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India most expensive place to tank up

ATF prices in India are about 70 per cent higher than neighbouring locations such as Bangkok and Singapore, reports Samiran Saha.

india Updated: Jun 25, 2008 20:37 IST
Samiran Saha
Samiran Saha
Hindustan Times

India may not be alone in fighting skyrocketing jet fuel prices, but it is among the most expensive places to tank up.

Aviation turbine fuel (ATF) prices in India are about 70 per cent higher than neighbouring locations such as Bangkok and Singapore.

ATF prices touched an all-time high of Rs 69,227 per kilolitre earlier this month, up from Rs 45,496 per kilolitre in January. prices range between Rs 32,000 and Rs 37,000 per kilolitre overseas.

Domestic airlines also find themselves on the wrong side of a pricing regime that forces them to pay many times more than international airlines while filling up in India.

Members of Association of European Airlines indicate their fuel bill constitutes 33 per cent of their total operating cost where as for Indian carriers, the fuel bill constitutes nearly 50 per cent of their operating cost.

The situation is so grave that as many as 24 airlines the world over have already gone belly-up in the past six months, unable to bear high jet fuel prices. “Domestic operators pay a 51 per cent higher price than what is paid by international carriers in India,” a recent report of research firm Frost & Sullivan said.

Matters have gone from bad to worse following the recent hike in ATF prices in the country. Siddhantha Sharma, Executive Chairman, SpiceJet said “Our break even has been pushed back by a year, by July we will reduce our flights to 100 per day from 117 now.”

Analysts said high crude oil prices alone are not be blamed for the steep rise in ATF prices. An arbitrary and differential tax regime across states has also added the price rise.

Oil companies levy a 16 to 49 per cent add-on towards marketing margins and contingencies in ATF prices.

“This add-on varies between various cities. On this, the central Government levies sales taxes ranging from 4 to 39 per
cent, which on an average work out 25 per cent countrywide,” the Frost & Sullivan report said.

The total government levies work out to an add-on of 35 per cent.

Airlines are now looking to cut corners to stay afloat. “We are taking a hard look at flight schedules with economic viability being a determining factor,” Air India spokesman Jitender Bhargava said.