The jet fuel or aviation turbine fuel (ATF) costs are highest in the country largely due to the oligopolistic environment created by the government-owned oil companies,which supply it to the domestic airlines,according to a report. The coordinated pricing arrangement of these companies,which account for over 60 per cent of the ATF supply,raises barriers to competition and efficiency,said the report prepared by Nathan Economic Consulting India Ltd. The cooperative agreements between Indian Oil Corporation (IOC),Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) for sharing pipeline infrastructure raises artificial entry barriers for a private oil supplier. The report,commissioned last year by the ministry of civil aviation to study the pricing and tax regime governing jet fuel,was submitted in March. Prompted by the findings of the report,civil aviation minister Ajit Singh has written to his counterpart in the oil ministry,Jaipal Reddy,earlier this month,seeking his intervention in implementing the recommendations. The report has mooted transparent oil determination by oil companies,open access to fuel related infrastructure outside of airports both pipeline as well as storage infrastructure. Simultaneously,civil aviation secretary Nasim Zaidi too has written to the Petroleum and Natural Gas Regulatory Board (PNGRB),requesting the regulator to take action on the recommendations. In the ultimate analysis,it is important to ensure that the prices payable for ATF by user industries in India are transparent and competitively determined, the letter has said. The report said that Indias ATF market is conducive to anti-competitive practices,thereby leading to market failure. It said the airlines have highlighted the lack of transparency as a major issue related to pricing of ATF in India. At present,a differential pricing policy is followed for jet fuel whereby it costs less for international flights than domestic flights. As per the report,even the international fuel price at Delhi,Mumbai and Chennai was found to be 18 per cent higher than Singapore,apart from Abu Dhabi,Sharjah,Hong Kong and London. It said lowering sales tax levied by States on fuel would result in reduction of 6 per cent in the fuel bill of airlines. ATF alone accounts for nearly 40 per cent of operating costs for full-service carriers,and 45-50 per cent for budget carriers. Heavy fuel * Report prepared by Nathan Economic Consulting India Ltd says,the coordinated pricing arrangement of these companies raises barriers to competition and efficiency * The report has mooted transparent oil determination by oil companies,open access to fuel related infrastructure outside of airports * Civil aviation minister Ajit Singh had written to the oil ministry earlier this month,seeking intervention in implementing the recommendations
