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OMCs reduce jet fuel price by 3%

17 May 2011 Evaluate

Last week government owned Oil Marketing Companies (OMCs) have cut the Jet fuel prices by 2.9% after increasing it for 14 times in a row from last October. Despite the decrease in price of jet fuel, passengers are unlikely to pay less for their travels.

The domestic OMCs modify the jet fuel prices on 1st and 16th of every months based on the standard international prices in the prior fortnights. The jet fuel prices have been reduced by 2.9% to Rs. 58,794 per kilo litre from Rs. 60,560 per kilo litre, since last October jet fuel prices have gone up by more than 48.6% from Rs. 40,728. 

As per the aviation experts, the reduced price of jet fuel is a welcome step of OMCs, but cut might be too modest for the industry, which is already reeling under significant operating cost. Fuel forms around 40% of airlines’ total operation cost, which may differ among domestic flights which have to pay for surges; however international flights get exemptions from duty on the fuel. The airline industry has been demanding a declared goods status for ATF, which will attract a uniform 4% tax across the country.

Above all, it is being anticipated that the cut in fuel prices may not have any major impact on the pricing, as airlines’ are already giving attractive fares, instead the reduced fuel prices will be used to improve the margins. The fare prices are likely to come down if the average of the basket of crude oil remains low and the ATF price is consistently reduced for some months.

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