Modi government approves ₹10,000cr fund to stabilize jet fuel prices
What's the story
The Indian government has approved a ₹10,000 crore Aviation Turbine Fuel (ATF) Price Stabilization Fund. The fund aims to shield airlines and passengers from the steep rise in ATF prices due to the ongoing West Asia crisis. The move comes as international ATF prices have skyrocketed nearly 2.5 times from ₹60.5 per liter in March 2026 to ₹142 per liter in May.
Cost implications
Interest-free advances to oil marketing companies
ATF constitutes nearly 40% of an airline's operating costs and up to 60% during extreme volatility. The recent price surge has heavily impacted both carriers and oil marketing companies (OMCs). To mitigate this impact, the government will provide interest-free advances to OMCs through the Ministry of Petroleum and Natural Gas. This support is available for all willing scheduled Indian carriers for domestic as well as international operations.
Fuel procurement
Fixed-price arrangement for fuel procurement
The government has devised a mechanism that provides a fixed-price arrangement for fuel procurement, giving airlines more predictability in their costs. This comes as ATF prices have been capped for domestic operations but carriers continue to buy fuel for international routes at import parity prices, leaving them vulnerable to high costs. The scheme mandates participating airlines to procure ATF exclusively from OMCs for up to three years.
Oversight
Monitoring committee to oversee implementation
A monitoring committee with representatives from the ministries of civil aviation, petroleum and natural gas, and the department of expenditure will oversee the implementation of this scheme. The stabilization support is expected to keep airline operations running smoothly and protect passengers from fare spikes. It is also critical for maintaining connectivity to Europe, North America, and Central Asia amid Pakistani airspace closure.
Protection
Price stabilization support for 36 months
The fund is vital for protecting the 77 lakh jobs dependent on the aviation ecosystem. It also ensures continued air access to Tier-II and Tier-III cities, including those under the UDAN scheme. The price stabilization support will remain in force for 36 months, subject to an annual review or until the advance is fully recovered, whichever comes first.