| In the wake of the unrelenting rise in aviation turbine fuel (ATF) prices, the government is planning to allow private sector airlines to enter into hedging arrangements overseas. |
| This will benefit Jet Airways, Air Sahara and Indian Airlines, which have international operations and earn foreign exchange as well. ATF accounts for up to 25 per cent of an airline's operating costs. |
| Carriers like Air Deccan and Kingfisher Airlines will gain nothing out of the move. |
| Jet, Air Sahara and Indian Airlines will be able to buy ATF in the international market from foreign oil companies at a pre-determined price, thus hedging the fluctuation in jet fuel prices in the domestic market. |
| "We are looking at allowing airlines to hedge ATF in the international market as part of a strategy to reduce the impact of the high jet fuel price in the domestic market. The ATF price in the domestic market is much higher than the international prices," Civil Aviation Minister Praful Patel said today at a function organised by the Federation of Indian Chambers of Commerce and Industry here. |
| Currently, private airlines are not permitted to enter into fuel hedging in overseas markets due to government regulations. But international airlines hedge 50 to 70 per cent of their fuel cost exposure. |
| In addition, the government is planing to consider ATF sold to international flights of Indian carriers as deemed exports under Section 5 of central sales tax. |
| The government is also planning to dismantle the monopoly of public sector oil companies on the supply of ATF in an attempt to rationalise the spiraling ATF prices in the domestic market. |
| This, according to Patel, will lead to a reduction in the jet fuel prices as a result of increased competition. Private oil companies like Reliance have shown interest in selling jet fuel to Indian carriers. |
| The civil aviation ministry also wants public sector oil companies to rationalise the ATF prices in step with international prices. |
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