Domestic ATF Steady; Commercial LPG, 5-Kg Cylinders See Steepest-Ever Hike

Aviation fuel prices for domestic airlines were left unchanged on Friday, providing stability for local carriers and sparing flyers any immediate cost increase, while commercial LPG and 5-kg cylinders recorded their steepest-ever rate hike, in line with a surge in international energy costs.

A month after jet fuel prices for them were more than doubled, state-owned oil firms hiked aviation turbine fuel (ATF) rates for international airlines by $76.55 per kilolitre, or 5.33%, to $1,511.86 per kl.

Alongside, prices of commercial LPG - the one used in hotels and restaurants - were hiked by ₹993 to a record high of ₹3,071.50 per 19-kg cylinder. The rates for 5-kg FTL or market-priced LPG cylinders were hiked from ₹549 to ₹810.50 per bottle.

The 5-kg FTL cylinder now costs just a shade lower than the ₹913 rate for a 14.2-kg cylinder used in household kitchens (called domestic LPG).

Also, prices of bulk diesel, used by industrial users like telecom signal towers, were increased from about ₹137 per litre to over ₹149 a litre. These rates compare to the ₹87.62 a litre price of diesel available at petrol pumps.

The ATF for domestic airlines will continue to be priced at ₹1,04,927.18 per kl as state-owned oil companies have decided to absorb the rise in global fuel prices to protect airlines and consumers.

Even on April 1, when rates for international carriers were more than doubled to $1,435.31 per kl, oil companies had increased jet fuel price for domestic airlines by 25%, adopting a calibrated approach in passing on the increase that had become necessary because of the West Asia war-linked surge in international energy prices.

The decisions on ATF by state-owned oil companies will come as a relief to domestic carriers like Air India, IndiGo and SpiceJet, who in the run-up to the scheduled monthly revision warned of the sector being under "extreme stress".

Their association, Federation of Indian Airlines (FIA), had in a letter to the government stated that "unprecedented increase in ATF cost has moved the airline's operation from 30-40% to 55-60%, creating completely non-operatable conditions for airlines.

Prices vary from state to state depending on local taxes like VAT.

Announcing the decisions, market leader Indian Oil Corporation (IOC) said the retail prices of petrol, diesel and household domestic LPG (14.2 kg cylinders) have not been changed, fully insulating domestic consumers from the recent increase in international fuel prices.

These fuels, along with kerosene, whose rates too have not been changed, make up for over 80% of all fuels consumed in the country.

"Price revisions have been limited to select industrial segments, which constitute a relatively small share of overall consumption and are subject to routine monthly adjustments based on prevailing international prices," IOC said in a statement.

As part of a consumer-centric approach, "there has been no change in key fuels affecting the general public - retail prices of petrol and diesel remain unchanged for the general public, which constitutes around 90% of the total petrol, diesel consumption in the country. There is no change in the prices of domestic LPG (14.2 kg) for 33 crore domestic LPG consumers.

"There is no change in ATF prices for domestic airlines (scheduled operations) and no change in prices of PDS Kerosene," it said.

Overall, about 80% of petroleum products have witnessed no change in prices, ensuring stability for the majority of consumers.

"Prices of bulk and commercial LPG cylinders (less than 1% of total consumption) have been revised," it said.

"Prices of bulk diesel and ATF for international airline operations have been adjusted upward." At the same time, around 4% of petroleum products have seen a downward revision, reflecting the dynamic nature of global price movements.

"The measures reflect the calibrated and balanced approach adopted by oil marketing companies to align with global market trends while protecting domestic consumers and ensuring economic stability," it added.

Global oil prices have shot up almost 50% after the war in West Asia disrupted energy supply chains.

Petrol and diesel prices continue to remain frozen after a ₹2 per-litre reduction in March 2024; petrol currently costs ₹94.72 per litre in Delhi and diesel ₹87.62.

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 third 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. According to ratings agency Icra, they are losing ₹14 a litre on petrol and ₹18 on diesel.

The under-recoveries on petrol, diesel and ATF will have to be set off against past earnings or against margins oil companies will earn when international prices fall. For domestic LPG, the government is likely to provide a subsidy to cover the losses.