India Introduces New Jet Fuel Benchmark at Rs 115 per Litre Under ATF Stabilisation Plan

Government Introduces Price Stabilisation Scheme for Aviation Turbine Fuel

The Indian government has launched a new price stabilisation scheme aimed at shielding domestic airlines and passengers from a surge in global fuel costs. Under the voluntary scheme, participating airlines will be able to buy aviation turbine fuel (ATF) at a fixed price of Rs 86.32 per litre for up to three years.

The benchmark compares with the current effective ATF price of about Rs 105 per litre in Delhi, which has remained frozen for more than two months after the government allowed only a partial pass-through of soaring global fuel costs triggered by the outbreak of the West Asia conflict in late February. Participating airlines will pay the fixed free-on-board (FOB) benchmark price plus airport charges, oil company margins, and applicable taxes, taking the effective selling price to about Rs 115 per litre in Delhi, Rs 114.5 in Mumbai, and Rs 139 in Chennai.

The scheme is part of the Union Cabinet-approved Rs 10,000-crore fuel price stabilisation programme for airlines that provides financial support to state-owned oil retailers to cap ATF prices and shield carriers from soaring fuel costs linked to the ongoing West Asia crisis. Under this, a one-time, interest-free advance of up to Rs 10,000 crore will be provided to oil marketing companies (OMCs), enabling them to supply jet fuel to scheduled Indian airlines at a fixed price for both domestic and international operations.

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The benchmark has been fixed at Rs 86.32 per litre at the FOB level for domestic operations and Rs 104.49 per litre for international operations. The effective selling price in Delhi works out to about Rs 115 per litre for both domestic and international operations. The rate compares to about Rs 105 a litre cost of ATF in Delhi currently. The current rate was capped in April when prices were raised by 25 per cent instead of 100 per cent.

The scheme will remain in force for up to 36 months or until the entire amount advanced by the government is recovered, whichever is earlier. Participation by airlines will be voluntary. The Rs 10,000 crore corpus will be provided as an interest-free advance to OMCs. Any compensation paid during periods of elevated fuel prices will be recovered once international prices moderate, with funds returned to the Consolidated Fund of India through a prescribed mechanism.

The government aims to provide airlines with greater certainty over fuel costs, helping sustain domestic and international connectivity while limiting the pass-through of fuel-price shocks to passengers. ATF typically accounts for about 40 per cent of airline operating expenses and can rise to as much as 60 per cent during periods of extreme volatility. The approved mechanism is designed as a temporary self-correcting arrangement, protecting air connectivity, ensuring stability in air services, and shielding passengers from the impact of extraordinary volatility in the global fuel crisis arising out of the ongoing crisis.

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