The government will allow cash-strapped Kingfisher Airlines to directly import fuel instead of sourcing it through state canalising agencies only if it is satisfied that the restriction was causing "genuine hardship", a senior official said.

Vijay Mallya, chairman of the UB Group, which runs Kingfisher Airlines, had said on Tuesday that it had sought the Directorate General Of Foreign Trade's permission for the airline to directly import fuel to save on sales tax, which varies from 4% to 30% across the country as per a report in ET by Amiti Sen & Anindya Upadhyay.

Oil companies have laughed off the idea saying it was akin to someone doing an MBBS course to avoid paying consultation fee to a doctor.

Aviation turbine fuel is a restricted item which can be imported only by state-trading enterprises, in this case IndianOil Corp.

"I am yet to see the application. If Kingfisher has asked for an individual exemption, the DGFT has the power to grant it if it is satisfied that import restriction was leading to genuine hardship and an adverse impact on trade," DGFT Anup Pujari told ET. The DGFT exemption is for a specified quantity and not period.

However, if a request has been made for putting ATF on open general licence, the matter has to be referred to the commerce minister for a policy change, he said.

While the Foreign Trade Policy 2009-13 includes ATF in the list of restricted products that are to be imported through canalising agencies, the DGFT has discretionary powers to grant exemption.

The oil industry says the idea is not viable as it can cost Rs 100 crore to build facilities at a large airport.

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