Formal proposal submitted for Indian carriers to import fuel

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India's Ministry of Civil Aviation has submitted a formal proposal to the Ministry of Commerce to allow local carriers to import jet fuel directly.

Air turbine fuel (ATF) prices in India are up to 40% higher than those on the international market due to the high base price and even higher taxes, said the ministry in a statement. The prices also differs between four to 30% in different Indian states.

This proposal comes after a group of ministers' meeting supported the move.

The ministry added that it also recently wrote to the country's chief ministers to bring down the tax rate on fuel so as to lower the operational costs of domestic airlines but that they did not respond favourably.

"Revenue from sales tax on ATR contributes only 0.5% to 2% of the total sales tax collection of the states while in terms of operational cost of airlines its portion is almost 40%, which makes the operational costs of airlines very high," it added.

Should the proposal come through, Indian carriers will make their own tie-ups with suppliers to import fuel directly and only pay local tax rates on "unavoidable purchases".

"Also this would bring down the cost of working capital to the airlines as suppliers credit on lower interest rates will be feasible," said the ministry.

Fuel costs have long been a major concern of Indian carriers as the country has one of the highest tax rates on fuel, and many local carriers are operating on hugh losses.