ATF prices hiked by 16.3% in the capital, touches all time high

Aviation Turbine Fuel (ATF) or jet fuel price has touched a record high after a price hike of 16.3 percent. ATF prices now stand at an all-time high of Rs 1.41 lakh per kilolitre in Delhi.

The price of aviation turbine fuel (ATF) has been hiked by 16.3 percent, to ₹1.41 per kl ( ₹123.03 per litre) in the national capital, according to a price notification of state-owned fuel retailers. Jet fuel, which makes up for almost 40% of the running cost of an airline, has this year surged to new highs. The price of jet fuel has been rising since the beginning of this year, moving up from Rs 72,062 per kilolitre in January to Rs 1.41 lakh per kilolitre now.

Calling massive increase in ATF prices “not sustainable”, SpiceJet CMD Ajay Singh said that domestic airlines have no choice but to raise fares. “See a minimum 10-15 percent hike in fares to sustain the cost of operations,” he said. 

Singh noted that ATF prices are up by more than 120 percent since June 2021. He called for urgent action from union and state governments to reduce taxes on ATF.  “Fuel constitutes more than 50 percent of our operational cost. Weakening of rupee against dollar further significantly impacts airlines,” he added.

On 3 June, the price of ATF was reduced by 1.3 percent which was the first reduction after being hiked for 10 rounds of hike in ATF prices.

ATF makes up about 40 percent of the operating cost of an airline. Jet fuel prices are at a record high in line with the global surge in energy prices. And since India is dependent on imports to meet its oil needs, the only way to cut jet fuel prices is to reduce taxes.

ATF presently is chargeable at an 11 per cent ad valorem rate of excise duty. A concessional rate of 2 per cent is applicable for ATF sold under the Regional Connectivity Scheme.

Ad valorem rate means the incidence of taxation rises whenever there is an increase in the base price. ATF attracts both excise duty of the central government and sales tax or VAT of states.

India’s fuel rates have seen a sharp surge in 2022 on the back of supply concerns amid the ongoing Russia-Ukraine war and a rise in demand that came after relaxations in the pandemic-related restrictions. India imports more than 80 percent of its oil requirements from other countries.