Centre approves ₹10,000-crore fund to stabilise jet fuel prices and support airline operations

The Union Cabinet on Wednesday approved a ₹10,000-crore aviation fuel price stabilisation fund to support Indian airlines and oil marketing companies amid a sharp rise in global aviation turbine fuel (ATF) prices linked to the ongoing West Asia crisis. The government said international ATF prices increased from ₹60.50 per litre in March 2026 to ₹142 per litre in May 2026. It also announced that ATF for domestic airline operations would remain capped at ₹75.6 per litre.

According to the government, the ₹10,000-crore support will be provided as an interest-free advance to oil marketing companies through the Ministry of Petroleum and Natural Gas. The mechanism is intended to compensate oil marketing companies whenever prevailing Import Parity Prices exceed the benchmark price determined under the approved framework. The support applies to both domestic and international operations of participating Indian airlines.

The government stated that ATF accounts for nearly 40 per cent of airline operating costs and that the recent surge in fuel prices has placed significant financial pressure on airlines and fuel suppliers. It said the stabilisation mechanism is designed to provide greater predictability in fuel costs, reduce exposure to sudden price fluctuations and help maintain airline operations during the current period of volatility.

Under the approved framework, participating airlines will procure ATF exclusively from oil marketing companies for up to three years, subject to annual review or until the full support amount is recovered. When international ATF prices decline, the differential amount will be recovered from oil marketing companies and returned to the Consolidated Fund of India. The support arrangement will remain in force for 36 months or until complete settlement of the advance amount, whichever occurs earlier.

The government said the mechanism will be implemented through a memorandum of understanding involving airlines, oil marketing companies, the Ministry of Civil Aviation and the Ministry of Petroleum and Natural Gas. A monitoring committee comprising representatives from the civil aviation ministry, petroleum ministry and Department of Expenditure will oversee implementation, claim verification, reconciliation and settlement. All claims and recoveries will be subject to audit.

The government stated that the measure is intended to prevent disruption of airline operations, reduce the impact of fuel price increases on airfares and support domestic and international air connectivity. It said the mechanism would help sustain operations across regional, domestic and international routes, including services to Europe, North America and Central Asia, while also supporting employment linked to airlines, airports, logistics, tourism and related sectors.