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Oil firms cut jet fuel prices by 1.38 percent

State-owned oil marketing companies (OMCs) Thursday pared jet fuel prices by 1.38 percent or Rs.833 per kilo litre (kl), effective from Dec 16.

With this, the air turbine fuel (ATF) prices at Delhi's IGI airport will come down from Rs.64,622.34 per kilo litre to Rs.63,739 per kilo litre from midnight Thursday.

The price cut comes after the OMCs Nov 30 hiked the fuel cost by 3.70 percent. The OMCs had previously increased the prices by 1.95 percent on Nov 15.

The OMCs revise ATF prices on every 1st and 16th of the month based on the average international crude oil price during the fortnight.

The latest cut is expected to reduce the burden on the industry, which has seen many airlines reporting losses owing to the high cost of jet fuel.

'Any reduction in ATF prices is a welcome step. But there is still a long way to go in rationalizing our domestic ATF prices which are nearly 50-60 percent higher than that in our competing markets like Middle East and Southeast Asia,' Amber Dubey, director, aviation for the global consultancy firm KPMG, told IANS.

Earlier, Civil Aviation Minister Vayalar Ravi informed parliament that domestic jet fuel is being sold at a much higher price than other Asian cities like Kuala Lumpur, where ATF is sold at Rs.41,009.33 per kilo litre, followed by Singapore at Rs.42,289.90 and Dubai at Rs.43,087.33.

The ATF cost accounts for nearly 50 percent of the operating cost of any airline. Jet fuel prices also vary from state to state which levy sales tax on the ATF in the region of 3 to 35 percent.

'Various taxes imposed by government on ATF is one of the reasons for higher cost of domestic aviation fuel,' Civil Aviation Minister Vayalar Ravi had informed the parliament.

Jet fuel prices have increased by 30 percent since December 2010, and domestic airlines are expected to lose Rs.3,500 crore in the first six months of this fiscal.

Owing to high jet fuel and interest costs, three major airlines -- Kingfisher, Jet and SpiceJet -- have reported heavy second-quarter losses.

Flag carrier Air India and its subsidiaries owe Rs.1,563.67 crore to Indian Oil Corp, followed by Rs.409.82 crore to Bharat Petroleum Corp and Rs.337.16 crore to Hindustan Petroleum Corp.