THE aviation turbine fuel (ATF) market, till now the monopoly of public sector oil companies, could soon witness competition as the ministry of civil aviation has urged Airport Authority of India (AAI) to develop common fuel infrastructure at airports and enable private oil retailers such as Reliance and Essar to enter the fray. The ministry has said throughput charge should not be the basis for awarding contract to oil companies for supplying the jet fuel.
The move is intended to stop the trend of public sector oil companies like IOC quoting higher throughput charge to bag the contract and then pass on the extra burden to airlines. AAI awards the contract to supply the fuel at airports to the companies which ensure maximum throughput charge to it.
Airlines feel that competiton in ATF supply would lead to lower prices and have been pushing for oil supply infrastructure to be converted into a common carrier so that more players can enter this business. The civil aviaiton ministry is also supportive of this move as this could lead to some moderation in ATF prices in India which are among the highest in the world.
“In the recent past public sector oil marketing companies which have monopoly in supplying ATF at almost all the major airports have been quoting maximum throughput charge to win the contract. While these companies pass on the throughput to airlines, the move has adverse effect on airlines as well as passengers. In that case airlines levy fuel surcharge to passengers. This is not healthy trend for the domestic aviation industry,” an official in the ministry of civil aviation said.
“We have asked AAI to help us rationalise the fuel price in the country and bring it to international level,” he added.
Earlier this month, oil regulator Petroleum and Natural Gas Regulatory Board (PNGRB) had written to the civil aviation ministry for freeing of aviation fuelling facilities at airports from the public sector stranglehold by allowing use of existing infrastructure by all players including private companies.
“Taking a cue for the awards for new airports by Airport Authority of India at Hyderabad and Bangalore for setting up aviation fuelling infrastructure under common carrier or open access principles, AAI should also be simultaneously directed to pursue extension of similar principles to cover other airports,” PNGRB chairman L Mansingh said in a letter.
Fuelling infrastructure at most of the airports in the country are in the hand of public sector oil companies. At these airports even if a private oil marketing company wins the contract they can’t supply the fuel as they won’t find any space there. Lack of competition in marketing the jet fuel leads to the price of ATF escalating.
A Federation of Indian Airlines (FIA) estimate indicates that a reduction in ATF price by 60% (to bring it closer to international benchmarks) has an impact of lowering airline operational losses by 25%. It believes that rationalisation of ATF price and bringing it to international level may bring an annual savings of $ 624 million for the airline industry.