A one-time stabilisation fund has been introduced to protect both airlines and passengers from sharp fluctuations in jet fuel prices and rising operational costs.
India on Wednesday approved a one-time budgetary support package of up to ₹100 billion ($1.2 billion) to help stabilise aviation turbine fuel (ATF) prices for airlines, as fuel costs continue to rise amid the ongoing conflict in West Asia.
The support will be provided to oil marketing companies (OMCs) as an interest-free advance and is aimed at cushioning airlines against unprecedented fuel-price volatility that has sharply increased operating costs across the aviation sector.
Announcing the decision, Union Minister Ashwini Vaishnaw said international aviation turbine fuel (ATF) prices have surged from ₹60.5 per litre in March 2026 to ₹142 per litre in May 2026, driven largely by geopolitical tensions in the Middle East.
Jet fuel price surge
The government said the sharp rise in fuel prices has placed significant pressure on airlines, with aviation turbine fuel (ATF) typically accounting for around 40 per cent of operating costs, and rising to as much as 60 per cent during periods of extreme volatility.
The increase has also impacted oil marketing companies (OMCs), which continue supplying fuel despite elevated global prices. While domestic ATF rates remain capped, airlines operating international routes are still exposed to higher import-parity pricing.
How the support works
Under the approved framework, the government will provide interest-free advances to oil marketing companies (OMCs) through the Ministry of Petroleum and Natural Gas.
The corpus is designed to compensate OMCs whenever international aviation turbine fuel (ATF) prices exceed a benchmark set under the government’s pricing mechanism. In return, airlines will benefit from a fixed-price fuel procurement system that improves cost predictability.
When global fuel prices ease, the excess differential will be recovered from OMCs and credited back to the Consolidated Fund of India, making the system self-balancing over time.
All routes to benefit
The scheme will be open to all willing scheduled Indian airlines, covering both domestic and international operations.
Participating carriers will be required to procure aviation turbine fuel (ATF) exclusively from oil marketing companies (OMCs) for a period of up to three years. The programme will remain valid for 36 months, subject to annual review or until the full advance is recovered, whichever comes first.
A monitoring committee comprising officials from the Ministries of Civil Aviation, Petroleum and Natural Gas, and the Department of Expenditure will oversee implementation, verify claims, and conduct audits.
Curbing fare spikes
The Centre said the fund is aimed at preventing disruptions to airline operations and shielding passengers from higher airfares caused by soaring fuel costs.
“The fund will help stabilise ATF prices for scheduled Indian carriers and prevent disruption of airline operations. It will also protect air passengers from fare spikes driven by the global price surge,” Union Minister Ashwini Vaishnaw said.
The government also underlined the importance of maintaining international connectivity, noting that the closure of Pakistani airspace has forced Indian airlines to operate longer routes to Europe, North America, and Central Asia, increasing fuel consumption and overall costs.
Investor confidence
According to the government, the stabilisation package is expected to safeguard around 7.7 million jobs linked to India’s aviation sector and protect investments in airport infrastructure.
Officials also said the measure would help maintain connectivity to Tier-II and Tier-III cities, including routes operated under the government’s UDAN regional connectivity scheme.
The announcement was welcomed by investors, with shares of InterGlobe Aviation, the parent company of IndiGo, rising as much as 1.62 per cent after the Cabinet decision.
The government added that the support mechanism will remain in place until the full amount is recovered and settled, while offering temporary relief to airlines and fuel suppliers from one of the steepest fuel price surges in recent years.\
