Fuel Surcharge – Government Aided Scam
Circumstances – Massive dip in the oil prices world over. Good news - A few days back Air India announced a fare cut by 45 to 85 % in various sectors. Others are likely to follow suit. Bad news – The cut was limited to the basic fare charged and not on the fuel surcharge. What is happening, one might be tempted to ask. If the fuel prices have gone down, the fuel surcharge should go down, why the basic fare. There is a lot of economics at work here. This is an example of a Government aided scam. Let us try to understand it. The fuel surcharge here in India was introduced in Nov 2005 for the airlines business, primarily to offset the volatility in the prices of fuel and hence the Aviation Turbine Fuel or the ATF. No, it is not the brain of some over-intelligent Indian economist; it has existed in the west for a lot longer and has pervaded other sectors too, besides the aviation sector as it will, in our country too. How does the airlines company benefit? On the face of it, it might seem...