ATF price hiked 10% for domestic airlines; jet fuel rate in Delhi rises to ₹115/litre

Domestic airlines will pay 10% more for aviation turbine fuel (ATF) from Wednesday under a new government-backed pricing framework that allows carriers to lock in fuel rates for up to three years and insulates them from unpredictable swings in global oil prices.

Under the revised pricing, jet fuel will now cost ₹115 per litre in Delhi, up from ₹104.927 per litre earlier.

In Mumbai, the price has been fixed at ₹114.5 per litre, while in Chennai it will cost ₹139 per litre.

The increase comes amid elevated global fuel prices triggered by the ongoing crisis in West Asia, which has raised concerns over the operating costs of airlines.

The hike also follows the Union Cabinet's recent approval of a ₹10,000-crore Aviation Turbine Fuel (ATF) Price Stabilisation Fund aimed at protecting airlines and passengers from sharp fluctuations in jet fuel prices.

ATF accounts for around 40% of airlines' operating expenses, making fuel costs a key factor in determining profitability and ticket pricing.

The one-time budgetary support of up to ₹10,000 crore will be provided to OMCs to help stabilise ATF prices for scheduled Indian airlines.

According to the government, the stabilisation fund will function as a self-sustaining revolving mechanism and will be available for both domestic and international airline operations.

Under the framework, participating airlines will sign memoranda of understanding with OMCs and procure ATF exclusively from them for up to three years.

The Ministries of Civil Aviation and Petroleum and Natural Gas will be parties to the arrangement.

The government has said that once international fuel prices ease, the differential amount paid under the scheme would be recovered from OMCs and returned to the Consolidated Fund of India.

According to an NDTV report, carriers opting in will be able to procure fuel at fixed rates for up to three years, while those staying out will continue to buy ATF at market-linked prices, currently estimated at around ₹142 per litre.

The report suggests that the fixed pricing formula is based on a free-on-board (FOB) benchmark of ₹86.32 per litre, along with airport charges, oil company margins and applicable taxes.

International jet fuel prices climbed to nearly ₹142 per litre in May from about ₹60.50 per litre before the outbreak of the West Asia conflict.

Domestic ATF prices, however, remained unchanged at around ₹105 per litre in Delhi for over two months, resulting in losses for state-owned oil marketing companies (OMCs).

Announcing the price stabilisation fund last week, Information and Broadcasting Minister Ashwini Vaishnaw said the government stepped in after prolonged volatility in global fuel markets began affecting oil marketing companies (OMCs).

"While this measure helped stabilise domestic airline operations, the prolonged crisis began to have a significant negative impact on oil marketing companies (OMCs)," Vaishnaw had said.

"The challenge, therefore, was to find a win-win-win solution, one that benefits airlines, OMCs, and citizens alike," he added.