Oil PSUs may lose jet fuel monopoly

Civil aviation ministry takes up issue with pmo

The civil aviation ministry wants to end the monopoly of public sector oil companies in the supply of aviation turbine fuel (ATF).

It has sought the nod of the Prime Minister's Office (PMO) for this move, aimed at checking the price spiral in the domestic market. It has also proposed a uniform 4 per cent sales tax across the states.

The ministry also wants public sector oil companies to rationalise ATF prices in line with international prices.

"There should be a standard pricing mechanism for ATF. Otherwise, it will give an undue price advantage to international airlines vis-a-vis Indian carriers," said a senior ministry official.

The civil aviation ministry's appeal comes at a time when domestic carriers have twice hiked air fares by 10 per cent each in less than three months.

The price of ATF in the country has touched an unprecedented level of Rs 30,800 a kilolitre in October up from Rs 26,000 a kilolitre in June. In comparison, international prices of ATF vary between Rs 13, 600 and 19,300 a kilolitre.

Domestic carriers have also pointed out that the unprecedented rise in crude oil prices globally and the consequential increase in the price of ATF have hit their bottom lines.

Jet Airways has recently seen its cost of operations go up by about R s 14 crore a month, while Air Sahara's has gone up by about Rs 8 crore a month in the last four months. Similarly, Indian Airlines had incurred an additional expense of Rs 224.34 crore in 2002-03.

Pointing out that the cost of ATF constitutes about 30 per cent of the operating cost of airlines in India compared with 10-15 per cent for international carriers, the official said a major reason for this was the high sales tax levied by some state governments. The ministry wants to categorise ATF as a declared good to cap the sales tax at 4 per cent for domestic airlines.

Airlines also pointed out that ATF sold to international flights of foreign carriers was exempt from sales tax, while it was levied on ATF sold to Indian carriers.