The ATF price stabilisation mechanism will operate for 36 months, subject to annual review or until the support amount is fully recovered, whichever comes first.
Reeling from the high cost of aviation turbine fuel (ATF) since the start of the West Asia conflict in March this year, scheduled Indian carriers are in for some relief after the Union Cabinet, chaired by Prime Minister Narendra Modi, approved a budgetary support of up to ₹100 billion for oil marketing companies (OMCs). This one‑time measure will provide ATF price stabilisation support to airlines for their domestic and international operations.
The exceptional fuel price volatility arising out of the ongoing West Asia crisis has posed significant challenges for airlines worldwide, with international ATF prices rising 142 per cent in the last three months. The approved mechanism seeks to provide enhanced stability and predictability in ATF pricing for Indian carriers while ensuring continuity of air services and protecting passengers from the impact of sudden fuel price shocks.
Welcoming the Cabinet decision, Minister of Civil Aviation Kinjarapu Ram Mohan Naidu reiterated that the Centre was committed to taking calibrated measures to safeguard the interests of passengers, airlines, and the broader aviation ecosystem. “Earlier, under the Emergency Credit Line Guarantee Scheme (ECLGS), nearly ₹50 billion was earmarked for airlines, providing critical liquidity support. Today, the Cabinet has once again taken a far‑reaching decision by approving ₹100 billion of interest‑free support to OMCs for ATF price stabilisation. This intervention will bring significant relief to airlines by reducing uncertainty in fuel costs and will ultimately benefit our passengers through reduced airfare.”
Naidu further highlighted that the present decision builds upon a series of calibrated measures already undertaken by the government. “For domestic operations, the increase in ATF base prices was moderated and capped at 25 per cent despite the much steeper rise witnessed in global fuel markets. In addition, landing and parking charges for domestic carriers were reduced by 25 per cent.”
He also thanked the chief ministers of Delhi and Maharashtra for reducing value‑added tax (VAT) on ATF to 7 per cent. Both states account for up to 80 per cent of the country’s ATF uplift.
Taming Volatility
ATF constitutes nearly 40 per cent of airline operating costs under normal circumstances and can account for as much as 60 per cent during periods of extreme fuel price volatility. Such fluctuations can significantly impact airline operations, route planning, and fare stability.
Highlighting the impact of the decision, Naidu added, “The decision has been greatly appreciated by the aviation industry and beyond because of the huge cascading effect over other sectors like tourism, hospitality, trade, and exports. With this, we would be able to ensure continuity in air operations, facilitating passengers as well as high‑value air cargo.”
The ATF price stabilisation mechanism will operate for 36 months, subject to annual review or until the support amount is fully recovered, whichever comes first. A monitoring committee comprising representatives of the Ministry of Civil Aviation, Ministry of Petroleum & Natural Gas, and Department of Expenditure shall oversee implementation, claim verification, reconciliation, and settlement.