Petroleum ministry asks airlines to clear Rs900-cr in ATF dues

New Delhi: With cumulative arrears running up to a whopping Rs900 crore, state-run oil companies have now asked the petroleum ministry to recover their dues from the country's airlines, including Jet Airways, Kingfisher and Air India. According to reports, the petroleum ministry may even contemplate punitive action, such as a ban on fuel sales to defaulting airlines, should they fail to pay up. 

According to ministry sources, Jet Airways is currently defaulting on payments of about Rs259 crore, flag carrier Air India to the tune of Rs600 crore and Kingfisher by about Rs60 crore. 

The warning to airlines from the petroleum ministry has been issued in the wake of Jet's decision to lay off a large number of probationary staff without prior notice. Petroleum minister Murli Deora was a notable voice protesting against the airline's decision.

"I appeal to Goyal not to retrench people and try to find some solution. This is not the right time to retrench people, particularly before Diwali," Deora said. 

According to industry sources, it was only recently that Deora had facilitated a 60-day credit for the private carrier from the Indian Oil Corporation (IOC).  

Jet's current outstanding is Rs859 crore, including the defaulted amount of Rs259 crore, which relate to bills raised more than two-and-half months back. Jet purchases aviation turbine fuel (ATF) worth Rs330 crore from domestic oil companies every month.

Meanwhile, petroleum secretary RS Pandey also struck a dire note saying, "These are difficult times for them (airlines) and also for oil companies. IOC, BPCL and HPCL practically live on borrowings and so the airlines have to clear their outstanding (at the earliest)." 

The price of ATF has become a contentious issue with airline companies pleading that it's prohibitively high cost in the country, which for one reason or the other provides the costliest ATF in the world, has been singularly responsible for taking their operations into the red.  

In this matter, civil aviation minister Praful Patel has pleaded the case of airlines time and again with the petroleum and finance ministries as well as State governments, though without success.

ATF pricing is determined by the imposition of 5% customs duty, 8% excise duty, 3% education cess and an average rate of 25% sales tax over the base price of fuel. It is enough to keep airlines swimming in a sea of red even as passengers dole out ever higher travel fares.