oil (IOC), Hindustan Petroleum (HPCL) and Bharat Petroleum have unanimously opposed the move. The companies have said that the move would put “public funds at loss” besides being “bad economics” for the beleaguered airline due to high taxes and handling costs.
The country’s largest oil marketing and refining firm IOC told the petroleum ministry that given the surplus of jet fuel, allowing direct import of this fuel by Kingfisher was not advisable.
“The concern is that the country today is surplus in ATF — and would continue to be so in short, medium and long-term basis — so any relaxation in the policy would be detrimental to the interest of PSU oil companies,” IOC told the ministry.
Further, according to IOC, there is no tariff protection in the form of customs duty differential vis-a-vis crude oil for the domestic refining industry. “This in itself is a relief to the airline industry,” the oil major said.
HPCL has also stated that allowing direct import of ATF will destroy the self-sufficiency in refining capacity which India has achieved by investing huge public funds into the sector.
“A closer look at the way the legal system governs the import would tell that it is bad economics for Kingfisher to import ATF,” HPCL said while commenting on Kingfisher Airlines belief that by importing ATF directly, it will not have to pay high sales tax.
Airlines would have to pay 12.8% duty on the imported ATF (additional customs duty or CVD of 8.2% plus a 3% education cess on top of it and an additional 4% special CVD).
Kingfisher currently pays only 8.2% excise duty on jet fuel purchases made from oil firms.
Kingfisher did not respond to email and text message from HT.