Jet fuel prices

Jet Fuel Prices Cut By 1.3%, Deepak Talwar Explains Its Effects On Air Travel

For the first time this year, the Indian Oil Corporation Limited dropped the price of Aviation Turbine Fuel (ATF) by 1.3 per cent to Rs.1.21 lakh/kl. Since January, India’s jet fuel prices have been pushed up by a global spike in fuel prices caused by the Russia-Ukraine war and increased demand as a result of a controlled number of Covid cases. A seasoned market analyst and lobbyist, Deepak Talwar, talks about its effects on air travel and various other aspects.

The price of jet fuel was recently increased by 5 per cent in the month of May. In March, there was a significant increase of 18.3 per cent, followed by a 2 per cent increase in April. Since the beginning of 2022, prices have increased by 61.7 per cent, from Rs 72,062/kl to Rs 1.23 lakh/kl. After 10 rounds of price hikes, this is the first cut on softening international crude oil rates. Commercial LPG costs, which are utilised by businesses such as hotels and restaurants, were dropped by Rs 135 per 19-kg cylinder at the same time. “Despite the AFT price hike, the domestic air passenger traffic grew by 59 per cent to 84 million in 2022. However, this was 40 per cent lower than the pre-pandemic levels,” informs Deepak Talwar, a seasoned market expert. 

The price of jet fuel is adjusted twice a month, on the 1st and 16th, and the price of gasoline and diesel is adjusted daily, based on corresponding rates in the worldwide market. ATF now costs Rs 120,306.99 per kilogramme in Mumbai, whereas it costs Rs 126,369.98 in Kolkata and Rs 125,725.36 in Chennai. Rates vary in each state, based on the amount of municipal taxation imposed. India relies on imports for 85 per cent of its oil needs. Jet fuel, which accounts for 40 per cent of an airline’s operating cost, has witnessed a surge due to a rise in fuel prices. 

“ATF costs are still substantially higher than they were in January, and they may have little impact on airline ticket pricing in the immediate future. The recent increase in ATF rates has had a significant impact on air travel, with airline businesses experiencing significant losses as a result of the high prices,” says Deepak Talwar, a seasoned market expert and lobbyist. In light of growing fuel prices, the Ministry of Civil Aviation should consider raising the upper restrictions on domestic airfares. The cost of jet fuel accounts for 40 per cent of the total cost of flying. “First, there was the COVID-19 pandemic’s uncertainty, and now there are these astronomically high fuel prices. If anything, the higher band should be increased because we just need to keep the fares in line with fuel prices, which are a serious issue,” explains Talwar. 

In general, air travel is resilient to shocks, and this dispute is unlikely to have an influence on the industry’s long-term growth. Although it is too early to predict what the short-term repercussions of the war and pandemic crisis will be for aviation, it is evident that there are risks, particularly in markets that are affected by the conflict.

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