India Approves Rs 10,000 Crore Fund to Stabilize Aviation Fuel Prices

The Union Cabinet on Wednesday approved a one-time budgetary support of up to Rs 10,000 crore for oil marketing companies (OMCs) to provide ATF price stabilisation for scheduled Indian airlines, as surging fuel prices driven by the ongoing West Asia crisis continue to weigh heavily on the aviation sector.

Announcing the decision, Union Minister Ashwini Vaishnaw said ATF prices have risen sharply due to the conflict in West Asia and that the fund is aimed at cushioning the impact on airlines and passengers. International ATF prices have surged nearly 2.5 times from Rs 60.5 per litre in March 2026 to Rs 142 per litre in May 2026.

Since ATF accounts for nearly 40% of airline operating costs and up to 60% during periods of extreme volatility, the price surge has severely affected both carriers and OMCs.

Also read: ATF prices for international airlines slashed 27%; domestic rates unchanged

The support will be extended as interest-free advances to OMCs through the Ministry of Petroleum and Natural Gas, and will be available to all willing scheduled Indian carriers for both domestic and international operations.

While ATF prices have been capped for domestic operations, carriers have continued to purchase fuel for international routes at import parity prices, leaving them exposed to elevated costs.

The mechanism provides a fixed-price arrangement for fuel procurement, offering airlines greater predictability in costs. When international ATF prices moderate, the differential will be recovered from OMCs and returned to the Consolidated Fund of India, making it a self-sustaining arrangement.

Under the scheme, participating airlines will procure ATF exclusively from OMCs for up to three years, subject to annual review or until the advance is fully recovered, whichever is earlier.

A monitoring committee comprising representatives from the ministries of civil aviation, petroleum and natural gas, and the department of expenditure will oversee implementation, claim verification, and audit.

Also read: India keeps local jet fuel prices unchanged after airline plea

The stabilisation support is expected to prevent disruption to airline operations and shield passengers from fare spikes. The government also cited the need to sustain connectivity to Europe, North America, and Central Asia, given the ongoing closure of Pakistani airspace, which has forced Indian carriers onto longer flight paths, increasing fuel burn and operational costs.

The fund is seen as critical to protecting the 77 lakh jobs dependent on the aviation ecosystem, and to ensuring continued air access to Tier-II and Tier-III cities, including airports operationalised under the UDAN scheme.

The price stabilisation support will remain in force for 36 months, with provision for annual review or until the advance is fully recovered, whichever is earlier.

As a result, IndiGo’s parent company, InterGlobe Aviation, saw its shares surge by up to 1.62%.