New Delhi: India's flagship carrier, state-owned Air India slashed fares across the board Monday by reducing its fuel surcharge by Rs.400 for all routes. The cut will come into effect from midnight, an airline official said.

According to an official here, domestic carriers presently charge fuel surcharge of Rs.2,350 per passenger flying up to 750 kms and Rs.3,100 for those flying beyond 750 kms in India. The airline had in June increased the surcharge by Rs.300 for sectors less than 750 kilometres and Rs.550 for longer flights.

The reduction in the fuel surcharge comes after a recent decline in jet fuel prices. State-run oil companies cut jet fuel prices Nov 15 by over 12 per cent to a 14-month low.

Aviation turbine fuel (ATF) prices were slashed by over Rs.5,580 per kilolitre to Rs. 38,163.23 per kilolitre in Delhi from that prevalent in September 2007.

The fare cuts follow Civil Aviation Minister Praful Patel's comments that India's airlines should cut fares now that jet fuel prices have eased.

Private air operators had, however, said they would continue to watch the situation before slashing passenger fares. Aviation experts, however, believe the private operators would be forced to do so now that Air India has cut fuel surcharge.

ATF prices, which account for nearly 35 percent of an airline's operating costs, have dropped by nearly 50 percent since hitting a high of Rs.73,673.56 a kilolitre in August.

The state-owned airline had said in August that it expected to report a loss of Rs.20 billion for the financial year ending March as rising fares and competition had reduced demand.

The carrier plans to raise $1 billion to buy 21 Airbus aircraft by 2011.

National Aviation Corp of India Ltd, which controls Air India, had in 2005 placed an order for 111 aircraft, 68 from Boeing and 43 from Airbus worth Rs.600 billion then. The airline has so far raised more than Rs.120 billion to add 38 new generation aircraft to up its fleet to 147.