[TusharK]

Jet fuel prices in India have been slashed by a record 14.7%. As a result, aviation fuel is now cheaper than petrol and diesel.



Following reduction in international prices, state-owned oil marketing companies have reduced the price of jet fuel twice in the last 2 months. On December 1, 2018, prices were cut by Rs. 8,327.83 per kilolitre, which amounted to 10.9%. On January 1, 2019, jet fuel prices were slashed again by Rs. 9,990 per kilolitre. As a result of these price revisions, jet fuel prices are now at their lowest in year.

On January 4, 2019, the price of jet fuel (HPCL) at Delhi (Terminal 3) was Rs. 46,448.78 per kilolitre. In comparison, petrol was retailing for Rs. 68.44 per litre, while diesel was priced at Rs. 62.44 per litre. In Mumbai, the price of jet fuel was Rs. 46,413.86 per kilolitre, whereas the price of petrol and diesel was Rs. 74.10 per litre and Rs. 65.34 per litre respectively.

Source: Times of India

Link to Team-BHP News

[Hayek]

Jet fuel should be cheaper than petrol and diesel. It is nothing but kerosene - plus it is typically not taxed esp for international operations.

[vigsom]

^^ +1

From a refinery distillation process standpoint, it is Naphtha which is the lowest boiling cut, followed by ATF/Kerosene as the second lightest cut, then diesel.

Pricing would be in the same descending order.

[GrammarNazi]

Jet Fuel is Kerosene!

The local kerosene generally seen is blue because a colouring agent is added to indicate that it's meant only for cooking food & is sold by ration shops. Else, regular kerosene is colourless.

[V.Narayan]

^^^^
Yes jet fuel is kerosene with additives to make it suitable for staying in fuel tanks in low pressure low temperature environments. Military fuels have other additives suited to their needs.

Just what I was waiting for. "Jeeves, get my Gulfstream 650 out please" :-)

[SmartCat]

Naresh Goyal / Jet Airways should apply for BPL card, and get all their fuel supplies from ration shops then.

From what I understand, jet engines can run on any fuel -> petrol, diesel, kerosene, biofuel etc. All it needs is a combustible liquid fuel

[V.Narayan]

Originally Posted by smartcat

From what I understand, jet engines can run on any fuel -> petrol, diesel, kerosene, biofuel etc. All it needs is a combustible liquid fuel

Theoritically a jet engine can be modified to run on diesel or biofuel - but it has to be modified. The only aircraft that can fly on different fuels with turning a switch in the cockpit is the Sukhoi Su-25.

[Ragavsr]

Originally Posted by Hayek

Jet fuel should be cheaper than petrol and diesel. It is nothing but kerosene - plus it is typically not taxed esp for international operations.

That it is not taxed abroad for international operations aside, considering that its the purest of fuels, it should be taxed higher.

Originally Posted by vigsom

^^ +1

From a refinery distillation process standpoint, it is Naphtha which is the lowest boiling cut, followed by ATF/Kerosene as the second lightest cut, then diesel.

Pricing would be in the same descending order.

The fuels with the lowest boiling point cut are supposed to be the purest fuels and hence should be taxed higher.

Also, by the government's logic is that the things which the upper middle class and rich use, should be taxed the highest - the reason for taxing cars like anything.

Going by that same logic, ATF should have far higher taxes than petrol/ diesel. But, hell airline lobby is at work and seems to be far more successful at lobbying than the car makers.

[MaheshY1]

Originally Posted by smartcat

Naresh Goyal / Jet Airways should apply for BPL card, and get all their fuel supplies from ration shops then.

But then, it'll puke the ugly blue smoke. NGT is looking for someone to blame for the Delhi fog. The airlines will end up becoming the victim after the automobile industry. Then you may have to wait for 2 days if you miss a flight because of the odd-even.

From what I understand, jet engines can run on any fuel -> petrol, diesel, kerosene, biofuel etc. All it needs is a combustible liquid fuel

No. There's a difference there. The smaller prop planes like Cessna run on gasoline. They've engines very similar to cars.

The jet airliners use what's similar to diesel/kerosene. Untreated diesel and kerosene themselves aren't all that different in their chemical composition. But try putting petrol in a diesel car or vice versa. Diesel is oil. Petrol is spirit.

Even the regular petrol/diesel are otherwise colorless. The coloring helps identify the tax bracket, the purpose of the fuel and prevent misuse.

[NiInJa]

^^^^

"The fuels with the lowest boiling point cut are supposed to be the purest fuels and hence should be taxed higher. "

There seems to be some mis-understanding. Kerosene is not pure as such, and purity is not exactly related to lowest boiling point. By fractional distillation, the first 'fuels' (not lubricating oils) are Diesel, ATF/Kerosene and then Petrol. The ones coming out first are the cheapest. Hence oils are cheap, then diesel or Kerosene/ATF and petrol in increasing order of price. Also, after-treatment for reducing pollutants or additives etc. might increase the price, so an automobile engine oil might still be expensive.

Its actually nothing to be surprised about. In theory, ATF should always be cheaper than gasoline, but there are other factors along with fall in crude at play here.

[V.Narayan]

The revision in taxes is simply to make the price of jet fuel in India comparable to global rates and not the unusually high prices that have been around for some years. The Govt. through its Udaan scheme is connecting Tier III and Tier IV towns with Tier I and Tier II stations to help support business travelers from say Jabalpur who wish to fly to Chennai without lengthy stop over and flight changes. And this mind set change from treating air travel as an expensive rich man's luxury to a business tool that can, in its own way, aid doing business in India easier needs competitive pricing and an environment where airlines can make a profit.

Some fun facts on jet fuel which some may know:

- before every flight a sample of the jet fuel in the tanks is taken and sealed. This is checked to provide evidence on fuel quality in case there is, God forbid, an accident.

- jet fuel in its liquid form is not easily inflammable. You could hold a glass a jet fuel and drop a lighted match in it. No fire. The burning matchstick will get doused. Jet fuel fumes are the risky cousin.

[libranof1987]

Originally Posted by V.Narayan

The revision in taxes is simply to make the price of jet fuel in India comparable to global rates and not the unusually high prices that have been around for some years. The Govt. through its Udaan scheme is connecting Tier III and Tier IV towns with Tier I and Tier II stations

OT: May be too little, too late. Read this in the news today.

Six months after the Ministry of Civil Aviation tom-tommed the success of the second round of bidding under the UDAN (Ude Desh Ka Aam Nagrik) scheme early last year, one of the bidders found itself grounded. Gurgugram-based Zoom Air, which had reportedly bid for the Northeast routes, had to suspend operations in July 2018. In fact, at least seven other regional airlines, including Air Odisha, Air Costa, Supreme Airlines and Air Carnival, have also ceased operations in the past two years, Mint reported. Financial and operational challenges, high costs, scarcity of airport slots, maintenance issues and promoters' inability to raise capital are among the reasons cited for the closures.

https://www.businesstoday.in/top-sto...ry/307548.html

“The cost of infrastructure and operational cost of managing an airport is extremely high. An airport in a small city needs the same equipment as are required for large airports like Mumbai. It requires the same kind of air-conditioning and amenities,” explained a former board member of the AAI.

During a Lok Sabha session, Civil Aviation Minister Suresh Prabhu stated that out of the 129 airports in India, 94 registered a loss in FY18.

https://swarajyamag.com/insta/udan-s...losses-in-fy18

[longhorn]

Originally Posted by libranof1987

“The cost of infrastructure and operational cost of managing an airport is extremely high. An airport in a small city needs the same equipment as are required for large airports like Mumbai.It requires the same kind of air-conditioning and amenities,” explained a former board member of the AAI.

Ah ! Finally the realisation has sunk in. Great ! So its now official. Another scheme bites the dust. What a way for a scheme named 'UDAN' to end up. Aviation is an industry that turns billionaires into millionaires. The govt ought to keep its nose out of such things and let market forces decide, else you will have 8 out of 10 airlines winding up and the 9th one (Air India) turn into a sinkhole.

Originally Posted by libranof1987

During a Lok Sabha session, Civil Aviation Minister Suresh Prabhu stated that out of the 129 airports in India, 94 registered a loss in FY18.

Happens when you have a bunch of morons deciding state policy.

[V.Narayan]

^^^^^^
As tax paying citizens it is only natural that we feel incensed when we read newspaper reports such as - "During a Lok Sabha session, Civil Aviation Minister Suresh Prabhu stated that out of the 129 airports in India, 94 registered a loss in FY18" or "In fact, at least seven other regional airlines, including Air Odisha, Air Costa, Supreme Airlines and Air Carnival, have also ceased operations in the past two years". These statements are true and their true impact can only be gauged by viewing the situation holistically. So, dear BHPians allow me to share the facts as I know them.

First on the airlines that went belly up after starting small shoe string operations - in my professional opinion I am glad, for the sake of the flying public, that these under capitalized, poorly run, cash strapped, outfits have passed on. I am not at all surprised they packed up. What needs improvement is the floor level standards the Ministry lays down for the formation of an airline. The financial standards are too low which permits these 2 and 3 aircraft operations to start turning their turbines.

Where the airports are concerned - we have 486 air strips, ie a simple cemented strip, on which an aircraft can land. Of these only about 131 are in use for civil, military or training purposes. The rest lie idle. The UDAN scheme is a well planned programme to eventually have at least a feeder airline service at most of these 486 strips. Many of course need augmentation in terms of air traffic control, passenger building, landing lights etc. The aim being to get this national asset operational so that Nellore in AP or Korba in Chattisgarh, or Keshod in Gujarat get air connectivity to the closest now, two or three Tier I and Tier II stations. A prejudiced person may argue as to why is this needed. This is no different from certain swadeshi politicians who, in 1952, questioned why Mumbai, Delhi & Calcutta needed elitist things like air connections.

The nature of infrastructure is such that the 10% of stations/routes provide 90% of business. But that doesn't mean you ignore the remainder 90%. Hence it is in the natural order of things that the bottom three-fourths of airports will run at a loss. What has to be measured is the multiplier effect of that airport on the wider trade and commerce of that station.

[alpha1]

Originally Posted by TusharK

Jet fuel prices in India have been slashed by a record 14.7%. As a result, aviation fuel is now cheaper than petrol and diesel.

1. Let us understand that all products from a refinery cost roughly the same.
That is because:

1.1. it is very difficult to attribute one particular plant / unit / equipment to one product in an overall refinery. There are 3-4 streams like LPG, Naphtha (kind of Petrol with low octane and medium sulfur), Kerosene (which is also sold as ATF), Gas oil (kind of diesel with high sulfur) coming from single unit.

1.2. the capital cost is quite less when amortized over the plant life - in fact it is the cost of the crude that mainly determines the product cost. (rough calculation: capital cost is about $10000 per barrel, and a refinery would be typically $100k barrel per day capacity. That means in a plant life of about 20 years we incur a capital cost of $1000 million spread over 666 million barrels processed =<$2 per barrel. Compare it to the cost of a barrel of crude)

2. Now we can still differentiate between different products based on the grade. Let say a high sulfur diesel vs low sulfur diesel. The low sulfur diesel will surely cost more because it entailed an extra capital cost of desulfurization units as well as sulfur removal units.

Or alternatively, a low sulfur diesel requires processing of low sulfur crude oil which is more costly compared to high sulfur diesel.

3. In this case going though the spec of ATF (https://www.bharatpetroleum.com/imag...bine_Fuel.pdf; https://www.iocl.com/products/atfspe...ions261112.pdf), we can see that the desired sulfur levels are 0.3%. Which means 3000 ppm
Whereas as going through the specs of other fuels like MS (petrol), HSD (Diesel) (https://www.bharatpetroleum.com/our-...ts/fuels.aspx; you will find that the BS4 spec states 50 ppm.

Which means that ATF is lesser processed fuel compared to MS and HSD. Surely that means it costs less to produce.

4. Now coming over to the pricing aspect. Mainly it is driven by Govt fixing the prices (remember GOI holds majority ownership in the national oil companies) and the Govt taxation. There is nothing remotely free market about the pricing of LPG, MS, HSD and Kero.

Whereas in case of ATF, we have to be globally competitive since an airplane can easily go an fill the ATF from another country where it is available cheaper.