GoM Clears The Proposal To Allow Indian Carriers To Import Fuel Directly (07-Feb-2012)
The group of ministers (GoM), headed by the Finance minister, has cleared the proposal to allow Indian carriers to import fuel directly. The panel of ministers has also approved a debt restructuring plan for state-run carrier Air India. The panel was also apprised on the issue of FDI in domestic airlines by international carriers.
The airline industry, off late has been under severe financial stress and demanded that it be allowed to import aviation turbine fuel directly rather than buying it domestically. Currently Indian carriers buy jet fuel from state run corporations and have to pay a hefty sales tax to state governments. Since jet fuel accounts 40 to 50% of an airline's total operational cost, savings in this area can bring down costs substantially. Average tax on jet fuel in India is 24%, which is second highest in the world second only to Bangladesh at 27%.
The GoM has also approved a debt restructuring plan for state-run carrier Air India. It has recommended issuance of bonds with sovereign guarantee worth Rs 7,400 crore for Air India. The bond is likely to carry a coupon rate of 8.5-9% and financial institutions may subscribe to these bonds. A final decision is expected after the matter is approved by the Cabinet Committee on Economic Affairs.
The panel was also apprised about the issue of FDI in domestic airlines and the aviation ministry is likely to move a note to the cabinet to allow foreign airlines to buy stakes of up to 49% in Indian carriers. Currently foreign investment of up to 49% is permitted in the aviation sector, apart from 100 % in MRO (maintenance, repair and overhaul), airports, helicopter and sea-plane operations, but foreign carriers are not allowed to invest.
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