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  3. Cash-strapped airlines to import fuel directly against licences issued by DGFT

Cash-strapped airlines to import fuel directly against licences issued by DGFT

23 Feb 2012 Evaluate

There seems to be finally a sigh of relief for the cash-strapped airlines who will now be allowed to import fuel directly on actual user basis against licences issued by DGFT. All licenses will come with a validity period and will become invalid if an airline is not able to import within the prescribed period. Commerce Secretary Rahul Khullar was reported to have said that the government will only allow actual users to import ATF against licences. Traders who want to import to sell it to other customers will not be allowed.

The airlines have asked the DGFT to allow them to import aviation turbine fuel (ATF) directly instead of canalising it through a state trading enterprise or STE, as through this medium the airlines were ending up paying huge local taxes that varied between states ranging from 4% to 30%. After intense lobbying by private airlines, an empowered group of ministers recommended to the Cabinet that all domestic carriers should be allowed to directly import the fuel to cut their losses. ATF contributes to about 40% of an airline's operational costs.Now all the carriers who are interested to avail the opportunity to import ATF directly without going through STE route may apply to the DGFT.

Meanwhile, the state owned oil marketing companies (OMC’s) who were till now supplying the ATF to the airlines have argued that any move to allow airlines to directly import ATF would upset production of diesel and petrol too. OMC's have further stated that currently the country is self-sufficient in the production of ATF and they produce enough to take care of the domestic demand.

However, the government will have to consider the infrastructure factors before announcing this ostensible benefit to airlines. ATF is a very quality-sensitive product and there is lack of infrastructure for bringing in ATF cargo, along with many other issues.

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