India Approves $1.2 Billion Aviation Fuel Price Stabilization Fund Amid Middle East Crisis

Amid the prolonged Middle East conflict, the government has approved an Aviation Turbine Fuel (ATF) Price Stabilisation Fund to safeguard problems being faced by airlines, oil marketing companies and fliers. This will be a self sustaining revolving fund. The Union Cabinet on Wednesday approved the fund of Rs 10,000 crore support package to protect airlines from the sharp surge in aviation fuel prices triggered by the ongoing turmoil in West Asia. The fund will be channelled through interest-free advances to Oil Marketing Companies. These funds will be used to compensate OMCs whenever international ATF prices remain significantly above the benchmark level prescribed under the scheme. The move is aimed at preventing sudden spikes in fuel costs from disrupting airline operations at a time when global energy markets remain highly volatile. A key feature of the arrangement is the introduction of a fixed-price framework for ATF. By reducing uncertainty around fuel expenses, the government hopes to provide airlines with greater visibility over operating costs and allow them to plan their finances more effectively. The scheme will be open to scheduled Indian carriers operating both domestic and international services. The support, however, is not intended to be permanent. Once global fuel prices begin to ease, the amount extended to OMCs will be gradually recovered and returned to the Consolidated Fund of India. The recovery process will continue until the entire advance has been settled.

Aviation Turbine Fuel (ATF) Price Stabilisation Fund: Top points

According to the government the new fund will benefit in the following ways:

Help stabilise ATF prices for scheduled Indian carriers

Prevent disruption of airline operations

Shield air passengers from fare spikes driven by global price surge

Protect 77 lakh jobs dependent on the aviation ecosystem

Safeguard substantial public investment in airport infrastructure by keeping airline operations viable

Maintain regional and international connectivity to Europe, North America and Central Asia given Pakistan airspace closure

The government said that due to the crisis in the Middle East, international ATF prices have increased 2.5 times. They have gone up from Rs 60.5 per litre in March 2026 to more than double levels of Rs 142 per litre in May 2026. The government has capped ATF prices at Rs 75.6 per litre for domestic operations. ATF accounts for around 40% of operating cost for airlines, and the price surge has severely affected both airlines and oil marketing companies.