Airline stocks surge on GoM nod to direct ATF import
Per capita income is the earnings of each Indian if the national income is evenly divided among the country’s population of around 120 crore. It is an important indicator of overall prosperity in the country.
Airline stocks surged after Aviation Minister Ajit Singh said the Group of Ministers (GoM) has decided to allow domestic airlines to directly import aviation turbine fuel (ATF).
Kingfisher Airlines (13.2%), SpiceJet (11%) and Jet Airways (14.5%) closed with big gains.
"...companies will be allowed to import directly for their use. This also has to go to the Cabinet," Mr Singh said after the GoM meeting. Read more.
Fuel costs are the biggest component of an airline's operating cost. Airlines pay sales tax in the range of 4-28 per cent on ATF which accounts for 40 per cent of the operational cost of airlines.
"This is good news for airlines. A large part of operating cost is the cost of ATF and in many states airlines are paying 30 per cent sales tax on ATF... ATF is 45-50 per cent of total operational cost and a reduction in taxes will lead to 8-10 per cent savings in overall cost," Sanjay Singh of SpiceJet told NDTV Profit.
Domestic airlines companies have been buying fuel from oil marketing companies and had to pay huge taxes. Carriers like Kingfisher have been advocating for direct import of ATF as this will help reduce their fuel cost.
On the issue of foreign direct investment (FDI), Mr Singh said that a Cabinet Note has been prepared and it will be sent to the Commerce Ministry after which the Cabinet will take a call on it. The Cabinet Note recommends that foreign airlines can buy up to 49 per cent stake in Indian carriers, he added.