The Union Cabinet has imposed a price cap on Aviation Turbine Fuel (ATF) at Rs 75.60 per litre for domestic operations, aiming to stabilize surging fuel prices triggered by the ongoing West Asia crisis. Union Minister Ashwini Vaishnav announced the decision during a cabinet briefing on Wednesday, alongside a Rs 10,000 crore price stabilization fund to assist Oil Marketing Companies (OMCs) in subsidizing ATF costs.
Government's Financial Support Mechanism
The government has approved a one-time budgetary support of up to Rs 10,000 crore for OMCs to provide ATF price stabilization support to scheduled Indian airlines for both domestic and international operations. This support will be extended as interest-free advances through the Demands for Grants of the Ministry of Petroleum and Natural Gas. The objective is to ensure stable ATF pricing for airlines during the period of exceptional fuel price volatility arising from the West Asia crisis.
When international ATF prices moderate, the differential amount will be recovered from OMCs and returned to the Consolidated Fund of India. This arrangement will continue until the entire support amount is fully recovered and settled.
Implementation and Eligibility
The scheme is available to all willing scheduled Indian carriers for both domestic and international operations. It will be implemented through a Memorandum of Understanding (MoU) between participating Indian airlines and OMCs, with the Ministry of Civil Aviation and the Ministry of Petroleum & Natural Gas as signatories. Under this one-time arrangement, participating airlines will procure ATF only from OMCs for up to three years, subject to annual review or until the advance amount is fully recovered, whichever is earlier.
Impact of the West Asia Crisis on ATF Prices
Due to the ongoing West Asia crisis, international ATF prices have surged nearly 2.5 times, from Rs 60.50 per litre in March 2026 to Rs 142 per litre in May 2026. ATF accounts for nearly 40% of an airline's operating cost, and during periods of extreme fuel volatility, this share can rise to up to 60% of total operating expenditure. This volatility has placed significant cost pressure on airline financials, prompting the government's intervention.
The official release emphasized that the price cap and stabilization fund are designed to mitigate the financial burden on airlines and ensure continued operations without drastic fare increases for passengers.
