New Delhi, Oct 31 (IANS): India's largest fuel retailer Indian Oil Thursday announced a 4.51 percent cut in the price of jet fuel in New Delhi region, effective from midnight Thursday.

According to IOC, the air turbine fuel (ATF) will cost the airlines 4.51 percent less at New Delhi, which comes to Rs.73,607.26 per kilolitre from Rs.77,089.42 per kilolitre.

The fuel price difference in other major cites will be decided by factoring in the state tax regimes applicable there.

The reduction came after the three state-owned oil marketing companies (OMCs), which revise jet fuel prices on the first day of every month, had hiked fuel prices by 6.9 percent for purchases from Sep 1.

This was the fourth hike since June due to the fall in rupee value. The increase in ATF prices last month had led to three airlines namely Air India, Jet Airways and budget passenger carrier SpiceJet to increase fares by 25 percent.

Fuel prices are a determining factor in the tough Indian aviation sector as the cost comprises about 50 percent of the total operating costs of an airline.

High prices have dented the sector as major airlines bleed under the high state sales tax regime which ranges from 4-34 percent.

Currently, ATF sold in the country is nearly 50-60 percent costlier than in overseas markets like Bangkok, Singapore or Dubai.

There has been a longstanding perception that ATF, which is a super-refined form of kerosene, should not be subsidised for air travel.

The government currently subsidises sensitive products like diesel, LPG (liquefied petroleum gas) cylinders and kerosene.

Currently, the central government is trying to get the fuel as a notified category item. Once listed as a notified product or a declared good under the Central Sales Tax (CST) Act, airlines will only have to pay a uniform sales tax of four percent.