Business - Taxes, costing methods make Indian ATF prices highest in Asia-Pacific

Rakteem Katakey

Despite a 36 per cent cut in aviation turbine fuel (ATF) prices since August and a waiver on customs duty, India can still boast of some of the highest prices in Asia-Pacific — with or without taxes.

Stripped of taxes and duties, the ATF prices are around 10 per cent higher in India compared with those in Singapore and Kuala Lumpur as the oil companies look to make up for losses on kerosene and cooking gas, industry experts said.

If taxes and duties are added, the retail price of ATF in Delhi and Mumbai, India’s largest aviation hubs, is around 60 per cent more expensive.

“The cross-subsidisation on jet fuel is quite low, but it does help us to quite a large extent,” said an official with Indian Oil, which sells more than half the jet fuel the country’s airlines consume.

The base price of ATF — the price at the refinery gate without the taxes and margins — is around Rs 30.21 per litre. The base price in Singapore, Kuala Lumpur and Abu Dhabi is around Rs 27.50 per litre.


HIGH-FLYING COSTS

Retail jet fuel prices (in Rs/litre*)
Singapore 29
Kuala Lumpur 29
Abu Dhabi 30
Islamabad 31
Karachi 27.5
Chittagong 43.5
Kathmandu 65
Delhi 44.9
Mumbai 46.5
* At $1=Rs 50 (Including taxes)
Source: Oil marketing companies


The base price in India is calculated on an import parity basis, which adds shipping costs and insurance to the internationally traded price of jet fuel.

However, Indian refiners and fuel marketers do not import jet fuel. The shipping costs and insurance, which they don’t actually incur, in the final base price also help the marketers make profits on the fuel.

India levies excise duty and countervailing duty at the rate of 8 per cent each, and local governments additionally levy taxes ranging from 20 to 30 per cent. All these imposts increase the final selling price nearly 50 per cent from the base price. In comparison, the final price in Singapore, Malaysia and Dubai are only 5 per cent higher than the base price.

In cities like Singapore and Kuala Lumpur the total tax component of the jet fuel prices is not more than 5 per cent. In Delhi, taxes and duties make up around 32 per cent of the final price of the fuel.

The country’s airlines have been calling for lower taxes on jet fuel which will reduce prices and help them make profits.

As retail jet fuel prices in India rose over 81 per cent between August 2007 and August 2008, the airlines increased passenger fares, causing passenger growth to dwindle.

India’s airlines are expected to make losses of between Rs 7,000 crore and Rs 9,500 crore this year.