Aviation fuel prices hiked

Domestic airlines will have to pay more for filling up aviation turbine fuel (ATF) in their aircraft.

The increase in ATF prices, combined with the implementation of the Budget 2010-11 proposals of imposing a 10 per cent service tax on all passengers, is likely to see domestic flying become more expensive.

Late on Sunday night, the domestic oil companies increased ATF prices with the increase in price ranging from Rs. 1.32 a litre in Delhi to Rs. 1.42 a litre in Chennai.

The increase in prices of petrol and diesel by Rs 2.71 and Rs 2.55, respectively, on account of an increase in customs duty on crude oil and increase of Re 1 in excise duty for both these products will make it difficult for the government to take another increase to cut the under recoveries of oil marketing companies (OMCs). In the current fortnight, the OMCs are estimated to lose Rs 4.72 on every litre of petrol and Rs 1.94 on every litre of diesel.

The petroleum sector had expected some clarity on the government's position on the Kirit Parikh committee's report (which asked for freeing of petrol and diesel prices from government control), said Mr. R. S. Sharma, Chairman and Managing Director of ONGC.

"We were expecting some price revision because of under recoveries on petrol and diesel," said Mr. S. V. Narasimhan, Director (Finance), IndianOil. He noted the Budget just made a provision of Rs 12,000 crore for under recoveries in the current financial year and none at all for those in 2010-11. In the current year, the OMCs IndianOil, Bharat Petroleum and Hindustan Petroleum are estimated to have a total under recovery of Rs 31,000 crore on sale of kerosene and domestic LPG at government-capped prices. "It is a concern to us, since for every quarter we will have to ask the government to compensate the under recoveries," he said.
Business Line, New Delhi, 1 March 2010