Airfares Likely to Rise with Steep Jump in Jet Fuel Price
The price of Aviation Turbine Fuel (ATF) has more than doubled to a record Rs 2.07 lakh per kilolitre on Wednesday
New Delhi: In a big blow to air travellers, the airfare costs are likely to rise soon for the customers using both domestic and international flights due to the exponential price surge of jet fuel or aviation turbine fuel (ATF). But the government on Wednesday clarified that the ATF prices for domestic airlines were raised by a calibrated 8.5 per cent on Wednesday, instead of more than doubling as warranted by a war-driven surge in global oil prices.
Earlier in the day, it was seen that the ATF price was hiked to a record high of over Rs 2 lakh per kilolitre in metros in April, which was more than double as compared to the previous month. As per the reports, the ATF pricing for April has been increased to about 115 per cent for domestic flights and 107 per cent for international carriers. However, state-owned largest oil retailer Indian Oil Corporation (IOC) has now clarified that the increase is significantly lower. “The ATF prices have risen by about 8.5 per cent, not 115 per cent as previously indicated. The current price of jet fuel stands at around Rs 1.04 lakh per kilolitre,” the company said.
At the same time, the rates of commercial LPG — one that is used by hotels and restaurants — were also hiked to Rs 195.50 per 19-kg cylinder, while domestic cooking gas LPG rates, which were last hiked by Rs 60 per 14.2-kg cylinder on March 7, remain unchanged. Generally, state-owned Indian Oil Corporation, Bharat Petroleum, and Hindustan Petroleum revise their ATF and LPG prices on the first day of every month based on international benchmarks and the exchange rate.
However, state-owned oil firms also said that jet fuel for domestic carriers was hiked by Rs 8,289.04 per kilolitre, or 8.56 per cent, to Rs 1,04,927.18 per kl from Rs 96,638.14 per kl last month. “Domestic airlines will pay half of what foreign airlines, as well as other carriers such as non-scheduled, ad hoc, and charter, would pay. For them, the prices have gone up by Rs 1,10,703.08 per per kilolitre, or 114.5 per cent, to Rs 2,07,341.22 per per kilolitre,” they clarified.
Apart from ATF, the rates of commercial LPG, whose pricing is also deregulated, were increased by Rs 195.50 per 19-kg cylinder. Alongside, price of select premium, or branded petrol and diesel, which make up for 2-5 per cent of all auto fuels sold in the country, too, was increased by Rs 1.50 a litre to Rs 92.99 for ‘extra green’ diesel and by Rs 11 to Rs 160 a litre for 100 octane petrol (XP100). Prices of normal, or unbranded petrol and diesel remain unchanged, and so do the rates of domestic cooking gas LPG.
Meanwhile, the petroleum ministry issued a clarification saying that while the international oil prices have jumped to over $100 per barrel in one month, only a partial and staggered increase of 25 per cent (only Rs 15 per litre or Rs 15,000 per kilo litre) was being passed on to airlines. The civil aviation ministry and some private airliners also endorsed the number and the decision of the government as well.
Reacting the ATF price surge, Sujata Sharma, joint secretary in the ministry of petroleum and natural gas said that a calibrated approach has been taken on revision of ATF prices so as to have minimal impact, while her senior colleague Asangba Chuba Ao, joint secretary in the ministry of civil aviation, said the move would ensure that carriers’ domestic operational costs remain manageable and will not lead to the levy of additional fuel surcharge on airline tickets. “With the partial hike in ATF price, airlines would recalibrate their pricing and the move prevents a potential industry-wide crisis,” Chuba added.
As aviation fuel makes up around 40 percent of an airline's operating cost, it has been observed that the rising ATF prices will further strain airlines which are already burning more fuel in taking longer routes for flying to western destinations because of closure of airspace due to the war. Earlier in the day, civil aviation minister K Rammohan Naidu said that the decision by PSU oil marketing companies to implement only a partial and staggered increase of 25 per cent (Rs 15/litre) for domestic airlines is both pragmatic and forward-looking, while ensuring that foreign routes bear the full market-aligned price.
Welcoming the government decision, Ajay Singh, chairman and managing director, SpiceJet said that the timely intervention of the government will go a long way in helping airlines navigate one of the most challenging global crises in recent times, marked by severe external disruptions and volatility in fuel markets. “The government has, time and again, demonstrated strong and reassuring leadership, steering Indian aviation through global headwinds with clarity and resolve. This decision once again reinforces that commitment,” Singh said.