GoM for direct import of fuel by airlines

GoM for direct import of fuel by airlines

In a significant decision aimed to give a boost to cash-strapped airlines, a Group of Ministers (GoM) on Tuesday approved a proposal to allow them to directly import jet fuel.

While jet fuel (also called aviation turbine fuel or ATF) will help airlines save on high incidence of taxes, the panel, in another key decision, approved a debt restructuring for Air India by allowing it to raise Rs 7,400 crore by issuing bonds or other means. Both the decisions will now go to the Union Cabinet for final approval.

The GoM, headed by Finance Minister Pranab Mukherjee, was also apprised of a recommendation to allow foreign airlines pick up 49 per cent stake in Indian carriers. No decision was taken in this regard. Some private carriers, especially Kingfisher Airlines of liquor baron Vijay Mallya, have been demanding that they be allowed to import ATF, which accounts for nearly 40 per cent of an airline’s operating cost.

Part of this amount include huge amounts they spend in customs, sales and excise taxes on fuel. With most airlines suffering huge losses, Mallya and others had pitched their demand for direct import.

Speaking to reporters after the meeting, Civil Aviation Minister Ajit Singh said “airline companies will be allowed to import fuel directly for their use. This also has to go to the Cabinet. The GoM has approved this. We will try to see whether some kind of credit arrangement can be made.”

If it comes through, then this will be the first time that airlines will be directly importing jet fuel which is now being done by oil marketing companies. However, airlines will have to continue to depend on OMCs, especially for storing oil and pumping it to aircraft.

Reacting to the decision, S Radhakrishnan, chairman and managing director of Bharat Petroleum Corporation Ltd, a state-run oil marketing company, said: “Infrastructure and transporting is not going to be easy… good luck to them. Inventory, carrying cost, infrastructure, it’s not going to be an easy option as it is looking to be.”

Asked about the decision on AI, Singh said: “On AI’s financial restructuring, the GoM has taken a view. Bonds will be issued, but the GoM discussed other options also,” he said.
The meeting was attended by Home Minister P Chidambaram, Petroleum Minister S Jaipal Reddy, Commerce Minister Anand Sharma and Planning Commission Deputy Chairman Montek Singh Ahluwalia, apart from top officials.

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