Jet fuel prices cut by 7.3% on falling overseas oil rates

The decision will give relief to aviation sector

Jet fuel prices cut by 7.3% on falling overseas oil rates

Jet fuel (ATF) rates were cut by a steep 7.3 per cent, the fourth straight reduction in prices since August on back of falling international oil rates.The price of aviation turbine fuel (ATF), or jet fuel, at Delhi was cut by Rs 4,987.7 per kilolitre, or 7.3 per cent, to Rs 62,537.93 per kl, oil companies announced on Saturday.

This is the fourth reduction in jet fuel rates since August. Rates were cut by almost 3 per cent or Rs 2,077.62 per kl on October 1. Declining international oil prices have made imports cheaper, resulting in price reduction.

In Mumbai, jet fuel will cost Rs 64,414.98 per kl from today as against Rs 69,610.50 per kl previously. The rates vary because of differences in local sales tax or VAT.
Jet fuel constitutes over 40 per cent of an airline's operating costs and the price cut will ease the financial burden of cash-strapped carriers.

No immediate comment was available from airlines on the impact of the price cut on passenger fares.The three fuel retailers -- IOC, Hindustan Petroleum Corp and Bharat Petroleum Corp -- revise jet fuel and non-subsidised LPG prices on the first of every month, based on the average international prices in the preceding month.

On Friday, oil companies had cut petrol price by Rs 2.41 a litre and diesel by Rs 2.25 per litre. The sixth reduction in price since August has meant that petrol costs Rs 64.25 a litre in Delhi, Rs 9.36 per litre less than what it cost in July.

The second reduction in diesel rates in one month has led to price coming down to Rs 55.60 a litre.Also, the price of non-subsidised cooking gas (LPG) was cut by Rs 18.5 to Rs 865 per 14.2-kg cylinder.

Since August, this is the fourth reduction in rate of non-subsidised LPG which consumers buy after exhausting their quota of sub-market priced domestic cooking gas.

Non-subsidised LPG in Delhi was priced at Rs 922.50 in July and rates have in every subsequent month been reduced.

Impact of previous cut
When the jet fuel rates were cut on October 1 by 3 per cent, shares of airline operators like SpiceJet and Jet Airways gained as much as six per cent.

During that time, shares of SpiceJet surged 5.6 per cent to Rs. 13.01, while Kingfisher Airlines rose 4.87 per cent to Rs. 2.15 and Jet Airways (India) gained 4.73 per cent to Rs. 218 on the BSE.

Jet fuel constitutes over 40 per cent of an airline’s operating costs and the price cut will ease the financial burden of cash-strapped carriers.

Indian aviation sector is reeling under other challenges of high airport charges and the new proposed policy for regional and remote air connectivity which forces airlines to mount flights to areas that are remote and where flying is unviable.
The government’s 5/20 rule forces airlines to have a five year domestic mandatory operation and a fleet of 20 aircraft before they can fly aboard.

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