Cabinet approves Rs. 10,000 crore support package to stabilise ATF prices for airlines

The assistance will be extended in the form of interest-free advances to OMCs through the Demands for Grants of the Ministry of Petroleum and Natural Gas. The measure aims to ensure stable ATF pricing for airlines amid volatility in global fuel prices triggered by the ongoing West Asia crisis.

Key features of the scheme

Under the approved mechanism, OMCs will receive a one-time interest-free advance of up to ₹10,000 crore to offset losses arising from elevated international ATF prices whenever import parity prices exceed a benchmark level.

The scheme includes a recovery and true-up mechanism, under which the differential amount will be recovered from OMCs and returned to the Consolidated Fund of India when global fuel prices moderate. The cycle will continue until the entire support is fully recovered.

The support will be available to all willing scheduled Indian carriers for both domestic and international operations.

The mechanism also introduces a fixed-price arrangement for ATF, aimed at providing greater predictability in fuel costs and reducing airlines’ exposure to sudden price fluctuations.

Supply and implementation framework

As part of the arrangement, participating airlines will procure ATF exclusively from OMCs for a period of up to three years, subject to annual review or until the advance amount is fully recovered, whichever is earlier. The framework will be formalised through an MoU involving airlines, OMCs, the Ministry of Civil Aviation, and the Ministry of Petroleum and Natural Gas.

A monitoring committee comprising representatives from the Ministry of Civil Aviation, Ministry of Petroleum and Natural Gas, and the Department of Expenditure will oversee implementation, including claim verification, reconciliation, and audit.

Duration and review

The ATF price stabilisation mechanism will remain in force for 36 months, with provisions for annual review or earlier termination once the corpus is fully recovered. It may be extended beyond this period with approval of the competent authority if required.

Expected impact

The government said the initiative will provide stability and predictability in aviation fuel pricing, enabling better financial planning for airlines while reducing fare volatility for passengers.

It is also expected to shield OMCs from losses arising from extreme fuel price fluctuations during the crisis period and ensure continuity of domestic and international air connectivity.

The measure is expected to support regional air links, particularly to Tier-II and Tier-III cities, and strengthen economic activity across tourism, trade, logistics, and allied sectors.

Background

The aviation sector has been impacted by sharp volatility in global ATF prices following the West Asia crisis. International ATF prices have reportedly surged from around ₹60.50 per litre in March 2026 to ₹142 per litre in May 2026.

ATF accounts for nearly 40% of airline operating costs, and in extreme conditions can rise to as much as 60%, significantly affecting airline finances.

While domestic ATF prices are currently capped, international operations continue to be exposed to import parity pricing, increasing cost pressures on Indian carriers.

Additional challenges, including longer flight routes due to airspace restrictions over Pakistan, have further increased fuel consumption and operational costs, leading to higher fares and reduced demand on select international routes.