India allows airlines to import jet fuel to save on local taxes

India allowed airlines to directly import jet fuel to help cut operating costs by saving as much as 30 percent in local taxes.

Carriers keen to import aviation turbine fuel need to apply to the Directorate General of Foreign Trade, the country’s ministry of commerce and industry said in a statement today. Only state trading agencies were allowed to import the fuel previously.

Airline fuel costs as much as 40 percent more in India than in the international market because of higher taxes. Kingfisher Airlines Ltd., controlled by billionaire Vijay Mallya, Jet Airways (India) Ltd., the nation’s biggest carrier, and discount airline SpiceJet Ltd. all posted losses in the three months to Dec. 31 as jet fuel costs and competition eroded gains from rising travel demand.

“Taxes are killing the industry,” Dhiraj Mathur, executive director at the local unit of auditor PricewaterhouseCoopers LLP. “Every airline will be interested in importing fuel directly. The decision will also push state governments to lower taxes.”

Indian states levy sales tax on jet fuel, which varies from 4 percent to 30 percent, government data show.

Kingfisher is seeking new investment after pledging its brand and other assets against $1.3 billion of debts. It plans to import jet fuel to cut expenditure as part of a turnaround plan after more than 10 straight quarterly losses.

The carrier is operating less than half of its 64 planes and has pared services to about 175 flights a day, E.K. Bharat Bhushan, India’s Director General of Civil Aviation, said yesterday.

The nation’s civil aviation ministry told airlines Feb. 16 to tie-up with the suppliers for oil storage infrastructure.

Go Airlines (India) Pvt., which runs a budget domestic airline, is interested “very strongly” in jet fuel imports, Chief Executive Officer Giorgio De Roni said in an interview Feb. 15.