Cabinet Approves ₹10,000-Crore Package to Stabilize ATF Prices and Mitigate Impact of Crude Price Volatility on Airlines

Indian Government Approves One-Time Support for Airlines Amid Ongoing Iran War

The Indian cabinet has approved a one-time budgetary support of up to Rs 10,000 crore for oil marketing companies (OMCs) to offer aviation turbine fuel (ATF) price-stabilisation support to Indian airlines. This move aims to provide relief to the airlines, which have been hit hard by the ongoing Iran war.

The support will be provided in the form of interest-free advances to OMCs through the demands for grants of the petroleum and natural gas ministry. Once 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.

The initiative aims to facilitate stable jet fuel pricing for airlines during the ongoing period of exceptional fuel price volatility arising from the West Asia crisis. The corpus will compensate OMCs for losses arising from elevated international ATF prices whenever the prevailing Import Parity Price exceeds the benchmark price determined under the approved mechanism.

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This measure will provide enhanced stability and predictability in jet fuel prices for Indian carriers, enabling better operational and financial planning. By protecting and sustaining domestic and international air connectivity, the government aims to ensure continuity of air services, reduce the pass-through of fuel price shocks to passengers, and thereby help to moderate fare volatility.

Prior to this decision, airlines had urged the government to revisit the ATF pricing mechanism by reintroducing crack spread bands to cap refinery margins charged by OMCs and bring parity between domestic and international fuel pricing. The crack spread refers to the difference between the cost of crude oil and the market value of refined petroleum products, and is widely used as a measure of refinery profitability.

In recent weeks, several airlines increased fuel surcharge on international routes after ATF prices surged amid the West Asia conflict, further exacerbating the challenges faced by the airlines.

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