Recently the domestic oil marketing companies have warned that if the airline companies in the long run are allowed to import ATF directly, the sale of other fuels like petrol and diesel would also be hit.
In an earlier article (Titled:- Jet Fuel Import By Airline Companies May Prove To Be Bad Economics, dated 8th Feb 2012) we at DSIJ had expressed serious concerns on the government’s decision to allow domestic airline companies to directly import aviation turbine fuel (ATF) in order to help them reduce losses.
Though the move would augur well for the aviation sector, we had highlighted a number of glitches that would have to be followed to enact such a move and termed the idea as an economically bad decision.
Elaborating further on the same lines, we have recently learnt that the domestic oil marketing companies have now warned that if the airline companies in the long run are allowed to import ATF directly, the sale of other fuels like petrol and diesel would also be hit. As most fuel refiners in India still lack the technology to individually control output for every fuel variant, a cut in ATF production would mean that the refineries altogether will run at lower rates. This will consequently hit output for all products.
As per media reports, India is self sufficient in terms of ATF production at present. If airlines are able to successfully import ATF from international markets, it would lead to an over-supply situation and domestic refiners would either have to resort to exports or cut production. Though exports sound to be a good option, we believe that a weak export market would finally lead to a cut in production levels of ATF and other fuel variants too.
Further in order to bridge the demand-supply gap for other fuel variants, the oil marketers would have to depend heavily on imports which will further impact not only their GRM’s but also the country’s overall current account balance.
In conclusion, we continue to strongly oppose such a move to allow direct import of ATF. We believe that at times when the domestic oil companies are facing a severe financial crunch it’s appalling to see the government concerned about making good the losses of the airline companies.