The Hindu : Front Page : Praful for more capital to Air India

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Friday, Aug 14, 2009
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Praful for more capital to Air India

Vinay Kumar

NEW DELHI: Civil Aviation Minister Praful Patel, who made a presentation on the aviation sector to the Cabinet on Thursday, said he impressed upon his colleagues the need for infusing more capital into Air India, which has an equity base of just Rs. 145 crore and has placed orders for new jets worth Rs. 50,000 crore.

He said the base price of aviation turbine fuel was much higher than that in most countries. ATF accounted for more than 40 per cent of the total operational cost of an airline in India as against 20-25 per cent globally.

The Cabinet was also apprised of the decision of the Airports Authority of India (AAI) to raise funds by issuing infrastructure bonds worth Rs. 5,000 crore. The AAI was modernising and upgrading a large number of airports, including in Kolkata and Chennai.

Elaborating on the need for reducing the burden of ATF prices, Mr. Patel said the prices of jet fuel had increased by 99.6 per cent in the past one year. The price per kilolitre averaged between Rs. 24,000 and Rs. 26,000, from the entire East and Southeast Asia to Dubai, London and New York. However, in States like Andhra Pradesh, which had the lowest sales tax rate of four per cent, the price ranged from Rs. 34,000 to Rs. 35,000. In Delhi, it was Rs. 38,000, over Rs. 40,000 in Mumbai and Rs. 46,000 in Kolkata.

ATF attracted sales tax at 28-30 per cent in Karnataka, Bihar, Madhya Pradesh, Tamil Nadu and Gujarat, while it was 25 per cent in Maharashtra, West Bengal and Himachal Pradesh. Delhi, Goa, Haryana, Jharkhand, Chandigarh and some other States were charging 20 per cent, while in Jammu and Kashmir, Uttar Pradesh and Nagaland the rate was 21 per cent.

India emerged as the ninth biggest aviation market, but was “still the least penetrated:” the country accounted for 0.02 air trips per capita, compared to 0.1 in China and 2.2 in the U.S. He maintained that the aviation sector was estimated to grow at 8.5 per cent a year by 2015. While the number of aircraft in India had gone up from 158 during 2003-04 to 396 now, domestic flight departures per week had risen from 5,108 during 2003-04 to 11,048 during 2008-09.

Pointing out that the average yields of the airlines suffered owing to the global downturn, Mr. Patel said the average ticket price had fallen from Rs. 6,035 in 2003 to Rs. 3,956 in 2008, while the variable costs like that of ATF kept rising. As a result, the number of flights operated by all airlines had fallen by 12.5 per cent in 2009, while passenger traffic had risen from 28.5 million in 2003-04 to 69.6 million in 2007-08, before stabilising at 70.1 million in 2008-09.

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