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Airlines to be allowed to import jet fuel, says Ajit Singh

New Delhi, Tue, 07 Feb 2012 ANI

New Delhi, Feb 7 (ANI): Civil Aviation Minister Ajit Singh on Tuesday said the Indian airlines would be allowed to import jet fuel directly under a proposal from a ministerial panel, sending airline shares sharply higher on the prospect that they will be able to cut costs.


"It's a policy that any user, airlines basically, can import it for their use. See, regarding the Air India issue, let the Cabinet decide it, there are many options, financial restructuring package, there is 7,400 crore to be infused into the airline and GoM has decided on the bonds, but other issues will also be presented before the Cabinet," he told the media after a Group of Ministers (GoM) meeting here.


"Banks have come up with a new proposal, banks and the Finance Ministry and the proposal is that Air India will issue bonds, now other options are also there and the Cabinet will have to take the final view, but GoM has decided regarding the issuing of bonds," he added.


Airlines are now required to buy fuel from oil marketing companies including government-controlled Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp and are subject to certain taxes and levies.


Air India may issue 74 billion rupees of bonds as part of its restructuring.


Air India's lenders have yet to decide on how they will proceed with the airline's restructuring as they are reluctant to take on equity or take heavy write downs.


Most airlines in India are losing money as a result of high fuel costs, cutthroat competition and a slowdown in the economy.


Though the decision on import of aviation turbine fuel (ATF) and permitting foreign airlines to invest would finally be decided by the Cabinet, Air India's financial restructuring plan would also be taken up for approval.


However, analysts have cautioned that the ability to directly import fuel will not be without problems.


Shares of Kingfisher Airlines surged to its maximum daily limit of 20 percent, while SpiceJet and Jet Airways rose 19 percent and 16.8 percent respectively.


Loss-making Kingfisher Airlines, controlled by flamboyant liquor baron Vijay Mallya, has long demanded the right to directly import jet fuel to save costs. (ANI)


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