By Gabriel Araujo

SAO PAULO (Reuters) - Airline lobby group IATA has urged the Brazilian government and state-run oil company Petrobras to tweak the way jet fuel is charged in the country in order to reduce costs, calling kerosene prices in the South American nation "excessively high."

The International Air Transport Association (IATA) said in a statement on Monday that local prices "do not reflect the reality of an oil producing country," adding that fuel costs were one of the main challenges faced by the sector in Brazil.

Petrobras is Brazil's largest oil producer and responsible for most of the country's refining activity. It tweaks jet fuel prices at the beginning of each month based on factors such as global oil prices and foreign exchange rates.

"Petrobras' monopolistic position and additional administrative costs charged by suppliers result in artificially inflated jet fuel prices," IATA's head in the Americas, Peter Cerda, said.

Brazil's mines and energy ministry did not immediately respond to a request for comment.

Petrobras, meanwhile, pointed to the fact it had lowered kerosene prices at its refineries by an average 6% starting Dec. 1, which means prices have been reduced by a total 19.6% so far this year.

"It is important to highlight that the Brazilian market is open to free competition and there are no legal, regulatory or logistical restrictions for other companies to act as producers or importers of jet fuel," the oil giant added in a statement.

High fuel prices have long been a subject of complaint from local airlines, with Azul Chief Executive John Rodgerson saying last month that Brazil had "the most expensive fuel in the world."

Jet fuel represents roughly 40% of total costs of an airline in Latin America's largest economy, while the global average is 30% at times of "exceptionally high global fuel prices," according to IATA.