Jet fuel to cost more

The country's oil marketing companies are preparing for another round of increase in the price of aviation turbine fuel on July 1 as the average price of the fuel in international markets has shot up to around $160 per barrel in June from $150 per barrel in May.

The government-owned oil marketing companies – Indian Oil Corporation (IOC), Bharat Petroleum and Hindustan Petroleum – revise prices of aviation fuel on the first day of every month, taking into account the average global prices in the previous month.

"There will certainly be a price hike. We are yet to work out the quantum," said a senior official with IOC, which has a majority share in the ATF market. However, news agency reports said that prices are likely to go rise by up to Rs 2,500 per kilolitre on July 1.

The price of ATF in the country is almost 40 per cent higher than elsewhere in the world. This is seen as the main contributor to the losses of Rs 8,000 crore the industry is projected to report in the current financial year.

The oil marketing companies had increased ATF prices sharply by Rs 10,839-12,375 per kilolitre at the beginning of June. Prices were then lowered by Rs 3,000.42-3,239.41 per kilolitre on June 5 after the government cut customs duty on the fuel to 5 per cent from 10 per cent.

Executives of Indian carriers like Spice Jet, Kingfisher and Air India have already made it clear that there will be a further price rise next month if ATF price goes up, though none of them said by how much. "We have not decided on a price increase at this point," said a Simplifly Deccan executive.

Last month's increase led to leading carriers like Kingfisher and Air India hiking their fuel surcharge by Rs 300 to Rs 500 for short and long sectors, respectively.

This was followed by another round of increase in fares on June 19, when low cost carriers like Spice Jet hiked fuel surcharges in a similar manner and full service carriers like Jet Airways and Air India increased their minimum basic fare. Across the industry, fares increased by as much as 15 per cent.