Govt hikes aviation fuel price by 8.5 percent, airfare may increase soon

Ahead of the Budget 2022, the Government of India has announced price hike on Aviation Turbine Fuel (ATF) by upto 8.5 percent. Indian Oil Corporation (IOC) has also announced an increase in the ATF following the announcement.

ATF prices has been increased by Rs 6743/kl and the new prices in the Delhi now stands at Rs 86308.16/kl. The new prices are applicable from today.

With the hike in the ATF, it is expected that airline companies will pass the buck to the passengers, as a substantial amout of the air ticket prices goes into aviation fuel tax. However, there's no formal announcement from any of the airliner as of now. 

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While the jet fuel or Aviation Turbine Fuel (ATF) price has been hiked for the third time in a month, petrol and diesel prices remained unchanged for a record 88th day in a row.
ATF price was hiked by Rs 6,743.25 per kilolitre (kl) or 8.5 percent to Rs 86,038.16 per kl in the national capital, according to a price notification of state-owned fuel retailers.
This is the highest ever price touched by ATF. The rate is higher than Rs 71,028.26 per kl reached in August 2008 when international crude oil prices touched USD 147 per barrel.

Brent crude oil on February 1 was trading at USD 91.21 per barrel. The price increase will put pressure on the already strained balance sheets of airlines. Rates were hiked by Rs 2,039.63 per kl or 2.75 percent to Rs 76,062.04 per kl on January 1 and then again by Rs 3,232.87 per kl or 4.25 percent to Rs 79,294.91 per kl on January 16. These increases in the rate came on the back of two rounds of price cuts seen in December that reflected a drop in international oil prices during the second half of November and mid-December.

Thereafter, international rates have firmed up, leading to the hike in ATF prices. Jet fuel prices are revised on the 1st and 16th of every month based on the average price of the international benchmark in the preceding fortnight. Unlike ATF, petrol and diesel rates are revised daily after taking the average price in the preceding fortnight. But prices have remained unchanged since November 4, 2021, when the central government had cut excise duty on petrol by Rs 5 per litre and that on diesel by Rs 10 a litre.

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This is despite a wild swing in international oil prices. Brent crude oil, the best-known international benchmark, was at USD 82.74 per barrel on November 5, 2021, before it started to fall and touch USD 68.87 a barrel on December 1. Prices have climbed since and are now near USD 91, well above the peak of USD 86.40 touched on October 26, 2021, which had led to petrol and diesel prices spiking to an all-time high.

Petrol costs Rs 95.41 a litre in Delhi and diesel is priced at Rs 86.67, price information from state fuel retailers showed. Before the excise duty cut, petrol and diesel prices had touched an all-time high across the country. While petrol had crossed the Rs 100 a litre mark in most cities, diesel was above that level in nearly half the country. In Delhi, petrol came for Rs 110.04 a litre and diesel for Rs 98.42. Prices had eased from an all-time high on November 4, 2021, after the Union government had cut excise duty on petrol by Rs 5 per litre and diesel by Rs 10 a litre.

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