Welcoming the government notification allowing direct import of ATF, industry bodies CII and FICCI said the move would help the cash-strapped airlines to reduce costs
New Delhi: In a move aimed at helping the debt-laden airlines bring down their costs, the government on Wednesday formally allowed the local airlines to import jet fuel directly, reports PTI.
The airlines would be allowed to import aviation turbine fuel (ATF) under the so-called open-general license (OGL), enabling them to avoid sales taxes of between 12% and 23% that are levied by state governments.
“...Indian carriers who are interested to avail the opportunity to import ATF directly without going through state trading enterprises route may apply to the Directorate General of Foreign Trade (DGFT),” an official statement said.
Jet fuel in India exceeds the global average by more than 50% mostly due to local taxes. Some estimates suggest that direct imports could cut fuel costs by up to 20%, but also require new spending in terms of putting up storage and logistics infrastructure.
Carriers, led by Kingfisher Airlines, had demanded the right to direct import of fuel, which accounts for about half of their operating costs.
Airlines, almost all of which are losing money, currently buy ATF from local refiners like Indian Oil Corporation. Though jet fuel is priced at parity with international rates, the actual price for airlines is higher because of state sales tax.
Industry sources, however, said that importing the fuel will pose its own challenges like storages and logistics involved in moving the product from sea ports to consumptions points at airports.
The airlines would have to form tie-ups with the suppliers having infrastructure to import ATF directly for their use.
Sales tax on the fuel varies between 4% and 30% from state to state.
Welcoming the government notification allowing direct import of ATF, industry bodies CII and FICCI said the move would help the cash-strapped airlines to reduce costs.
“This decision would help airlines to reduce costs on account of ATF which constitutes around 45% of their operating costs,” CII director general Chandrajit Banerjee said in a statement.
“It would lead to huge saving on fuel cost which is almost 60% of the overall cost,” Ficci secretary general Rajiv Kumar said.
However, Mr Banerjee said transportation and storage infrastructure for supply of ATF would be a critical challenge for airlines.
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