Indian airlines get okay to import jet fuel

INDIA'S cash-starved airlines will be allowed to import jet fuel directly under a plan approved by a government panel yesterday, a break that could help them cut fuel costs by up to 20 per cent but also require new spending.!

Carriers led by Kingfisher Airlines have long demanded the right to import fuel, which accounts for about half of their operating costs, and airline shares soared on the news.!

The airlines, almost all of which are losing money, are now required to buy fuel from oil marketing companies including government-controlled Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp, which are mandated to levy various federal and state taxes.!

Largely because of these taxes, jet fuel prices in India are among the highest in the world and the move to allow direct imports could reduce costs by 15 to 20 per cent, analysts said.!

Kingfisher shares surged by their maximum daily limit of 20 per cent on the news, while SpiceJet and Jet Airways rose 19.5 per cent and 18.2 per cent respectively.!

Importing the fuel will present its own challenges, however.!

"Airlines have to look at where they can store this fuel," said Rajan Mehra, executive director at Asia Pacific Academy for Aviation and Hospitality.

"I think actual net savings will be 10 per cent because they will be paying for storage as well."!

Reuters