There is news of great relief for air passengers. Now there will be no increase in the prices of jet fuel for domestic flights. This means that common passengers will be freed from the sudden increase in air fares. Government fuel retailers have started a price stabilization scheme, under which domestic airlines will be given a fixed price of fuel for up to three years. The purpose of this step is to protect airlines and passengers from major fluctuations in global oil prices. On Tuesday, the prices of Aviation Turbine Fuel (ATF) were increased by about 10 percent. Let us also tell you what kind of news has come out regarding jet fuel.
10 percent increase
The PTI report quoted industry sources as saying that the price of jet fuel for domestic airlines will now increase from Rs 104.927 per liter to Rs 115 per liter. This means that according to the new formula, the price of jet fuel has increased by more than Rs 10 per liter. For those airlines that decide to join this price stabilization scheme of the government, the new price will remain fixed for three years. Airlines which do not opt for this scheme will have to pay market linked prices like international airlines, which is currently around Rs 142 per litre.
Airlines opting for the price stabilization scheme will continue to get ATF at the rate of Rs 115 per liter and will be protected from fluctuations in global benchmarks. At the same time, the airlines which will not participate in this will get the benefit of the fall in prices, but they may have to pay higher prices if the international rates increase. Sources said that this scheme is completely voluntary and the airlines will have to decide whether they want to join it or not.
What will be the price in which metropolis?
Under this voluntary scheme, participating airlines will pay a fixed ‘free-on-board’ (FOB) benchmark price of Rs 86.32 per litre. Airport charges, oil company margin and applicable taxes will also be added to this. Due to this, the effective selling price will be Rs 115 per liter in Delhi, Rs 114.5 in Mumbai and Rs 139 per liter in Chennai. The new price can be compared with the below market price of around Rs 105 per liter in Delhi. When global fuel prices rose after the conflict in West Asia began in late February, the government allowed only a partial increase to be implemented, due to which the prices remained stable for more than two months. Due to this stability, oil marketing companies had to suffer losses on ATF, as was also seen in petrol, diesel and LPG segments.
Price Stabilization Scheme real purpose
To compensate for this loss, the Union Cabinet approved a price stabilization scheme of Rs 10,000 crore. Its objective is to keep ATF prices within a limit and protect airlines from fluctuations related to geopolitical tensions, as well as to strengthen the financial position of government oil companies. Under this scheme, whenever global benchmark prices go above the base rate of Rs 86.32, the government will give an interest-free advance to oil marketing companies to cover the difference. When prices fall, the difference will be recovered from the companies and deposited back into the Consolidated Fund of India.
Operating expenses will increase by 60 percent
ATF generally accounts for around 40 per cent of an airline’s operating expenses and can go up to 60 per cent during times of significant price fluctuations. Sources said that in May, international jet fuel prices had increased from the pre-war rate of Rs 60.50 per liter to Rs 142 per liter, raising concerns about the airline’s operating expenses and possible increase in fares. He said the new arrangement is not a subsidy but a temporary stabilization framework aimed at reducing fuel price fluctuations while ensuring accountability, monitoring and full recovery of funds.
Passengers will benefit like this
The most important benefit of this decision for passengers is that it will help in reducing the sudden increase in airfares, which is often caused by huge jumps in fuel prices. By reducing the impact of large fluctuations in fuel prices, the government aims to reduce the burden of such expenses on passengers and bring greater stability in fares.
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