Ministries seek ‘declared good’ status for ATF

December 04, 2012 03:39 pm | Updated 11:10 pm IST - New Delhi

Civil Aviation Minister Ajit Singh attributed rising airfares to overall rise in operation costs.

Civil Aviation Minister Ajit Singh attributed rising airfares to overall rise in operation costs.

In a bid to bring down the cost of air operations , Civil Aviation and Petroleum ministries would make a joint representation to the Finance Ministry to notify jet fuel as a ‘declared good’, enabling levying of a flat 4 per cent tax on it.

At present, sales tax on aviation turbine fuel (ATF) ranges from 4 to 35 per cent, varying from State to State.

The cost of jet fuel accounts for about 40 per cent of the operating cost of Indian carriers, most of which are facing financial trouble.

Talking to reporters after a meeting, Civil Aviation Minister Ajit Singh said Petrolem Minister M. Veerappa Moily agreed to the proposal.

Finance Ministry

Mr. Moily said his Ministry was in agreement, but the issue had to be decided by the Finance Ministry. “We will jointly make a representation to the Finance Minister,” Mr. Moily said.

At the meeting, Mr. Singh is believed to have said that ATF prices in India were several times higher than countries in the neighbourhood, including those in Southeast and the Gulf.

It was also said that foreign airlines operating to India picked up jet fuel at concessional rates due to international agreements, rates which are far below those paid by Indian airlines for the same amount of fuel. The two ministers also agreed on a proposal to put ATF under the Petroleum and Natural Gas Regulatory Board (PNGRB), in a bid to check cartelisation amongst oil companies.

Charging the oil firms with indulging in cartelisation in ATF pricing , Mr. Singh said placing jet fuel under the PNGRB would mean that the board could monitor prices and take corrective measures if it felt that cartelisation was taking place.

Same rate

In this context, the ministry pointed out that on October 16, the three state-owned oil companies charged the same rate of Rs. 52,792 per kilolitre of ATF in Chennai and in Kolkata, Rs. 54,479.

The aviation minister also suggested moving to the Mean of Platts Arab Gulf (MoPAG) pricing mechanism for jet fuel, instead of the import parity pricing that oil firms followed presently.

MoPAG model

Singh said adoption of the MoPAG model would bridge the huge price differential in ATF pricing that airlines face Maintaining that the government did not regulate air fares, he said the ministry only wanted to make the system transparent. “What we are trying to do is to make the system for deciding the fares transparent. Public should know what is the bucket system and the range they have given should be reasonable,” he said.

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