ATF Pricing Revisions: IndiGo, Air India and SpiceJet have urged the Indian government to revise aviation turbine fuel (ATF) pricing and offer financial support. The Federation of Indian Airlines (FIA) has also urged the Civil Aviation Ministry to possibly extend the same mechanism of fuel pricing across both international and domestic operations uniformly.
It was contended by all that the airline industry of the country was under “extreme stress” and almost on the verge of closing operations.
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ATF Pricing Revisions-Causes Behind Requests
In recent weeks, the Middle East crisis has significantly spiked up oil prices globally. Moreover, airspace restrictions have increased the operating costs of airlines, especially on long-haul destinations. Interestingly, ATF accounts for approximately 35-40 percent of the operational expenses of a carrier.
The Federation of Indian Airlines that represents IndiGo, Air India and SpiceJet remarked that any irrational increase in ATF prices and/or ad hoc pricing (domestic versus international) would lead to substantial losses for airlines, resulting in the grounding of aircrafts and mass-scale flight cancellations.
The FIA further remarked that the Civil Aviation Ministry is requested to urgently intervene for meaningful and immediate financial support to help airlines amid the ongoing financial crisis.
Deferment Of ATF Excise Duty Requested
The airlines requested for temporary deferment of ATF excise duty that presently stands at 11 percent. They remarked that the duty exponentially increases manifold for the airlines while adding to the ATF price as a substantial impact on airlines due to factors like rupee depreciation and abnormal ATF price hikes.
In March this year, the Union Government raised the prices of ATF for international flights by Rs. 73 per litre and Rs. 15 per litre for domestic operations. The FIA has requested for a transparent pricing framework under the crack band mechanism (USD 12-22/BBL) that was implemented in October 2022. The federation remarked that there was a fair and reasonable margin for Oil Marketing Companies (OMCs).
