Move on ATF import by domestic carriers soon

Decision will save airlines from paying hefty sales tax

A Group of Ministers’ (GoM) meeting will be held shortly to decide on direct import of Aviation Turbine Fuel by domestic airliners, a move, if it comes into force, will save airliners from paying hefty state sales tax.

According to the current practice, the ATF is imported by the oil marketing companies and domestic airliners in turn buy it from these OMCs ending up paying hevy state-level levies.

A senior government official told Deccan Herald that the GoM is expected to be held shortly on the issue. He said that the Directorate General of Foreign Trade (DGFT) has already given in-principle approval to the proposal by the airliners and it has been sent to the Cabinet for a decision.

Earlier this week, the petroleum ministry had endorsed a proposal from the DGFT to let private parties to directly import jet fuel, giving a free hand to cash-strapped carriers to make their way through.
State taxes on aviation turbine fuel range between 25 per cent and 30 per cent. The oil ministry gave its clearance at an inter-ministerial meeting on Tuesday.

Importers, however, will have to pay an eight per cent customs duty on jet fuel, which is much less than the state-level levies that they will be able to save now.

The cash-strapped Kingfisher airlines had recently told the DGFT that ATF accounts for about two fifth of its total operating cost. Kingfisher also said that cost cutting measures including direct import of jet fuel will enable it to remain functional and meet its commitments to customers and banks.

Oil companies, however, are not very keen to allow this as they will have to face competition from imported jet fuel. India, which has a surplus crude oil refining capacity, exported 2.86 million tonnes of jet fuel in the April-October period this year, earning $2.87 billion.