In a significant move impacting businesses and the aviation sector, state-owned oil marketing companies announced a dual revision of fuel prices on Saturday. While commercial cooking gas (LPG) rates have been hiked substantially, aviation turbine fuel (ATF) prices have been slashed, offering relief to airlines.
Sharp Rise in Commercial LPG Cylinder Cost
The price of a 19-kg commercial LPG cylinder has been increased by a hefty Rs 111 in the national capital, Delhi. This revision, effective from June 1, pushes the new price to Rs 1,773 per cylinder. Prior to this hike, the cylinder was priced at Rs 1,662.
This increase directly affects restaurants, hotels, canteens, and other businesses that rely on commercial LPG for their cooking operations. The price varies in other cities due to differing local taxes.
Steep Reduction in Aviation Fuel Prices
In a contrasting move that brings cheer to the aviation industry, the price of Aviation Turbine Fuel (ATF) has been cut by a steep 7%. In Delhi, the ATF price has been reduced by Rs 6,674.25 per kilolitre (kl), bringing it down to Rs 89,066.29 per kl from the previous Rs 95,740.54 per kl.
This is the second consecutive monthly reduction in ATF prices, following a 5.7% cut in May. The reduction in ATF, which constitutes a major operational cost for airlines, is expected to improve their financial health and could potentially influence airfares.
Impact and Market Dynamics
The divergent price movements highlight the complex dynamics of the global and domestic fuel market. The commercial LPG price hike is attributed to changes in international benchmark rates and other market factors. Such increases add to the operational cost burden of small and medium enterprises in the food and hospitality sector.
Conversely, the reduction in ATF prices aligns with recent trends in international crude oil and product prices. This provides significant cost relief to airlines, especially as the sector experiences robust passenger traffic growth. The price revisions are undertaken by leading oil marketing companies like Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL).
These companies typically review and revise the prices of commercial LPG and ATF on the first day of every month, based on a formula linked to international product prices and foreign exchange rates.
