West Asia crisis: Jet fuel prices soar over 100%, India caps hike for domestic flights as oil PSUs bleed cash

New Delhi: Against the sharp rise in the prices of Aviation Turbine Fuel (ATF), or jet fuel, globally, India on Wednesday witnessed a “partial” increase in prices as Oil Marketing Companies (OMCs) announced a hike of 8.6 percent. The retail selling price of ATF now stands at Rs 1,04,927/kilolitre (kL) in Delhi, up from Rs 96,638.14 in March. Kolkata saw rates increase to Rs 1,09,450 from Rs 99,587.14, while Mumbai registered an increase to Rs 98,247 compared to Rs 90,451.87 last month. Chennai witnessed one of the steepest hikes among metros, with prices reaching Rs 1,09,873, up from Rs 1,00,280.49.

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On an average, there is an increase of roughly 8-10 percent month-on month in ATF prices across these metro cities. In addition, the price of XP100 petrol, a 100-octane fuel designed for high-end luxury cars and superbikes, has increased by Rs 11 to Rs 160 per litre. Meanwhile, the price of IOCL’s premium diesel variant, Xtra Green, has increased from Rs 91.49 to Rs 92.99 per litre. According to official estimates, the consumption of these fuels makes up around just 2-5 percent of overall petrol and diesel consumption.

Govt: Full cost pass-through would have pushed ATF prices by over 100%

Referring to the price hike, the Petroleum Ministry said on X that due to the “closure of Strait of Hormuz and extraordinary situation in global energy markets,” price of ATF for domestic consumers would have gone up by more than 100 percent had the price increase been passed on fully. ATF prices in India were deregulated in 2001 and are revised month by OMCs on the basis of a formula linked to global pricing benchmarks.

“In order to insulate the domestic travel costs from the substantial increase in international prices, PSU Oil Marketing Companies of the Ministry of Petroleum, in consultation with Ministry of Civil Aviation, have passed only a partial and staggered increase of 25 percent (only Rs15/litre) to the airlines,” said the Petroleum Ministry in a post on X.

The word ‘staggered’ elicited a lot of speculation during an inter-ministerial press briefing on Wednesday, with the press asking questions around whether the full increase in global ATF prices will be passed on to consumers eventually. In response, the Joint Secretary with the Ministry of Petroleum and Natural Gas, Sujata Sharma, said that she cannot comment on policy matters as of now.

Confusion over ATF rates

There was also confusion over the actual increase in jet fuel prices as Indian Oil, India’s largest fuel retailer, earlier in the day, released pricing data which showed a steep rise of 115 percent in ATF rates. However, later in the day, a clarification was issued that the prices have been increased by only 8.6 percent in comparison to March.

Clarifying the same during the inter-ministerial press briefing, Sharma said that the 25 percent increase in ATF prices mentioned by the Petroleum Ministry on X is on the base price of jet fuel, while the increase of 8.6 percent is the increase in the final price (retail selling price) inclusive of taxes and levies.

“ATF is a deregulated product. Since the prices of crude oil has increased substantially and consequently the cost of procurement to OMCs has gone up, so there was a need to pass on the increase in prices at least in deregulated products. This is the reason ATF prices have been hiked. We have not passed on the full price increase, it’s only a partial increase,” said the Petroleum Joint Secretary. She also declined to comment on whether the government will be supporting OMCs, who will be losing money on ATF now, in addition to petrol, diesel and LPG, financially.

Foreign routes to pay full increase in jet fuel prices: Govt

While the increase in ATF prices for domestic flights is partial, foreign routes will have to bear the full cost of the increase in jet fuel prices. “Foreign routes will pay for the full increase in ATF prices consistent with what they pay in other parts of the world,” said the Petroleum Ministry on X.

“If you look at the increase for domestic sector, the figure stands at around Rs 21 per litre. In comparison, the ATF price increase for international flights is more than Rs 110,” said Sharma during the press briefing. For airlines on international run, the price of ATF in Delhi has increased by about 107 percent to USD 1,690.81 per kilolitre.

MoCA: Partial ATF price hike provides ‘critical relief’

The Ministry of Civil Aviation said that the Centre’s decision to cap the increase in domestic ATF prices at 25 percent provides “critical relief,” and the move will “prevent a potential industry-wide crisis.” “For Indian carriers, fuel typically accounts for nearly 40 percent of total operating expenses for Indian carriers. The calibrated increase helps prevent a potential industry-wide disruption,” said Asangba Chuba Ao, Joint Secretary, Ministry of Civil Aviation, at the inter-ministerial press briefing.

The official also said that the revision will prompt airlines to review the fuel surcharges they had already announced in anticipation of a steep hike in ATF prices domestically. “Every airline has their own way of calculating their financials. So, they will do their due diligence. It’s an open and competitive market. So, the airlines will recalibrate their prices. We also have a very robust mechanism to monitor air fares. If there’s any abnormal surges in fares then the Civil Aviation Ministry can intervene,” said the Joint Secretary.

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Major Indian carriers, like IndiGo, Akasa Air and Air India Group had imposed fuel surcharges between Rs 200 for domestic flights to USD 200 for long-haul international flights. Industry sources said that the air fares could go further up, especially for international flights.

OMCs bleed cash as govt shields domestic consumers

State-run fuel retailers have already held the rates of petrol, diesel steady, while announcing a small increase of Rs 60 in domestic LPG cylinders earlier in March to shield public from the increase in global energy prices. Even though the government has announced excise duty cuts of Rs 10/litre for petrol and diesel, it still leaves OMCs with under-recoveries of Rs 24.40/litre on petrol and Rs 104.99/litre on diesel. On LPG, they incur under-recovery of Rs 380/cylinder. In addition, the government has imposed export duty of Rs 29.5/litre on ATF to disincentivise exports.

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