Three aviation shares rose by 0.67% to 5.52% on the BSE on reports that the government may help the financially-pressed aviation sector by allowing airlines to import their fuel directly.
At 12.22 pm, SpiceJet up 5.52%, Jet Airways (India) up 4.04% and Kingfisher Airlines up 0.67%.
Jet fuel, or aviation turbine fuel ( ATF), makes up for 50% of an airlines' operating cost. Currently airlines buy ATF from state-run oil marketing companies (PSU OMCs). It is imported on their behalf. That is why airlines have to pay hefty states sales tax. By importing directly for their own consumption, the airlines would not have to pay the levy. The average sales tax on ATF in India is the second highest in the world, lower than only Bangladesh's 27%. The average tax in India is 24%.
According to reports, the move would help airlines save at least Rs 2500 crore annually, a fourth of their total ATF bill of Rs 10000 crore. Since a decision on allowing airlines to import ATF involves a policy change, any decision on this will have to be referred to the Cabinet for approval, reports suggested.
PSU OMCs recently cut jet fuel rates by 1.3% in step with softening in commodity's international rates. The price of ATF in Delhi was cut by Rs 833 per kilolitre (kl), or 1.3%, to Rs 63,739 per kl with effect from midnight Thursday (15 December 2011).
The three PSU OMCs--BPCL, HPCL and Indian Oil Corporation--revise jet fuel prices on the 1st and 16th of every month, based on the average international price in the preceding fortnight.