Date:03/05/2006 URL: http://www.thehindubusinessline.com/2006/05/03/stories/2006050303320800.htm

Back IA plans Rs 300 fuel surcharge soon

Our Bureau

Taking Rs 400-cr hit due to hike in fuel prices

Fuel re-charge
No date for imposing the surcharge has been announced as yet
ATF price up by more than 10.6 pc during the last month
IA's fuel bill during 2005-06 would be around Rs 2,300 cr
Domestic ATF prices almost 65 pc higher than global prices

New Delhi , May 2

Indian Airlines plans to impose a fuel surcharge of Rs 300 soon, as the continuous increase in oil prices has put an additional annual financial burden of Rs 400 crore on the airline, the Chairman and Managing Director, Mr Vishwapati Trivedi, told presspersons here on Tuesday. However, no date for imposing the surcharge has been announced as yet.

"The surcharge is just days away. We will have to do something," Mr Trivedi said during an informal interaction with the media. The proposed hike in the fuel surcharge will, however, not fully compensate the airline for the loss it is incurring due to the hike in ATF prices, officials said.

Indian Airlines and other domestic airlines have been facing a mounting fuel bill with the public sector oil companies hiking the price of ATF regularly. During the current month the ATF price increased by more than 10.6 per cent with the average per kilolitre price for the month touching Rs 41,950 up from Rs 37,900 charged last month. The continuous increase in fuel prices has affected the domestic aviation sector, as fuel constitutes 30-35 per cent of total operating costs.

Indian Airlines has estimated that its fuel bill (including that of its subsidiary Alliance Air) during 2005-06 would be around Rs 2,300 crore (revised estimate) against Rs 1,750 crore during 2004-05. The airlines fuel bill has been increasing steadily from Rs 866 crore during 1999-2000 to touch Rs 1,164 crore during 2002-03. The following year it touched Rs 1,750 crore before peaking at Rs 1,750 crore during the 2004-05.

While officials of the low-cost airline Spice Jet were not available for comment, industry sources estimate that the airline's monthly fuel bill would increase from the current level of Rs 20-22 crore to about Rs 30 crore. In this case, the increase in the fuel bill is not only on account of hike in fuel price hike, but also due to the fact that the airline is to induct more aircraft soon.

Industry sources maintain that the high rate of sales tax on ATF was one of the primary reasons for domestic ATF prices being much higher than global prices. "During April this year, the average domestic price of ATF was almost 65 per cent higher than the rates prevailing in West Asia and the South East. Last month while the ATF rate in India was around Rs 38,000 per KL, the average rate in Dubai was about Rs 24,000 per KL and in Kuala Lumpur about Rs 21,900 per KL," sources said.

While IA has not yet announced an increase in fuel surcharge, several other domestic airlines have already imposed this. Last week, both Jet Airways and the low-cost airline Air Deccan announced their decision to impose a fuel surcharge of Rs 300. Kingfisher Airlines also imposed a fuel surcharge of Rs 300, effective Tuesday.