Free Press Journal

Airlines get approval to directly import jet fuel


The govt panel also okayed debt restructuring for Air India and allowed it to raise Rs 7,400 cr through govt- backed bonds


In a major move to bolster the beleaguered aviation sector, a Group

of Ministers ( GoM) on Tuesday recommended direct import of jet fuel by airlines to help them save on high taxes and approved Air Indias debt restructuring, pending a final approval by the cabinet.

The debt- ridden carrier would be allowed to raise Rs7,400 cr by governmentguaranteed bonds or by other means. The restructuring package comes at a time when the embattled airline is fighting multiple fires, primary among them a mountain of debt, loss of market share to private carriers, rising costs, and continuing employee unrest over timely payment of salaries.

Official figures show Air India has outstanding loans and dues worth Rs. 67,520 cr, of which Rs. 21,200 cr is working capital loan, Rs. 22,000 cr is long- term loan on fleet acquisition, Rs. 4,600 cr is vendor dues besides an accumulated loss of Rs. 20,320 cr.

The move to allow direct import of aviation turbine fuel ( ATF) would enable airlines to cut operating costs by about 10- 15%, saving on sales tax, which ranges between 4% and 35% and is levied by state governments, when they directly import jet fuel as an end user. Jet fuel now comprises about 50% of the total operating cost of airlines in India.

While the decisions on direct import of ATF and allowing foreign airlines to invest would go to the Union Cabinet for a final nod, the Cabinet Committee on Economic Affairs would take up Air Indias financial restructuring plan for approval soon, Civil Aviation Minister Ajit Singh said.

” This is the vital step in the process of bringing ATF prices in line with global standards. This will help the aviation industry in the long term,” Amber Dubey, director, aviation, at global consultancy firm KPMG, said. On ATF imports, Singh said airline ” companies will be allowed to import fuel directly for their use. This also has to go to the Cabinet.

GoM has approved this. We will try to see whether some kind of credit arrangement can be made.” The scrips of airline companies rallied after the GoM agreed to direct import of ATF. Shares of Jet Airways settled 14.48% higher at Rs 341.20 on the BSE, while Kingfisher Airlines closed at Rs 29.15, up 13.20% from the previous closing price.

Spicejet shares ended the day with a jump of 10.98% to Rs 27.30.