New mechanism will be more transparent and cushion airlines from price fluctuations, say industry players.
India has introduced a new pricing mechanism for ATF (jet fuel) beginning Q3 FY23 (October – December period). The new price mechanism – which replaces the Import Parity Price based system – will be benchmarked on the MOPAG or Mean of Platts Arab Gulf and could bring in more parity between global crude price and jet fuel price in India.
Those in the know say, the new pricing mechanism will be “more transparent” and cushion airlines from ATF price fluctuations. MOPAG pricing refers to paying the same price that is paid in Dubai for ATF.
The mechanism could see 10 -15 per cent reduction in price say some industry sources, while others say it’s too early to comment.
The decision to use MOPAG as a benchmark was taken after a meeting of the airlines top brass, oil marketing companies (OMCs), the Ministry of Petroleum and Natural Gas and the Civil Aviation Ministry.
“Indian airlines are also expected to benefit from the new pricing mechanism of aviation turbine fuel (ATF) in India, with oil marketing companies (OMCs) and airlines planning to set MOPAG as the global benchmark,” Motilal Oswal said in a recent report.
IndiGo’s CFO, Gaurav Negi, during an analysts call had said, “The way the pricing of ATF is being done is undergoing a change as we speak.“ IndiGo, the country’s largest carrier, saw fuel costs rise over 214 per cent y-o-y in Q2 FY23 (July – Sept) to ₹62.58 billion against ₹19.89 billion in Q2 FY22.