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Aviation: Air Travel is set to become costlier

If you are planning to travel by air in the coming vacations, it is going to cost you much more. The reason: there is a 16 percent increase in the prices of aviation fuel.

If you are planning to travel by air in the coming vacations, it is going to cost you much more. The reason: there is a 16 percent increase in the prices of aviation fuel.

While petrol or diesel continues to cost you around Rs 100 a litre after the recent cut in excise duty on petroleum products, the new price of fuel used by aircraft has been pegged at Rs 141.2 a litre.

Increase in the Jet fuel (aviation fuel) prices on Thursday has been  the steepest ever. It is  16 per cent  and will catapult rates to an all-time high in step with hardening international oil rates.

The price of aviation turbine fuel (ATF) — the fuel that helps aeroplanes fly—has been increased by Rs 19,757.13 per kilolitre, or 16.26 per cent, to Rs 1,41,232.87 per kl (Rs 141.2 per litre) in the national capital, according to a price notification of state-owned fuel retailers.

The hike, which comes on the back of a marginal 1.3 per cent (Rs 1,563.97 per kl) cut in rate earlier this month, takes jet fuel prices to record high across the country.

The hike, says the Oil Board,  is in consonance  with firming international oil rates. Brent – the world’s most popular crude oil benchmark – was on Thursday trading at USD 119.16 per barrel – the highest in almost a decade.

The sharp increase in aviation turbine fuel (ATF) prices and the depreciation of the rupee – Rs 78.22 for a US $ – have left the domestic airlines with no choice but to immediately raise airfares.

Ajay Singh, Chairman and Managing Director, SpiceJet, a budget airline, issued a statement immediately after the increase in aviation fuel prices was announced, saying that there was no choice for domestic carriers but to increase the prices of air tickets.

A minimum 10-15 per cent increase in air fares is required to ensure that cost of operations are better sustained, he said in his statement.

The Union Ministry of Civil Aviation, in its attempt to regulate air travel,  had imposed lower and upper limits on domestic airfares based on flight duration when services were resumed on May 25, 2020, after a pandemic-forced two-month lockdown. Domestic  airlines currently cannot charge a passenger less than Rs 2,900 (excluding GST) and more than Rs 8,800 (excluding GST) on flights with a duration of less than 40 minutes.

The lower caps were imposed to help the airlines tide over financial loss suffered due to travel restrictions. The upper caps were imposed so that passengers are not charged huge amounts when the demand for seats is high.

Fuel prices have been rising  continuously since the Russia-Ukraine War broke out on February 24.

Ajay Singh further said that the ATF prices have increased by more than 120 per cent since June 2021.

“This massive increase is not sustainable and governments, central and state, need to take urgent action to reduce taxes on ATF that are amongst the highest in the world,” he said.

Domestic airlines have  in the last few months tried to absorb as much burden of this fuel price rise, which constitutes more than 50 per cent of our operational cost, as we could, he said.

“The weakening of the Indian rupee against the US dollar further significantly impacts airlines as our substantial cost is either dollar denominated or pegged to the dollar,” he added.

ATF prices are revised on the 1st and 16th of every month based on the average of benchmark international rates.

The increase in jet fuel price will raise the operating cost for airlines. ATF makes up to 40 per cent of an airline’s operating cost.

The June 1 reduction had come after 10 rounds of price increases this year.

ATF in Mumbai now costs Rs 1,40,092.74 per kl, while it is priced at Rs 1,46,322.23 in Kolkata and Rs 1,46,215.85 in Chennai.

Rates differ from state to state, depending on the incidence of local taxation.

Meanwhile, petrol and diesel prices remained unchanged at Rs 96.72 per litre and Rs 89.62 a litre, respectively. An excise duty cut by the government had helped reduce petrol by Rs 8.69 a litre and diesel by Rs 7.05 per litre on May 22, but for that, the base price has remained unchanged since April 6. Before that, prices had risen by a record Rs 10 per litre each.

The retail prices of petrol, diesel and domestic cooking gas are way below the cost.

Petrol and diesel rates are revised daily, based on equivalent rates in the international market.

Fuel rates have been on the rise in India because energy prices globally have risen on the back of supply concerns following Russia’s invasion of Ukraine and demand returning after being hit by the pandemic. India is 85 per cent dependent on imports to meet its oil needs.

 

Prabhjot Singh

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