The Telegraph
Since 1st March, 1999
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Air travel set to feel fuel pinch

New Delhi, May 1: The tab for air travel is likely to get heavier with PSU oil companies raising aviation turbine fuel prices by 8.6 per cent today to cover up for the global oil boil. On April 1, prices were jacked up by Rs 831-1,015 per kl.

“Aviation turbine fuel prices have been raised by Rs 3,100- 3,700 per kilolitre from today,” a senior Indian Oil Corporation official said. The hike for international airlines is lower at $54-$58 per kl as they are outside the purview of excise duty and sales tax.

Indications are that airlines are going to raise ticket prices to cover part of the hike in fuel cost. “We are looking at prices,” Indian Airlines spokesman Deepak Brara said.

A Jet Airways spokesman said, “We will hold a meeting to see what to do next.” Only last week, the company had slapped a fuel surcharge of Rs 300 on premium and economy class tickets on domestic routes. The surcharge, which Jet imposed from today, was a reaction to the rise in ATF prices last month.

The oil companies are losing money as the government has put a lid on petrol, diesel, kerosene and LPG prices, despite the upward spiral in global crude.

The government, however, has allowed global price parity for products used by industry: ATF, bitumen and heavy diesel.

PSU oil firms fear a loss of Rs 57,000 crore this fiscal, if the government continues to keep a leash on crude prices.

The PSUs have reportedly lost Rs 4,722 crore in revenues during April. During 2005-06, their gross under-recoveries were Rs 39,600 crore.

Even as it grapples with the ATF turmoil, the industry is gearing up for a series of guidelines on its operations. The civil aviation policy, which is waiting in the wings, is likely to propose an independent regulator and norms on mergers and acquisitions.

The regulator will frame standards for the sector, issue licences, regulate tariff, give punishments, ensure fair play and prevent abuse of market dominance.

A comprehensive aviation law will be framed to replace the existing acts on aviation and security. This law will legally establish the regulator.

The draft policy will frame guidelines on mergers and acquisitions in the aviation sector and is likely to allow 100 per cent transfer of aircraft, flight rights and parking bays on payment of fees.

It will, however, not allow, 'grand-fathering' of these rights. This means it won't be possible for one airline to sell these rights and slots to another before or after the merger.

The draft policy favours the levy of an aviation cess, which will replace various taxes on air travel. It has also recommended the creation of an Essential Services Fund 'which won't lapse ' out of the aviation cess and proceeds from privatising airports.

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