Express Industry Council of India (EICI), the apex industry body of Express companies, has alleged that domestic airlines have formed a price cartel that is exploiting the levy of fuel surcharge (FSC) on cargo by not applying a rational pricing mechanism for the same.
According to EICI findings, in the last four years, there has been substantial hike in fuel surcharge, which has not been commensurate to the highly volatile air turbine fuel (ATF) prices.
With effect from November 19, domestic airlines have further increased the FSC on cargo by Rs 2 a kg in spite of a marked drop in ATF prices.
“What is surprising is that all airlines have chosen to increase the FSC by the same amount more or less at the same time. This has led us to believe that this action has been taken in concert,” said Vijay Kumar, Chief Operating Officer, Express Industry Council of India.
He added, “Though designed to mitigate the fuel price volatility, FSC has been used as a pricing tool to harm the interests of express companies, freight forwarders and ultimately the end-user.
Internationally, fuel surcharges are benchmarked to an index. This will ensure equity airlines will not charge more when the fuel price go up and at the same time fuel surcharge is reduced when prices go down.”
Initially, all airlines had levied a charge of Rs 5/kg as FSC on May 15, 2008 without justifying the rationale behind the move.
The FSC has been revised by around 15 per cent by the airlines in November 2012, while the industry witnessed a fall in fuel prices from what was prevailing in September 2012, when the FSC was last revised.
In May 2008, when FSC was first introduced the fuel prices were Rs 69,227 and FSC charged by the airlines was Rs 5.
During the recent hike, on November 19, the fuel prices were Rs 68,397 and the FSC charged was Rs 15.
“The average cost for freight between Mumbai and New DelhiI is Rs 7. Add FSC and other fixed costs to it and the price would shoot up to Rs 28 on an average,” Kumar added.
EICI operates the common user express terminals at Mumbai, Delhi and Bangalore international airports for clearance of express shipments.