Cheaper ATF sees Hyderabad airport buzzing

By Vishwanath Pilla & Harsha Subramaniam/ CNBC-TV18

More than a hundred flights are queuing up daily at Hyderabad's new airport to refuel, thanks to lower sales tax on jet fuel.

If you want to cut costs, fly to Hyderabad. That' is the new mantra in the aviation industry because aviation turbine fuel or ATF is cheaper in Hyderabad's new airport compared to other Indian airports.

The sales tax on ATF ranges from 20 to 35% across various states while in Andhra Pradesh, it's just 4% making it an attractive point of refueling.

“The decision taken by government of AP to reduce sales tax from 33 to 4% is a huge advantage. The airlines are saving 10% of their fuel costs,” said A Viswanath, VP-Commercial, GMR.

An airline can save at least Rs 3.3 to Rs 3.8 lakh for an A-320 and Rs 80,000-90,000 for an ATR plane.

Another factor that has helped reduce ATF prices at Hyderabad is the newly introduced open-access system for fuel. This system allows oil companies to sell oil to any airline depending on the agreements they have entered.

“Because of the competitive environment, there is a pressure on the pricing at which they will be selling to airlines. We have understood there is a good reduction in pricing. Further, the entry of private players will further reduce the price,” added Viswanath.

The existing capacity of the fuel farm is 13,500 kilolitre and to fuel the increasing demand GMR plans to double the capacity. The pricing advantage has worked in Hyderabad's favour with airlines opting for overnight parking and having their flights originate from the city. Now, the only question that remains is whether airlines will pass on the cost-saving to the consumers.