The Group of Ministers has cleared a proposal to allow domestic airlines to directly import aviation turbine fuel (ATF).
“Companies (airlines) will be allowed to import directly,” the Civil Aviation Minister, Mr Ajit Singh, told newspersons after the meeting. The proposal will have to be cleared by the Cabinet Committee on Economic Affairs before it can be implemented.
Incidentally, Kingfisher Airlines had applied to the Director-General of Foreign Trade for permission to directly import ATF even before the GoM took up the issue. The move comes in the wake of airlines complaining that ATF costs in India were 40-50 per cent higher than in Singapore and Dubai.
This is mainly because States levy sales tax that varies across the country from 4 per cent to more than 30 per cent. Fuel is one of the largest cost components for domestic airlines and can account for up to 40 per cent of an airline's operating costs.
Jet and Kingfisher Airlines, among the largest operators, together burn about 80,000 kl of ATF a month.
The latest move, however, is being questioned by some. Sources point out that State Governments may levy an “entry tax” as they stand to lose revenue as ATF imported directly by the airlines will attract no sales tax.
“The Government had earlier attempted allowing direct imports. But the move was given up in view of strong opposition from a majority of State Governments,” a senior Government official connected with the move previously told Business Line . The financial viability of the move is also under question, say sources.
Air India bonds
The GoM also recommended providing sovereign guarantee to Air India for issuance of bonds worth Rs 7,400 crore.
“The bonds will carry a coupon rate of between 8.5 per cent and 9 per cent. Financial institutions will be allowed. The proposal will have to be cleared by the Cabinet,” the Minister said.
At the meeting, it was also decided that the Banking Secretary would discuss with individual airlines how they can best provide them with additional working capital and short-term bank guarantees to enable them get supplies.