New Delhi: In a move aimed at helping the debt-laden airlines bring down their costs, the government on Wednesday formally allowed the local airlines to import jet fuel directly.
The airlines would be allowed to import aviation turbine fuel (ATF) under the so-called open-general license, enabling them to avoid sales taxes of between 12 to 23 per cent that are levied by state-governments.
"...Indian Carriers who are interested to avail the opportunity to import ATF directly without going through State Trading Enterprises route may apply to the Directorate General of Foreign Trade (DGFT)," an official statement said.
Jet fuel in India exceeds the global average by more than 50 per cent mostly due to local taxes. Some estimates suggest that direct imports could cut fuel costs by up to 20 per cent, but also require new spending in terms of putting up storage and logistics infrastructure.
Carriers, led by Kingfisher Airlines, had demanded the right to direct import of fuel, which accounts for about half of their operating costs.
Airlines, almost all of which are losing money, currently buy ATF from local refiners like Indian Oil Corp. Though the jet is priced at parity with international rates, the actual price for airlines is higher because of state sales tax.
Industry sources, however, said that importing the fuel will pose its own challenges like storages and logistics involved in moving the product from sea ports to consumptions points at airports.
The airlines would have to form tie-ups with the suppliers having infrastructure to import ATF directly for their use.
Sales tax on the fuel varies between 4 to 30 per cent from state to state.