NEW DELHI (Reuters) - India on Wednesday allowed cash-strapped airlines to repay jet fuel dues of about $594 million to state-run oil firms in six monthly installments until March to help carriers hit by high oil prices.

Local carriers had defaulted on jet fuel dues as oil prices had soared in recent months, touching a record $147 a barrel in July. Crude prices have fallen below $70 but old bills have not been settled so far.
“The aviation industry worldwide and also in India has been affected due to the high cost of ATF (aviation turbine fuel) because of high oil prices internationally,” Civil Aviation Minister Praful Patel told reporters after meeting representatives of state refiners and airlines.
This would help Jet Airways, Kingfisher Airlines Ltd and National Aviation Company of India Ltd (NACIL), which runs flag carrier Air India
[AI.UL].
Petroleum Secretary R.S. Pandey said total dues of the three airlines were 29.26 billion rupees ($594 million), and of this the carriers have defaulted on payments of 21.31 billion rupees.
To pass on the benefit of declining crude oil prices, refiners will revise jet fuel prices every 15 days instead of 30 days and raise the credit period for jet fuel sales to 90 days from 60 days until March 2009, Patel said.
“After March 2009, credit period will depend on commercial negotiations between the airlines and the oil firms,” he said.
“These (steps) will soften the impact of the high prices, the high outstandings as well as liquidity crunch, which all airlines are facing as of today,” Patel said.
He said the steps announced on Wednesday would ensure that there would be no job losses and air connectivity will not be affected in the country.
“The aviation industry has witnessed a negative growth in the last 3-4 months. Airlines, all of them, cumulatively are suffering huge losses. This has affected their cash flows as well as their ability to pay oil firms,” he said.
Patel said he would urge the finance minister to cut taxes, which account for about 23 percent of the jet fuel prices.
Oil Minister Murli Deora said states should cut local taxes on jet fuel to 4 percent from the current range of 20-30 percent.
Indian carriers are expected to post losses of $1.5 billion in 2008 as high fuel prices, which make up about half of airlines operating costs, erode margins. The airlines are also facing falling demand due to high air fares and a slowing economy.
Shares of top carrier Jet Airways rose after the news but later fell in line with the benchmark index that closed down 4.8 percent.
State-run oil firms such as Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp dropped 2-8 percent. ($1 = 49.3 rupees)