Air-India will soon approach the Reserve Bank of India to seek permission to undertake fuel price hedging.

According to government sources, the Air-India board has already passed the risk management policy laying the guidelines for the process.

The airline plans to begin the process of fuel hedging by mid-February 2003. Ernst & Young, the consultant appointed by the airline for the process, is likely to approach the Reserve Bank of India shortly.

Sources said as soon as the airline acquires the RBI permission, the process to appoint authorised dealers to administer the hedging process would begin.

Though no decision has been taken on the exact amount of fuel upliftment, A-I is likely to take a flexible approach.

Sources said the upliftment could be anywhere between 30 per cent and 40 per cent of the total fuel required.

Fuel hedging is likely to help the airlines considerably in view of the fact that international aviation turbine fuel prices have increased by 10 per cent in September. The additional burden to A-I's fuel bill thanks to this hike would be Rs 150 crore (Rs 1.5 billion).

Earlier in the year, the price of ATF was 98 cents per US gallon, which went up to 112 cents per US gallon in September. Currently, the price is 102 cents per US gallon.

The fuel bill for the carrier in 2001-02 was Rs 905 crore (Rs 9.05 billion) . This year the bill is likely to go above Rs 1,000 crore (Rs 10 billion).

A-I has been pushing for permission for fuel hedging from 2000 as the year saw a 40 per cent increase in the carrier's fuel bill.