Jet fuel price up 3.2%; burdens cash-strapped airlines

The price of aviation turbine fuel (ATF), or jet fuel, in Delhi was hiked by Rs 2,130.17 per kilolitre (kl), or 3.27%, to Rs 67,135.76 per kl, according to Indian Oil Corp , the nation's largest oil firm. The rate hike comes on back of a steep 4.5% increase in rates effected from August 1 and has wiped off all of the reduction in prices done in May and June.

IOC and two other state-owned fuel retailers had on July 16 raised rates by 1.7% or Rs 1,039.1 per kl and followed it up with a Rs 2,797.41 per kl increase in price on August 1.

The increases have snapped a six fortnight trend of reduction in rates, including a steep 5% (Rs 3,260 per kl) cut effected from June 16, and about 2% (Rs 1,241 per kl) fall in prices from July 1. Jet fuel, which had hit an all-time high peak of Rs 71,028.26 per kl in August 2008, shortly after international oil rates touched a record USD 147 per barrel, had fallen to eight-month low of Rs 61,169.08 per kl in early July.

In Mumbai, jet fuel will cost Rs 68,103.26 per kl from today as against Rs 65,884.34 per kl previously. Jet fuel constitutes over 40% of an airline's operating costs and the increase in prices will put fresh burden on the cash-strapped airlines.

No immediate comments were available from the airlines on the impact of the price hike on passenger fares. The three fuel retailers -- IOC, Hindustan Petroleum and Bharat Petroleum -- revise jet fuel prices on the 1st and 16th of every month, based on the average international price in the preceding fortnight.