The Government on Monday announced a cut of around 3 per cent Aviation Turbine Fuel (ATF), thanks to the combination of softening international rates of the fuel and appreciation of the rupee.

The Indian Oil Corp (IOC), the country's largest fuel retailer, confirmed that the price of jet fuel was cut by Rs 2169.13 per kilolitre (2.8%) to Rs 74,072.20 per kiloliter in the national capital.

Jet fuel prices at different airports vary due to difference in local sales tax or VAT. In Mumbai, ATF now costs Rs 76,524.33 per kilolitre, as against Rs 78,783.83 per kilolitre previously.

ATF rates had reached a record high of Rs 77,089.42 per kilolitre in October last year, after the government increased the rates for at least five times since June. The hikes were forced by a steep decline in the value of rupee against the US dollar. Depreciation in the value of rupee makes imports costlier, and India meets most of its fuel requirements by importing fuel from other countries.

No major airline has so far made comments on the impact of the price cut on passenger fares. Government-run fuel retailers IOC, HPCL and BPCL revise jet fuel prices on the first of every month, taking into account the average global price of the fuel in the preceding month.

Jet fuel constitutes more than 40 per cent of an airline's operating costs, thus the price cut is expected to help the cash-strapped carriers a lot by trimming down their fuel costs.