The Centre has capped aviation turbine fuel at Rs 75.6 per litre for domestic operations.
The aviation sector has been impacted by unprecedented volatility in global ATF prices following the West Asia crisis, the government said.
Due to the ongoing West Asia crisis, international ATF prices have surged nearly 2.5 times from Rs.60.50/ litre in March 2026 to Rs.142/litre in May 2026. ATF accounts for nearly 40 per cent of an airline’s operating cost. Therefore, this volatility in ATF prices has resulted in high cost pressure on airline financials, it noted.
ATF accounts for nearly 40 per cent of airline operating costs and during periods of extreme fuel volatility, can constitute up to 60% of total operating expenditure. While ATF price has been capped for domestic operations, Indian carriers continue to purchase ATF for international operations at Import Parity Prices (IPP), exposing them to elevated fuel costs, the government added.
The budgetary support shall be in the form of interest-free advances to OMCs through the Demands for Grants of the Ministry of Petroleum and Natural Gas, an official statement said.
The support shall be provided to OMCs to facilitate stable ATF pricing for airlines during the ongoing period of exceptional fuel price volatility arising from the West Asia crisis, it added.
When international ATF prices moderate, the differential amount shall be recovered from OMCs and returned to the Consolidated Fund of India. The arrangement shall continue until the entire support amount is fully recovered and settled, the government said.
The scheme shall be available to all willing Scheduled Indian carriers for both domestic and international operations.
The mechanism provides greater predictability in fuel costs by adopting a fixed-price arrangement for domestic and international operations, thereby reducing airline’s exposure to sudden fuel price spikes.
The arrangement will be implemented through an 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.
A Monitoring Committee comprising representatives of the Ministry of Civil Aviation, Ministry of Petroleum & Natural Gas and Department of Expenditure shall oversee implementation, claim verification, reconciliation and settlement. All claims and recoveries shall be subject to audit.
ATF price stabilisation support will be in force for a period of thirty-six months with provision for annual review or until the advance amount is fully recovered/settled, whichever is earlier. The proposal may be extended beyond thirty-six months with the approval of the Competent Authority in case the corpus is not fully trued up within this period.
The proposed mechanism will provide enhanced stability and predictability in ATF pricing for Indian airlines, enabling better operational and financial planning, the government said.
It will shield Oil Marketing Companies (OMCs) from losses arising from volatile and elevated ATF prices during the ongoing West Asia crisis, it added.
The measure will help protect and sustain domestic and international air connectivity, ensuring continuity of air services, the statement said.
It will reduce the pass-through of fuel price shocks to passengers, thereby helping to moderate fare volatility, it added.
The arrangement will support continued air connectivity to remote, regional, Tier-II and Tier-III cities, promoting balanced regional development and inclusive growth, the government said.
