Indian airline industry calls for rationalisation of jet fuel taxes

21 Mar 2022 CW Team

Domestic airlines in India have called for rationalisation of jet fuel taxes, in a move to combat the spike in fuel prices. High crude oil prices prompted Oil Marketing Companies (OMCs) to raise Aviation turbine fuel (ATF) prices to over Rs 1 lakh per kilolitre (kl).

The price of jet fuel in the national capital was increased by 18.32% to Rs 1,10,666.29 per kilolitre (kl) from Rs 93,530.66 per kl.

The price was increased to Rs 1,14,979.70, Rs 1,09,119.83, and Rs 1,14,133.73 per kl in the other metro cities of Kolkata, Mumbai, and Chennai, respectively.

The increase occurred as crude oil prices remained high due to the Russia-Ukraine crisis. Jet fuel prices are updated every two weeks by fuel retailers.

Due to the ongoing conflict in Europe, crude oil prices have risen to a seven-year high nearing $140 per barrel, according to Ronojoy Dutta, Whole-time Director and Chief Executive Officer of IndiGo.This has resulted in an ATF price increase of over 50% since January 2022, including the current increase of 18%.

Such measures, according to Dutta, are needed now more than ever to offset the cost increase and make flying viable for airlines as well as affordable for consumers.

Domestic ATF prices in India are derived from international fuel prices denominated in US dollars, making ATF prices susceptible to exchange rate fluctuations. Notably, the rupee has recently depreciated against the US dollar, which has resulted in price increases. Due to high levels of taxation, ATF prices are significantly higher than international benchmarks.

The industry has been pushing for the fuel type to be included in the goods and services tax (GST), similar to how Bunker Diesel, which is used in the shipping industry, has been.

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