Big debts fuel airline burnout

Public sector oil firms have raised jet fuel prices with effect from Saturday, adding to a crippling blow the airline industry is facing from a differential tax structure, report Samiran Saha & Mahua Venkatesh.

Public sector oil firms have raised jet fuel prices with effect from Saturday, adding to a crippling blow the airline industry is facing from a differential tax structure that makes the fuel 60 per cent more expensive for local airlines than counterparts overseas.

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Prices have been raised by 1.4 to 1.66 per cent in the wake of rising oil prices worldwide.

The increase follows a sharp 5.7 per cent cut in jet fuel prices two weeks ago.

Indian Oil, Bharat Petroleum and Hindustan Petroleum have in the past two months raised ATF rates four times.

Compared to 16 July rates, aviation turbine fuel rates in Delhi were increased by Rs 585 per kilolitre to Rs 36,923 per kl, by Rs 622.38 in Mumbai at Rs 38,098 per kl, by Rs 625.52 in Chennai at Rs 40,789.34 per kl and by Rs 649.23 in Kolkota at Rs 45,060.05 per kl.

Sales taxes in India varies between various cities ranging from 4 to 39 per cent, with a countrywide average of 25 per cent. Other government levies work out to an add-on of 35 per cent.

The airline industry has been seeking a “declared goods status” for jet fuel that puts it in the essential commodities category on the lines of food grains.

That would bring the duty down to only four per cent.

Of the total operating cost of any airline, ATF comprises 35 to 46 per cent.

While members of the Association of European Airlines indicate that their fuel bill constitutes 13.3 per cent of their total operating cost, the fuel bill for Indian carriers accounts for nearly 50 per cent of operating costs.

India does not directly import ATF. Importing oil refiners add on marketing margins that push up ATF prices further.