In a bid to bring aviation turbine fuel (ATF) price parity, India-based airlines have urged union aviation and petroleum ministries to intervene and consider certain proposals, sources privy to the developments told CNBC-TV18.
Firstly, airlines have suggested moving to the Mean of Platts Arab Gulf (MoPAG) pricing mechanism for jet fuel instead of the import parity pricing that the oil firms follow at present, according to multiple sources familiar with the development.
The adoption of MoPAG would bridge the huge price differential in ATF pricing that airlines face while picking up aviation gas in India and nearby airports like Singapore or Dubai.
Another proposal is to bring ATF into the goods and services tax (GST) regime so that airlines can avail the benefit of input tax credit like in other countries. Till it is not included, exempt excise and request states to reduce value-added tax (VAT), said people familiar with the matter.
India is the only market that is not providing input tax credit on ATF to airlines.
Also, airlines are asking for import parity pricing as oil marketing companies (OMCs) are selling ATF to foreign airlines for refuelling in India at benchmark global rates while Indian carriers are charged at higher prices based on import parity pricing, both for domestic and international operations, sources in the know told CNBC-TV18.
According to Indian carriers, OMCs are charging for ATF at import parity pricing despite importing crude oil and distilling jet fuel within the country.
Further, airlines urged the government to end differential treatment to Indian carriers and remove multiple charges like common user terminal equipment (CUTE), passenger service fee (PSF), user development fee (UDF), airport development fee (ADF), and Regional Connectivity Scheme (RCS) fee, etc, that have hurt passengers, sources close to the development said.
Right now, domestic carriers pay ATF prices that are at least 20 percent higher than global rates and so are at an obvious disadvantage against foreign airlines.
Jet fuel constitutes over 35 percent of an airline's operating costs and the increase in prices will put a fresh burden on cash-strapped airlines. Airlines pay about 30 percent taxes on ATF — 11 percent excise and an average VAT of 19 percent.
