Jet Fuel Prices Increase 10% as Oil Retailers Implement ATF Price Stabilisation Plan
Aviation turbine fuel (ATF) prices for domestic airlines increased by approximately 10% on Tuesday. This rise follows the introduction of a government-backed price stabilisation scheme by state-owned oil marketing companies, allowing carriers to lock in fuel rates for up to three years. Under this new arrangement, airlines will pay a fixed ATF price of around Rs 115 per litre, up from the previous rate of Rs 104.93 per litre.
The voluntary scheme offers airlines a choice between a fixed fuel price and market-based pricing. Airlines that participate will be insulated from fluctuations in global crude and jet fuel prices, while those opting out will continue to pay market rates, exposing them to potential price increases and decreases. Industry sources indicate that participating airlines will pay a fixed free-on-board (FOB) benchmark price of Rs 86.32 per litre, along with additional airport charges, oil company margins, and taxes.
This adjustment comes after domestic ATF prices remained stable for over two months, despite rising international fuel costs due to the conflict in West Asia earlier this year. The limited pass-through of these higher global prices had led to losses for state-owned oil marketing companies. To mitigate these losses and protect airlines from price volatility, the Union Cabinet approved a Rs 10,000-crore price stabilisation mechanism. If global benchmark prices exceed the base rate of Rs 86.32 per litre, the government will provide interest-free advances to oil companies to cover the difference. Conversely, if prices fall below this benchmark, the excess will be recovered and returned to the Consolidated Fund of India.
Officials clarified that this arrangement is intended as a stabilisation mechanism rather than a subsidy, incorporating provisions for monitoring and accountability. ATF constitutes a significant portion of airlines’ operating expenses, accounting for about 40% of costs and potentially rising to 60% during periods of high fuel prices. International jet fuel prices had surged to nearly Rs 142 per litre in May, compared to approximately Rs 60.5 per litre before the West Asia conflict, raising concerns over airline profitability and the potential for increased airfares.
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