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Govt may reduce prices for ATF: Patel

Lowering of aviation turbine fuel will give a relief of Rs 500 crore to Indian airline industry, reports Ranju Sarkar.

india Updated: Feb 04, 2007 20:31 IST

The government may reduce the base prices for aviation turbine fuel (ATF) or what is internationally called jet fuel, which could provide a relief of Rs 500 crore to the domestic airline industry in the next fiscal.

Civil Aviation Minister Praful Patel disclosed this in an exclusive chat with Hindustan Times reporters in Mumbai. Airlines say that oil companies are making a marketing margin of 14-15 per cent on ATF compared lower margins on other petroleum products.

This increases the base prices for ATF, which the government may reduce. Oil companies, however, were unaware of such a move. "Everyone wants a subsidy. We are losing Rs 11 per litre on Kerosene, Rs 153 on every LPG cylinder. We have already lost Rs 3,000 crore this year," said the CMD of an oil company.

A cut in marketing margins can reduce base prices of ATF. "If they cut their margin by 10 per cent, that could reduce ATF prices by Rs 3-4/litre, which could bring down monthly fuel bill by Rs 3-4 crore," said SpiceJet director Ajay Singh.

Patel also indicated that the government may reduce the customs duty on ATF in the coming budget, and the matter has been taken up with finance minister P Chidambaram. Differential sales tax in states is another area of concern.

“The government may also extend the exemption from withholding tax on aircraft leases; the matter has been taken up with the finance minister,” said Patel. The tax could increase aircraft rentals by 10-12 per cent, thus increasing airfares.

Patel also said that the government is reviewing the eligibility norm for domestic airlines to start flying overseas. "We have to review it as we have signed a huge number of bilaterals (frequency of airline services are governed by agreements between governments), which we have not been able to reciprocate," said Patel.

So, Vijay Mallya’s Kingfisher Airlines may not have to wait for long to fly to New York or Paris.

First Published: Feb 04, 2007 19:47 IST