Oil Min may Reject ATF Import move.

New Delhi: This could disappoint Kingfisher Airlines, which hopes to import jet fuel without attracting state taxes and on credit from foreign suppliers. The petroleum ministry is set to reject the Director General of Foreign Trade’s (DGFT) proposal for letting private parties to import jet fuel as the country has surplus production.

“There is no question of allowing imports when we are a net exporter of ATF,” a person privy to the petroleum ministry’s thinking said. India exported 2.86 million tonne of jet fuel in the April-October period this year, earning $2.87 billion.

The official said that by importing jet fuel, user industries hope to save the state level taxes on the commodity in the range of 25%-30%. The central tax on on ATF is anyway very low, only 8% excise duty on domestic production. A matching 8% customs duty is to be paid if somebody imports the commodity. If businesses want ATF price to come down, they should approach state governments to lower their taxes, the person said.

As per the foreign trade policy, only state trading agencies or authorized companies like IOC are allowed to import ATF. Petroleum ministry, however, asserts that the non-tariff restriction on import of jet fuel has nothing to do with protecting the market for domestic refiners like IOC, HPCL, Reliance Industries and Essar Oil. “In this case (Kinfisher’s request), the proposed import of jet fuel is for their own consumption and not for further sales in the domestic market,” the person said.

The DGFT is empowered to give exemptions to individual companies. “But the applicant has to prove it is facing genuine hardship,” said Anup Pujari, the DGFT. The DGFT seriously takes into account the administrative ministry’s views—in this case, the oil ministry—while deciding on such requests.

Kingfisher has told the DGFT that ATF accounts for about two fifth of its total operating cost. The high price of jet fuel in the global market, which gets reflected in its local price, the sharp weakening of the domestic currency against the dollar and the high state level taxes adversely affect the company’s cash flow and profitability, it said. The company wants to explore cheaper supplier credit and to avoid the incidence of local taxes. Indicating that cost-cutting measures are vital for Kingfisher at this juncture, the company told the DGFT that direct import of jet fuel will enable it to remain functional and meet its commitments to customers and banks. Kingfisher reported a net loss of R468.66 crore for the second quarter ended September 30 and has a debt of R6,419crore. Due to the competition in the domestic aviation sector, companies were unable to raise fares .

Source : financialexpress.com