May take 1-2 months to see if ATF import feasible: Jet

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May take 1-2 months to see if ATF import feasible: Jet

M Shiv Kumar, senior vice president - finance, Jet Airways tells CNBC-TV18 that while it's a positive move from the central government, "We do not have the infrastructure to import ATFs."

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The government's decision to allow the import of aviation turbine fuel (ATF) came as a relief for many aviation companies. Though the GoM's decision needs a cabinet nod, airlines have been lobbying for a long time and are now hopeful that this move will see them save on sales tax which varies between 4% and 33% across states in India.

Despite this, there are a few airlines which do no see it as a relief as high handling costs and storage issues will have to be dealt with, they say. M Shiv Kumar, senior vice president - finance, Jet Airways tells CNBC-TV18 that while it's a positive move from the central government, "We do not have the infrastructure to import ATFs. Also, investing in importing fuel will be expensive."

Below is an edited transcript. Watch the accompanying video for more.

Q: How practically feasible is this idea of importing ATF and storing it for aviation companies? Do you think you will be able to do some kind of deal with oil companies or do you think it presents practical difficulties or impediments in implementation?

A: It's a good initiative from the government. There is some amount of relief that they would like to give the airlines across India and across our network. If this works out, nothing like it because if you look at the jet-kerosene prices prevailing in Dubai and if we were to import it, based on whatever customs duties that are currently prevalent, including storage, transportation to take care of even evaporation losses etc it could give a good amount of savings of up to 13-13.5%. However, if oil companies support these initiatives, it could be a good thing for the airlines to be able to bring down its costs.

Q: Do airline companies like yours have the infrastructure to go ahead with it? Among your peers, is anyone even looking at this point in time for the option?

A: We will be looking for assistance from oil companies with whom we are dealing with to be able to import ATF. We do not have the infrastructure facilities available with us. We certainly will have to go to oil companies and seek their cooperation. If the government has taken this initiative, we would also expect oil companies to cooperate to ensure that this materializes.

Q: How soon do you think when you could even potentially start looking at importing ATF directly?

A: There are two things in this. One is importing ATF means you have to immediately make some investments which could be quite tough at this juncture. Going forward we will look at some facilities from banks. Secondly, infrastructurally, unloading the entire consignment into tankers or can it go through the pipeline, those kinds of logistic issues will have to be sorted out with oil companies. It will be quite sometime before we can go for a first consignment.

Q: How much time when you say quite a bit of time?

A: It would at least take one or two month's before we come to a conclusion that this could be possible from all perspectives.

Q: It's too early at this point but do you have any ballpoint figure on how much the cost could go up putting together all of these higher taxes, storage issues, handling costs, etc?

A: Across the network we pay a sales tax of 22% - in the current prices that's about Rs 10-11 per liter. But when we import, obviously these costs will not be incurred but against these there are going to be transportation, storage, evaporation, airport levies and all. It could be about Rs 4-5. So there is a savings involved provided logistically it could be done and that there is cooperation from the oil companies on this matter.

Q: What is the countervailing duty currently for direct imports?

A: We do import ATF in the form of leftover fuel of Jet Airways when it goes for domestic circuit. We pay a customs duty which is about 8.5%.

Q: This talk of indirect import of ATF has been doing the rounds for a while. Have you had any preliminary discussion with oil companies and whether they will be able open to supporting you?

A: It is a little too early to say right now. We have to engage ourselves with them because until it is formally approved by the government, there is no point in actually talking to the oil companies. Now that the government has indicated that it is agreeing to allow airlines to import, we will look at this and talk to them and find out whether it is rational and how logically it could be possible.