Jet fuel cut makes it cheaper than diesel

Aviation turbine fuel (ATF) is now cheaper than petrol and diesel. (DH Graphics)

Jet fuel or ATF prices were on Thursday cut by 2.6 per cent following the government decision to lower excise duty on the fuel.

Aviation turbine fuel (ATF) is now cheaper than petrol and diesel.

ATF in Delhi was cut by Rs 1,962 per kilolitre, or 2.6 per cent, to Rs 72,605 per kl (Rs 72.6 per litre), according to a price notification issued by state-owned oil firms.

It costs Rs 72,225 per kl in Mumbai, down from Rs 74,177.

Even at the reduced price, ATF is at its highest level since March 2014.

The government had Wednesday cut excise duty on jet fuel to 11 per cent from 14 per cent previously to give relief to the aviation industry that has been in recent weeks hit hard by rising fuel prices and plummeting rupee.

The move came after jet fuel prices this month hit their highest level since January 2014. Rates had risen by 9.5 per cent since July, and over 58.6 per cent since July last year.

While the ATF has been cheaper than petrol before, the fuel used in aeroplanes is cheaper than even diesel now.

Petrol in Delhi costs Rs 82.36 per cent and diesel is priced at Rs 74.62.

Just last week, the government had cut excise duty on petrol and diesel by Rs 1.50 per litre and asked state-owned oil firms to subsidise the fuel by another Re 1 a litre. That step was matched by BJP-ruled states cutting local sales tax or VAT by an equal proportion to give customers hit by high auto fuel prices a relief of about Rs 5 per litre.

While the twin moves on auto fuels had led to a drop in the price of petrol from a record high of Rs 84 per litre to Rs 81.50 in Delhi and that of diesel from an all-time high of Rs 75.45 to Rs 72.95 a litre on October 5, rate hikes on subsequent days have pushed prices upwards.

Petrol has risen by 86 paise per litre since then and diesel by Rs 1.67, negating the entire excise duty reduction in less than a week.

Petrol in Mumbai costs Rs 87.82 per litre and diesel is priced at Rs 78.22.

The excise duty cut on ATF came after the government's move to raise customs duty on the fuel and 18 other non-essential import items last month, in a bid rein in current account deficit and shore up the rupee.

Basic customs duty of 5 per cent was imposed on ATF. It previously attracted nil duty. This led to an increase of Rs 2,000 per kl in prices.

The government had in 2016 hiked excise duty on ATF to 14 per cent from 8 per cent.

ATF like petrol and diesel is not covered by the goods and services tax (GST) regime, that on July 1 last year amalgamated 17 different central and state taxes.

The central government currently charges 14 per cent excise duty on ATF. On top of this, states charge up to 30 per cent sales tax or VAT - Odisha and Chhattisgarh have 5 per cent VAT while Tamil Nadu taxes ATF at 29 per cent, Maharashtra and Delhi at 25 per cent and Karnataka at 28 per cent.

When the GST was introduced on July 1 last year, five commodities -- crude oil, natural gas, petrol, diesel, and aviation turbine fuel (ATF) -- were kept out of its purview for the time being.

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