ATF Rises Sharply by Rs 16/Litre as Govt Cuts Export Windfall Tax

Aviation turbine fuel (ATF) prices were raised sharply by around Rs 16 per litre from October 1, adding to cost pressures on airlines, even as the government reduced the windfall tax on exports of diesel and ATF.

State-owned oil companies raised ATF prices for domestic airlines to around Rs 137 per litre from Rs 121, following increases of Rs 6.28 per litre in September and Rs 5 per litre in August. ATF can account for up to 40 per cent of an airline's operating costs, making the latest increase significant for carriers already dealing with high operating expenses.

The sharp rise could put pressure on airfares, particularly if elevated fuel costs persist and airlines seek to pass on part of the additional burden to passengers. However, the extent of any fare increase will depend on competition, demand, capacity, route economics and individual airlines' ability to absorb higher costs.

Higher fuel expenses could also weigh on airline profitability and cash flows, potentially affecting capacity decisions and expansion plans. The impact may be particularly relevant for domestic carriers operating on thin margins.

Separately, the government cut the windfall tax on fuel exports for the fortnight beginning October 1. The special additional excise duty and road and infrastructure cess on diesel exports was reduced to Rs 16 per litre from Rs 20, while the levy on ATF exports was cut to Rs 10.50 from Rs 15 per litre. The petrol export duty was retained at Rs 0.50 per litre.

There was no change in duties on petrol and diesel cleared for domestic consumption.

Commercial LPG prices were also increased by Rs 62.59 per 19-kg cylinder, while domestic LPG remained unchanged at Rs 942 per 14.2-kg cylinder.

The fuel price revisions are linked to international benchmark prices and the rupee-dollar exchange rate. ATF and LPG prices are revised on the first day of every month and may vary across states due to local taxes.