Centre clears Rs 10,000 cr to keep ATF prices stable, Pg21

Key Highlights:

• The Centre has approved a one-time budgetary support of Rs 10,000 crore to public sector Oil Marketing Companies (OMCs).
• This support aims to ensure stable Aviation Turbine Fuel (ATF) pricing for scheduled Indian airlines for three years.
• The initiative seeks to cushion OMCs from losses due to high international jet fuel prices and prevent runaway airfares.
• The arrangement requires Indian airlines to procure ATF exclusively from OMCs for up to three years.
• International jet fuel prices surged by 135% from Rs 60.50 per litre in March to Rs 142 per litre in May, primarily due to the West Asia crisis.
• A monitoring committee comprising the Ministry of Civil Aviation (MoCA), Ministry of Petroleum & Natural Gas (MoPNG), and the Department of Expenditure will oversee implementation.

Detailed Insights:

• The budgetary support is structured as interest-free advances to OMCs, facilitating a fixed-price arrangement for ATF.
• This mechanism aims to provide greater predictability in fuel costs for airlines, reducing their exposure to sudden price spikes.
• OMCs have been incurring losses on domestic ATF sales, as well as on other fuels like petrol, diesel, and cooking gas.
• Indian airlines, particularly those operating international flights, have faced significant financial strain due to market-linked fuel prices.
• ATF typically constitutes about 40% of Indian airlines' operational costs, which had escalated to 55-60% due to the price surge.
• The fund will compensate OMCs when the prevailing Import Parity Price exceeds a determined benchmark price.
• When international ATF prices moderate, the differential amount will be recovered from OMCs and returned to the Consolidated Fund of India.
• Recently, ATF prices for scheduled domestic flights remained unchanged, while international flight prices saw a 27% cut, aligning them with domestic rates.

Key Concepts Involved:

• Aviation Turbine Fuel (ATF): A specialized petroleum-based fuel, also known as jet fuel, used to power aircraft with gas-turbine engines.
• Oil Marketing Companies (OMCs): Public sector entities in India responsible for refining, distributing, and marketing petroleum products like petrol, diesel, and ATF.
• Import Parity Price (IPP): The price a purchaser pays for imported goods, including international costs, tariffs, and transport to the buyer's location.
• Consolidated Fund of India: The primary government account where all revenues, loans, and loan repayments are credited, and from which all authorized government expenditures are made.