India increases June jet fuel prices by 56pc

India increased jet fuel prices by 56pc in June from the second half of May after the government allowed domestic flights to resume from 25 May. Flights were suspended from late March after the government imposed a 68-day lockdown to combat the Covid-19 pandemic.

Domestic carriers will pay 33,575 rupees/kilolitre ($444/kl or $69.40/bl) for jet fuel in June in Delhi, up by more than Rs12,000/kl from Rs21,449/kl in the second half of May, according to state-controlled refiner IOC. Prices for international carriers, which do not pay Indian taxes, are $331/kl this month, up from $224/kl in May.

Jet fuel prices stood at Rs64,324/kl in early February. IOC attributes the jump in domestic prices to a surge in international rates for the fuel.

Demand for the fuel declined by over 90pc in April from a year earlier but was expected to rise in June after airlines started operating commercial flights from last week. But high jet fuel rates, coupled with price caps on tickets, will slow the resumption of flights.

The steep rise in jet fuel rates will affect demand because carriers are taking to the skies after two months of lost business and mounting losses. India has not launched any stimulus measures for the aviation sector, unlike some western countries. The government has also capped air fares for domestic flights for three months until August.

There were 44,593 passengers on 501 domestic departures, India's aviation minister Hardeep Puri tweeted yesterday, reflecting a load factor of around 50-60pc. This may shrink once passengers stranded by the lockdown reach their hometowns. Business activity is creeping up, while tourist travel has diminished and is unlikely to pick up anytime soon. International travel may resume in August or even later, depending on the pandemic, according to the government.

The nationwide lockdown to combat the Covid-19 outbreak has been extended by a month to 30 June, with the current number of cases in the country nearing 200,000.

Jet fuel prices are typically reviewed once a month but have been reviewed twice a month since February. Jet fuel accounts for around 40pc of costs across Indian carriers, twice as much as foreign airlines because of taxes.

By S Dinakar