New Delhi, June 3: Rising aviation fuel costs linked to the ongoing West Asia crisis have prompted the Union Cabinet to approve a Rs 10,000 crore support package aimed at stabilising Aviation Turbine Fuel (ATF) prices for Indian airlines and reducing the impact of global fuel market volatility on the aviation sector.
The decision was taken by the Union Cabinet chaired by Narendra Modi. Under the approved mechanism, the government will provide one-time budgetary support of up to Rs 10,000 crore to Oil Marketing Companies (OMCs) in the form of interest-free advances through the Demands for Grants of the Ministry of Petroleum and Natural Gas.
The measure is intended to compensate OMCs for losses arising from elevated international ATF prices during the current period of market instability. According to the approved framework, support will be activated whenever the prevailing Import Parity Price of ATF exceeds a benchmark price determined under the mechanism.
The government stated that the arrangement would remain operational for 36 months, subject to annual review, or until the entire advance amount is recovered and settled, whichever occurs earlier. The scheme is designed to provide greater predictability in fuel pricing and reduce airlines’ exposure to sudden increases in aviation fuel costs.
Under the framework, all willing scheduled Indian airlines operating domestic and international services will be eligible to participate. The mechanism establishes a fixed-price arrangement for ATF procurement, enabling airlines to undertake more stable operational and financial planning during a period of significant fuel price uncertainty.
To implement the programme, participating airlines and OMCs will enter into a memorandum of understanding, with the Ministry of Civil Aviation and the Ministry of Petroleum and Natural Gas serving as signatories. Airlines joining the scheme will procure ATF exclusively from OMCs for a period of up to three years, subject to the conditions of the arrangement.
The Cabinet also approved a recovery mechanism under which any differential amount generated when international ATF prices moderate will be collected from OMCs and returned to the Consolidated Fund of India. The arrangement will continue until the full support amount has been recovered.
The government expects the initiative to improve financial stability across the aviation sector while supporting broader economic activity linked to air connectivity. Officials stated that stable fuel pricing could have positive effects on tourism, hospitality, trade, exports, investment and regional development.
The intervention comes against the backdrop of a sharp increase in global ATF prices. According to official figures, international aviation fuel prices climbed from Rs 60.50 per litre in March 2026 to Rs 142 per litre in May 2026, reflecting the impact of the continuing geopolitical tensions in West Asia.
With fuel accounting for a major share of airline operating costs, the Cabinet’s decision seeks to cushion the aviation sector from sustained price shocks while ensuring continuity of services across domestic and international routes.
