The Union Cabinet on Wednesday approved a ₹10,000-crore Aviation Turbine Fuel (ATF) Price Stabilisation Fund to cushion airlines from soaring fuel costs triggered by the ongoing West Asia crisis and help prevent sharp fluctuations in airfares.
The scheme will provide interest-free advances to oil marketing companies (OMCs), enabling them to supply ATF to scheduled Indian airlines at a stabilised price for domestic and international operations, according to a government statement.
International ATF prices have surged from ₹60.50 per litre in March to around ₹142 per litre in May, putting significant pressure on airlines. Fuel accounts for nearly 40 per cent of airline operating costs and can rise to as much as 60 per cent during periods of extreme volatility.
Announcing the decision, Union Information and Broadcasting Minister Ashwini Vaishnaw said the support mechanism was necessitated by rising fuel prices linked to the West Asia conflict and the continued closure of Pakistani airspace for Indian carriers.
He said the fund would help stabilise ATF prices for airlines and ensure uninterrupted flight operations.
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“With this fund, airlines will get a stable ATF price as long as the turmoil continues. Once the crisis is over, participating airlines will reimburse the amount,” Vaishnaw said.
Under the mechanism, OMCs will be compensated whenever international import parity prices exceed a benchmark level fixed by the government. When global fuel prices moderate, the support extended to OMCs will be recovered and returned to the Consolidated Fund of India through a defined settlement process.
The budgetary support will be routed through the Ministry of Petroleum and Natural Gas and will remain in force for up to 36 months, subject to annual review or until the full amount is recovered.
Vaishnaw said the measure would shield passengers from fare spikes caused by rising fuel costs and help protect nearly 77 lakh jobs linked to the aviation sector.
He added that the fund would also safeguard public investment in airport infrastructure by maintaining airline viability and preserving connectivity to Europe, North America and Central Asia despite longer routes necessitated by Pakistan's airspace closure.
The government said the stabilisation mechanism would provide temporary relief to airlines while compensating OMCs for losses arising from elevated global fuel prices.
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