Indian airlines plead with oil majors to postpone jet-fuel hikes
Their proposal is under consideration by the refiners, sources say
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[MUMBAI] India’s airlines have asked state-run oil refiners to hold off on hiking jet-fuel prices for domestic flights until the conflict in the Middle East ends, sources said.
They are doing so in a bid to alleviate their rising cost pressures and mounting losses.
The proposal floated by airlines including Air India, IndiGo and SpiceJet is being considered by the refiners, said the sources, asking not to be named because the discussions are private.
India’s oil and gas ministry is also involved in discussions and may intervene again, as it did in April and May.
A decision is expected before Jun 1.
So-called aviation turbine fuel prices in India are set by the country’s oil-marketing companies, which usually make any revisions on the first day of the month.
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The price setting has been deregulated for years, but in April – after global oil prices surged due to the Iran conflict – the government limited the most recent jet-fuel price hike to 25 per cent and required the oil majors to keep them constant in May.
The state-owned refiners, which include Indian Oil, Hindustan Petroleum and Bharat Petroleum, are also discussing whether to raise jet-fuel prices in June by up to 25 per cent for domestic flights, the sources said.
They have been selling jet fuel for domestic flights at about 105,000 rupees (S$1,394.54) for every 1,000 litres, incurring a loss of 92,000 rupees for every 1,000 litres, the sources added.
Spokespeople for India’s oil ministry, the oil refiners and the airlines either did not comment or did not respond to queries.
The curbs apply only to fuel for domestic flights.
Jet-fuel prices double in April
Jet-fuel prices for international flights, which are not regulated, doubled in April and climbed further to US$1,511.86 for every 1,000 litres in May.
Oil constitutes around 40 per cent of airlines’ costs in India.
The industry recently warned of flight suspensions and other business disruptions if the government does not put a lid on fuel prices.
They are also lobbying for tax reductions or deferments, and some have reduced flight schedules due to a fall in demand that is partly a result of higher fares.
Airlines are grappling with a weaker rupee as well, which makes it costlier for them to pay in US dollars for aircraft leases and overseas airport charges.
Since the Iran war, India has announced a slew of measures that includes rebates on plane-landing and parking charges, regulating increases in jet fuel prices, and tax reductions on fuel for flights operating out of Delhi and Mumbai, its biggest airports.
International flights have also been impacted from the Middle East conflict, as airlines were using the Iran airspace to fly to Europe and America, after Pakistan earlier banned Indian airlines from using its airspace.
The carriers have passed on higher costs to fliers in the form of increased fares, which has depressed demand in the world’s third-largest domestic aviation market.
State-run refiners on Tuesday (May 19) raised road-transport fuel prices for a second time in less than a week, increasing prices of diesel and petrol in New Delhi by 1 per cent following a 3 per cent hike on May 15.
Those increases are modest in comparison to the 50 per cent surge in Brent crude since the war began. BLOOMBERG
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