- Aviation turbine fuel prices rose for the second consecutive month in India
- Indian Oil Corporation increased ATF rates by Rs 6.28 per litre to Rs 121.28
- The price hike represents a 5.46 percent increase from the previous rate of Rs 115
Aviation turbine fuel (ATF), the fuel used by commercial aircraft, has become costlier for domestic airlines for the second straight month.
According to a report by NDTV Profit, citing Indian Oil Corporation (IOC) sources, ATF prices have been increased by Rs 6.28 per litre, or 5.46 per cent, taking the rate from Rs 115 per litre to Rs 121.28 per litre.
The latest revision is expected to increase operating costs for airlines, as fuel remains one of their biggest expenses. While higher fuel prices can eventually lead to an increase in airfares, ticket prices are also influenced by factors such as passenger demand, competition among carriers and seat availability.
The hike follows a similar increase on August 1, when ATF prices were raised by about Rs 5 per litre from Rs 110 to Rs 115 per litre. Before that, fuel prices had been reduced by Rs 5 per litre in July.
In India, aviation fuel typically accounts for 35 per cent to 40 per cent of an airline's operating expenses, making any change in ATF rates a significant factor for the industry's profitability. Therefore, the industry may pass on the burden to customers by increasing air ticket rates.
Rise In Crude Oil Prices Amid Iran War
The increase comes amid a rise in global crude oil prices. Oil markets strengthened after fresh tensions between the United States and Iran heightened concerns about potential disruptions to energy supplies moving through the Strait of Hormuz, a key global shipping route for crude oil.
Oil prices ended August slightly higher after a turbulent month marked by shifting geopolitical developments and continued uncertainty over efforts to resolve the conflict. Concerns also grew after Washington reiterated its intention to increase pressure on Iran's economy.
Consequently, US benchmark West Texas Intermediate (WTI) crude traded above $86 a barrel after gaining 2.8 per cent in the previous session on Monday, while Brent crude settled close to the $90-a-barrel mark.
Fixed Pricing Formula
Earlier this year, the government had rolled out a price stabilisation scheme that allows carriers to lock in fuel rates for up to three years and reduce exposure to global oil price volatility.
Under the new regime, domestic airlines that opt into the voluntary scheme will pay a fixed ATF price of Rs 115 per litre, up from the earlier Rs 104.927 per litre. Domestic airlines can lock in aviation turbine fuel (ATF) prices for up to three years under the scheme.
Carriers that choose to stay out of the framework will continue to buy fuel at market-linked rates. Those that sign up will remain protected from fluctuations in international benchmark prices during the lock-in period, while non-participating carriers could benefit when prices fall but would also have to absorb any future increases.
