State-owned OMCs cut ATF prices, boosting airline margins
Cost of jet fuel in Delhi will be reduced roughly to Rs 110 per litre; prices lowered due to ease in West Asia tensions
State-owned oil marketing companies (OMCs) have lowered the price of aviation turbine fuel (ATF) by about Rs 5 per litre, with effect from Wednesday, a response to the drop in global crude oil prices following reduction in geopolitical tensions in West Asia.
The most recent pricing announcement indicates that starting on July 1, the cost of jet fuel in Delhi will be reduced to roughly Rs 110 per litre.
Although the exact benefit will depend on each airline’s fuel procurement and hedging arrangements, the latest price reduction is expected to reduce operating costs for domestic carriers.
As geopolitical tensions in West Asia slowed and worries about supply disruptions eased, global crude oil prices softened in recent weeks, which helped airlines, for which fuel is the single biggest operating expense.
In order to maintain airlines’ financial viability and the affordability of passenger tickets, the government earlier in June set the basic price of aviation turbine fuel (ATF) for domestic airlines at Rs 86.32 per litre for a maximum of three years under a new price stabilisation policy.
According to government officials, the final selling price will be approximately Rs 115 per litre in Delhi, Rs 114.50 in Mumbai, and Rs 139 in Chennai under the voluntary scheme, which requires airlines to pay the fixed free-on-board (FOB) benchmark price in addition to airport fees, oil company margins, and applicable taxes.
The windfall tax on petroleum product exports has also been updated by the Centre.
The Special Additional Excise Duty (SAED) on petrol exports has been raised to Rs 4 per litre under the new rates, whilst the export duty on diesel and ATF has been lowered to Rs 8.5 and Rs 7.5 per litre, respectively.
However, the current excise tax on petrol and diesel sold in the domestic market has not changed.
