The government has formally allowed local airlines to import jet fuel directly, it said in a statement on Wednesday, in a major policy move expected to bring down costs for debt-laden carriers.

The decision to permit carriers to import aviation turbine fuel (ATF) directly was taken earlier this month at a meeting of a group of ministers on aviation, and the givernment moved forward on the issue last week, when the Civil Aviation Ministry wrote to the Commerce Ministry to take necessary steps towards this end.

Cash-strapped carriers such as Vijay Mallya-controlled Kingfisher Airlines, have been asking for permission to direct import ATF due to the high incidence of taxation on the fuel by state governments. According to some estimates, ATF prices are almost 50% higher in India, than in countries such as Singapore, Japan, and some European nations.

Sourcing of ATF through direct imports would lower the overall procurement cost for the airlines as sales tax varying from 4% to 30% in different states would be required to be paid only when local purchase was unavoidable, they said.