India approves direct imports of aviation fuel

An empowered group of ministers (EGoM) led by Indian Finance Minister Pranab Mukherjee yesterday allowed domestic airlines to directly import fuel and approved Air India's debt restructuring plan. "The EGoM has allowed the airlines to import jet fuel directly," Civil Aviation Minister Ajit Singh told reporters here. The Indian aviation sector has been reeling under rising jet fuel prices caused by high sales taxes and other levies. The move will enable airlines to directly import jet fuel as end users, thereby saving sales tax, which ranges between 20 and 35 per cent and is levied by state governments. As a result there could be significant savings in operating costs. Jet fuel now accounts for about 50 per cent of the operating cost of India's airlines. Jet fuel is currently sold at Rs71,155.22 (Dh5310.75) per kilolitre in Kolkata, Rs67,702.21 in Chennai, Rs63,864.31 in Mumbai and Rs62,907.82 in New Delhi. The average fuel price in cities like Kuala Lumpur is around Rs41,000 per kilo-litre, followed by Singapore at Rs42,000 and Dubai at Rs43,000. Domestic airlines are estimated to have lost around Rs30 billion in the first six months of this fiscal year. Meanwhile, airlines have not yet come up with any plan to store and import the fuel. This was one of the arguments by the three oil marketing companies, Hindustan Petroleum, Indian Oil and Bharat Petroleum, who were opposing the move. The minister also said the EGoM has approved the debt restructuring plan of the national carrier Air India and it will go to the union cabinet for a final nod. The national carrier will be allowed to raise Rs74 billion via bonds, backed by a sovereign guarantee, said Singh. Currently, it has a total debt of Rs437.7 billion, including loans and dues to vendors like oil firms and airport operators. The plan envisages restructuring of the debt taken for working capital and aircraft acquisition from a consortium of banks, which include State Bank of India, IDBI and Bank of Baroda. It was allowed to issue bonds after the banks refused to convert the debt into equity.