New Delhi, April 1 The government's decision on a limited increase in jet fuel prices ensures that airlines' domestic operational costs remain manageable and will not lead to additional fuel surcharges, an official said on Wednesday.
Asangba Chuba Ao, joint secretary at the civil aviation ministry, said that with the partial increase in aviation turbine fuel (ATF) price, airlines would recalibrate their pricing, and this move prevents a potential industry-wide crisis.
ATF accounts for around 40 per cent of an airline's operational costs.
Earlier in the day, Civil Aviation Minister K Rammohan Naidu said that the decision by public sector oil marketing companies, in consultation with the Ministry of Civil Aviation, to implement only a partial and staggered increase of 25 per cent (₹15/litre) for domestic airlines is both pragmatic and forward-looking, while ensuring that foreign routes bear the full market-aligned price.
At an inter-ministerial briefing in the national capital, Asangba said that the limited increase of 25 per cent in ATF price for domestic scheduled carriers on domestic routes provides critical relief and ensures that domestic operational costs of Indian carriers remain manageable.
"This move prevents a potential industry-wide crisis... (and) allows airlines to maintain competitive pricing for domestic passengers, avoiding additional fuel surcharges that would have been necessary under a market-linked pricing mechanism," he said.
According to him, domestic airlines have informed that such calibrated measures are critical for operational stability and financial viability in a challenging global environment.
Last month, airlines either started levying or hiking fuel surcharges in the wake of the West Asia conflict that is pushing oil prices higher.
The domestic air passenger traffic is over 4.5 lakh per day.
While acknowledging that India is a competitive and price-sensitive market, Asangba said airlines would do their due diligence and added that there is also a robust mechanism to monitor airfares. In case there is anything abnormal, the ministry would intervene, he added.
The official also stressed that the move would support the broader economy by ensuring smooth movement of cargo and maintaining vital air connectivity for trade and logistics.
Airlines are already incurring higher operational costs due to airspace restrictions in the West Asia region amid the conflict. The situation is forcing carriers to take longer routes for international flights, resulting in increased fuel burn.
ATF price was increased by 8.5 per cent to ₹1,04,927.18 per kl for domestic airlines. The ATF price for domestic airlines in Delhi was hiked by ₹8,289.04 per kilolitre, or 8.56 per cent, to ₹104,927.18 per kl, according to state-owned oil firms. The rate compares to ₹96,638.14 per kl last month.
Domestic airlines will pay half of what foreign airlines, as well as other carriers such as non-scheduled, ad hoc, and charter, would pay. For them, prices have gone up by ₹110,703.08 per kl, or 114.5 per cent, to ₹207,341.22 per kl.
The increase for domestic airlines came to only 8.56 per cent or ₹8.3 per litre (₹8,289.04 per kl equals to about ₹8.3 per litre). While the ministry did not elaborate on its calculations, the quantum indicated -- 25 per cent, or ₹15 per litre -- may be the total increase that oil companies may have decided to pass on to domestic airlines over a certain period of time.
Pricing of ATF was deregulated in 2001, and since then, rates have been aligned with benchmark international prices, as per a written understanding with the airlines.
IndiGo on Wednesday said the partial hike in ATF price will help insulate the domestic air travel costs amid the rise in fuel costs due to the Middle East conflict.
SpiceJet Chairman and Managing Director Ajay Singh on Wednesday said the government's decision to allow only a partial increase in jet fuel prices would be a significant relief for the country's aviation industry at a time of unprecedented global uncertainty.
Appreciating the government's timely intervention, Akasa Air said such measures help create a stable operating environment for airlines, enabling to manage costs more effectively thereby making travel more affordable.
According to Naidu, the partial and staggered increase in jet fuel prices for domestic airlines will help in shielding passengers from sharp fare hikes.