Don't think Reliance can help out airlines: BPCL

Airlines will not save any money by directly importing aviation turbine fuel (ATF) and might even end up incurring more costs than they do now, said RK Singh, chairman and managing director, BPCL. Reliance Industries is also not a viable option to help out the aviation companies who now want to directly import ATF to avoid paying sales tax, he said in an interview to CNBC -Tv18.

If the airline companies import ATF, the logistic support has to come from oil marketing companies like BPCL or plausibly from Reliance Industries. Singh says fuel is sold to them on an import parity basis; while the sales tax varies from 15-28 percent across the country. If they import fuel, they will enjoy a 30 days credit period, while in India all aviation companies enjoy credit periods more than that.

If the companies have to import, they must import a minimum of 10,000-15,000 million tonnes at a time to maintain a freight economy. That will push up the cost to maintain inventory while Indian companies give them oil on just-in-time basis.

He explains the oil can be imported in around five ports in India like Mumbai, Kochi, Haldia, Chennai. Once the fuel reaches the port, they must pay charges for keeping it in the terminal, bear costs for pipeline, port charge etc. Taking out fuel from the ports or airports is not easy as major cities like Mumbai do not allow trucks inside the airport. The oil companies here have pipelines to transfer the fuel which the airlines must invest in now.

Talking about Reliance Industries being approached to help out the airlines, he said RIL could import ATF till Hazira or Jamnagar but could not perhaps help out when it came to taking the fuel to airports all over the country.

Moreover, if the airline companies import all the ATF they require, the oil companies here, which also produce ATF, could convert their produce to diesel. In any case, they would have to export their production and they would require infrastructure for that. In that case, they would not be able to spare any infrastructure to help out aviation companies.

He added that it is unlikely that the government would pressurise oil companies to help out airlines. In all possibility, the government will allow the import because the companies want it. But it will not go out of the way to help them out. Finally he said, even if the oil companies were ready to help, it was absolutely not feasible to import coal in a couple of ports and then carry it all over the country.