GoM okays direct ATF import, Jet Air, KFA fly high

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GoM okays direct ATF import, Jet Air, KFA fly high

Shares of Jet Airways rose 8.15% to Rs 322 after the Empowered Group of Ministers okayed direct import of aviation turbine fuel, which contributed to nearly 40% of the operating cost to an airline. Though, the EGOM’s decision needs a cabinet nod

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Shares of Jet Airways rose 8.15% to Rs 322 after the  Group of Ministers (GoM) okayed direct import of aviation turbine fuel (ATF), which contributes around 40% to the overall operating cost to an airline.
Though the GoM's decision needs a cabinet nod, airlines are hopeful that their long term demand of importing jet fuel will be finally met by the government

Meanwhile, shares of Kingfisher Airlines also climbed 12% to Rs 29.20 post this announcement. SpiceJet too followed trend by rising 10% to Rs 26.90.

Airlines have been collectively lobbying with the government to allow them to import ATF directly, so that they can save on sales tax which varies between 4% to 33% across states in India. Due to this uneven tax regime prevalent in the country, airlines have seen their fuel cost go up atleast 30% year-on-year.

ATF on an average cost around Rs 62,000 a kilolitre in India and is atleast 60% higher then what global carriers pay in West Asia or even South East Asia.

Airlines have been lobbying with the government to either introduce a common sales tax regime of 4% across India or to allow them import fuel directly so that they bring ATF expense under control.

 Infact, two year ago, airlines even threatened to stop operations for a day just to mark their protest against the high tax regime.

But they had to revoke their decision following the government assuring them to come out with a solution on the issue. But, since various states collected crores of rupees by way of taxes on ATF, they did not agree to bring down their tax structure as it would mean lower cash inflow.

However, airlines did not give up and time and again have been petitioning to the government to sort out the issue as high fuel cost has been hurting their profitability. Infact, Jet and SpiceJet, both have held high fuel cost responsible for their December quarter losses.