BY | March 26, 2013

New Delhi, (IANS) In a bid to provide cheap aviation fuel to domestic airlines, the Airports Authority of India (AAI) Tuesday said it will form a joint venture (JV) with airlines, state-run oil marketing companies and Reliance Industries.

According to AAI chairman V.P. Agrawal, the new JV company will provide a fuel cost saving of up to 10 percent.

“AAI will hold about 13 percent in the JV, with other stake being held by different partner,” Agrawal told reporters here on the sidelines of an industry event.

However, he did not divulge any details of the airline partners or when the JV would become operational.

In India, domestic airlines’ pay anywhere from three to 34 percent of state sales tax on aviation turbine fuel.

At present, aviation fuel in India is nearly 50-60 percent dearer than in Thailand, Singapore or the UAE due to the additional sales tax imposed by states. This pushes up the cost of operations by close to 30 percent.

In February 2012, the government notified direct import of jet fuel and called upon interested carriers to apply for licences.

The development came after a group of ministers headed by the then Finance Minister Pranab Mukherjee rolled out a plan to help domestic carriers, allowing them to directly import aviation fuel.

The move was envisaged to help airlines’ cut operating costs by 10-15 percent, saving on sales tax.

However, due to several logistical and financial difficulties, none of the airlines’ was able to directly import jet fuel.

The fuel component constitutes about 50 percent of the total operating cost of airlines in India.

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