New Delhi, 1 June

Aviation Turbine Fuel (ATF) prices for international airlines were cut by a steep 27 per cent in a monthly revision on Monday, offering significant relief to overseas carriers as global fuel benchmarks eased. ATF rates for domestic airlines, however, were left unchanged for a second consecutive month.

The reduction lowers jet fuel prices for international carriers by more than USD 400 per kilolitre to about USD 1,100 per kl, industry sources said.

Rates for these airlines had risen by USD 76.55, or 5.33 per cent, to USD 1,511.86 per kl on 1 May after increasing more than two-fold in April to USD 1,435.31 amid a surge in international energy prices.

Domestic carriers will continue to pay Rs 104,927.18 per kilolitre for ATF, the rate that became applicable on April 1, when only a fourth of the required increase was passed on to airlines. The prices have remained unchanged since then.

Despite a rise in international rates, state-owned fuel retailers had held prices steady in May, absorbing the higher international costs to avoid passing on the burden to passengers.

Now when international rates have softened, they have passed on the reduction to overseas carriers while continuing to suffer losses on domestic supplies.

Separately, oil marketing companies raised commercial LPG prices by Rs 42 per 19-kg cylinder, pushing rates to a record high. The cylinder used by hotels, restaurants and other commercial establishments will now cost Rs 3,113.50 in Delhi, up from Rs 3,071.50 previously.

The latest increase follows a sharp Rs 993 hike implemented on 1May 1, taking commercial LPG prices to their highest-ever levels.

Prices of 5-kg free-trade LPG (FTL) cylinders were also increased by Rs 11 to Rs 821.50 per cylinder.

Household consumers were spared any increase, with the price of the 14.2-kg domestic LPG cylinder remaining unchanged at Rs 913 since early March, when rates were increased by Rs 60 per bottle.

The revisions are part of the monthly price review undertaken by state-owned oil marketing companies.

Prices vary from state to state depending on the incidence of local taxes such as VAT.

Sources said ATF for domestic carriers continues to be priced below cost.

There was no change in prices of petrol and diesel after rates went up by about Rs 7.50 per litre last month. Petrol currently costs Rs 102.12 per litre in Delhi and diesel Rs 95.20.

Airlines across the world are facing disruptions amid a tightening jet fuel supply, triggered by the ongoing war in West Asia. The Strait of Hormuz - a critical conduit for global energy flows - remains effectively closed as the conflict enters its fourth month, further straining fuel availability and supply chains.

In India, jet fuel prices were deregulated more than two decades ago, and since then, the rates have been aligned with benchmark international prices, as per a written understanding with the airlines.

But since the West Asia war-induced surge in global energy prices warranted the steepest increase ever to be made in the ATF prices, the government and state-owned oil companies decided to adopt a calibrated approach, industry sources said.

While foreign airlines and other carriers would pay market rates, prices for domestic airlines have been moderated, they said.

In keeping jet fuel prices unchanged for domestic airlines, state-owned IOC, Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL) will definitely book under-recoveries or losses on such fuel sales.

They would also have similar losses on petrol, diesel and domestic LPG. These stood at around Rs 650 crore a day in May, according to the oil ministry.