The Telegraph
Thursday , April 19 , 2012
Since 1st March, 1999
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SpiceJet plan gets go-ahead

New Delhi, April 18: Low-cost airline SpiceJet today received approval from the Directorate General of Foreign Trade (DGFT) to directly import aviation turbine fuel (ATF).

Sources said SpiceJet had entered into an alliance with Reliance Industries to import ATF on a pilot basis to check the economic viability of the process. RIL has storage facilities at 20 airports across the country.

Officially, SpiceJet said it was negotiating with leading oil marketing companies.

Air India, Jet Airways and Kingfisher Airlines are next in line to procure DGFT’s permission to import jet fuel to curtail fuel costs.

The government recently allowed airlines to import fuel directly to help them save on state taxes ranging from 4 per cent to 28 per cent. Jet fuel accounts for 45 per cent of an airline’s operating costs.

Prior to the relaxation, carriers had to buy ATF from oil marketing firms who were subject to state taxes or value-added taxes. Direct import can enable the airlines to save up to Rs 13,000 on every tonne of ATF at current prices, or Rs 2,500 crore a year, said industry analysts, as they have to pay a flat rate of 4 per cent as VAT.

“Airlines will benefit from direct imports of fuel because of high ATF prices in India. We are hoping to commence the import of fuel in due course,” SpiceJet CEO Neil Mills said.

“Importing fuel from overseas market at a comparatively lower price would help us to considerably bring down our operational cost,” he said.

The airline will select an oil marketing firm to buy jet fuel from the international market, import it in tankers and store it. Jet fuel could be bought on long-term contract or at the spot market.

Indian Oil executives said the oil firms would take a “small management fee” to provide these services, which would be negotiated with each airline.