Govt approves ₹10,000-crore ATF price stabilisation fund to cushion airlines, passengers

The Union Cabinet on Wednesday approved a ₹10,000-crore Aviation Turbine Fuel (ATF) Price Stabilisation Fund to protect airlines and passengers from the impact of a sharp rise in global jet fuel prices triggered by the ongoing crisis in West Asia.

The decision comes amid a nearly 2.5-fold increase in international ATF prices, which rose from ₹60.5 per litre in March 2026 to ₹142 per litre in May 2026, according to the government.

The government, however, capped ATF prices for domestic operations at ₹75.6 per litre to shield carriers and passengers from the full impact of the surge.

"While this measure helped stabilise domestic airline operations, the prolonged crisis began to have a significant negative impact on oil marketing companies (OMCs)," Information and Broadcasting Minister Ashwini Vaishnaw said at a Cabinet briefing.

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

Vaishnaw also cited the closure of Pakistani airspace for Indian carriers as an additional factor driving up costs, as airlines operating flights to Europe, North America and Central Asia have been forced to take longer routes.

The one-time budgetary support of up to ₹10,000 crore to oil marketing companies (OMCs) will help stabilise ATF prices for scheduled Indian airlines.

ATF accounts for around 40% of airlines' operating costs, making fuel prices a critical determinant of the sector's financial health.

The newly approved fund would function as a "self-sustaining revolving" mechanism and would be available for both domestic and international airline operations.

Under the approved framework, participating airlines will enter into a memorandum of understanding with OMCs and procure ATF exclusively from them for a period of up to three years.

The Ministry of Civil Aviation and the Ministry of Petroleum and Natural Gas will be signatories to the arrangement.

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

"The mechanism provides greater predictability in fuel costs by adopting a fixed-price arrangement for domestic and international operations, thereby reducing airline’s exposure to sudden fuel price spikes," a government release said.

A monitoring committee comprising representatives of the civil aviation ministry, petroleum ministry and Department of Expenditure will oversee implementation, claim verification, reconciliation and settlement.