In a move which will bring cheer to the domestic airline industry, the Director General of Foreign Trade on Wednesday allowed individual domestic airlines to directly import aviation turbine fuel (ATF) by issuing a formal notification to this effect.
The notification states that airlines will have to apply afresh to the DGFT to be allowed to import ATF directly. Currently only State Trading Enterprises of the Government are allowed to import ATF. Kingfisher had applied for permission to import ATF directly.
Airlines have been clamouring for permission to import ATF directly as many feel this will help bring down their operating costs. This is because States levy a sales tax on ATF which vary from four per cent to above 32 per cent across the country. This makes the ATF costs in India almost 50 per cent more expensive more than what airlines pay in Singapore or Dubai.
With airlines being allowed to import ATF directly, the imports will not attract sales tax and thereby help bring down the cost of domestic carriers.
Industry sources, however, say that the States are unlikely to allow such imports without imposing some additional tax component as they were likely to lose a substantial amount of revenue. States may consider levying entry tax on such imports.
Besides, airlines will also have to factor in the cost of transporting ATF from the various ports in the country to airports around the country, something which could eventually lead to increase in the ATF cost.
The three listed airline companies – Jet Airways, Kingfisher and SpiceJet – all of which reported losses in the quarter ending December 2011, blamed rising ATF cost for their bad financial performance.
The two private airport operators GMR and GVK have said that they are ready to provide storage and refuelling facility at Delhi, Mumbai, Hyderabad and Bangalore to the airlines planning to import jet fuel directly.