The airline companies of the country have appealed to the petroleum companies not to increase the prices of jet fuel.
Crude oil prices are sky high. Brent crude of Gulf countries is teasing the world by standing at $110 per barrel. On the other hand, the condition of the country’s airline companies has become very poor. According to reports, Indian airlines have asked government oil refineries not to increase jet fuel prices for domestic flights until the ongoing conflict in the Middle East ends. Airlines want this so that the increasing cost pressure and increasing losses on them can be reduced. Let us tell you that fuel accounts for 40 percent of the total cost of the airline.
People associated with the matter, quoting media reports, said that the refineries are considering this proposal given by airlines like Air India Limited, Indigo and SpiceJet Limited. India’s oil and gas ministry is also involved in these discussions, and may once again intervene, as it did in April and May. A decision on this is expected before June 1.
The prices of aviation turbine fuel (jet fuel) in India are decided by the oil marketing companies of the country. Petroleum companies make any changes in prices on the first of the month. Pricing has been deregulated for years, but in April — when global oil prices spiked due to the Iran conflict — the government limited recent jet fuel price increases to 25 percent and asked oil companies to keep prices stable through the month of May.
How much loss on jet fuel?
State-run oil refineries — including Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation — are also discussing whether to increase jet fuel prices for domestic flights by up to 25 percent in June, people familiar with the matter said. These people further said that these refineries are selling jet fuel for domestic flights at the rate of about Rs 105,000 ($1,090) per kilolitre, due to which they are incurring a loss of Rs 92,000 per kilolitre.
No official statement has come out in this matter from the spokespersons of India’s Oil Ministry, Oil Refineries and Airlines. These restrictions apply only to fuel used for domestic flights. Jet fuel prices for international flights, which are free from government control, doubled in April and reached $1,511.86 per kiloliter in May.
Airlines’ problems are continuously increasing
Oil accounts for about 40 percent of the total cost of airlines in India. The industry had recently warned that if the government did not control fuel prices, they may have to cancel flights and face other disruptions in their business. They are also lobbying for tax cuts or deferrals, and some airlines have reduced their flight schedules due to reduced demand. This decrease in demand is to some extent the result of increase in air fares.
Airlines are also struggling with the weakening rupee, which has made it expensive for them to pay aircraft leases and airport fees abroad in dollars. Since the Iran war, India has announced a number of measures, including waiver of aircraft landing and parking charges, controlling rising jet fuel prices, and cutting taxes on fuel for flights operating from its largest airports – Delhi and Mumbai.
Increase in the price of petrol and diesel
International flights have also been affected by the conflict in the Middle East. After Pakistan earlier banned Indian airlines from using its airspace, airlines were using Iranian airspace to fly to Europe and the US. These airlines have passed the burden of increased costs on to passengers in the form of increased air fares, leading to a decline in demand in the world’s third largest domestic aviation market.
Government refineries on Tuesday raised the prices of road transport fuel for the second time in less than a week. Diesel and petrol prices in New Delhi have been increased by 1 per cent, after a 3 per cent increase last Friday. These increases are modest compared to the massive 50 percent increase in Brent crude prices since the war began.
