The Union Cabinet on Wednesday approved a one-time Price Stabilisation Fund of up to ₹10,000 crore to help shield scheduled Indian airlines from sharp fluctuations in aviation turbine fuel (ATF) prices amid the ongoing West Asia crisis.
The government said the budgetary support would be provided to oil marketing companies (OMCs) in the form of interest-free advances through the Ministry of Petroleum and Natural Gas.
Under the approved mechanism, OMCs will be compensated for losses arising from elevated international ATF prices whenever the prevailing import parity price exceeds a benchmark price determined by the government.
The arrangement will continue until the entire support amount is recovered and settled, the government said in a press release.
The scheme will be available to all willing scheduled Indian carriers and will cover both domestic and international operations.
According to the government, the fixed-price arrangement is intended to provide greater predictability in fuel costs and reduce airlines’ exposure to sudden spikes in ATF prices.
As part of the framework, participating airlines will procure ATF exclusively from OMCs for a period of up to three years, subject to annual review or until the advance amount is fully recovered, whichever is earlier.
A monitoring committee comprising representatives from the Ministry of Civil Aviation, Ministry of Petroleum and Natural Gas, and the Department of Expenditure will oversee implementation, claim verification, reconciliation and settlement, it said.
The government said the measure is expected to provide stability in ATF pricing, support operational and financial planning for airlines, and help sustain domestic and international air connectivity. It added that the mechanism would also limit the impact of fuel price shocks on passengers and support connectivity to remote, regional, Tier-II and Tier-III cities.
According to the government, international ATF prices surged to ₹142 per litre in May 2026 from ₹60.50 per litre in March 2026, due to the West Asia crisis. ATF accounts for nearly 40 per cent of an airline’s operating costs and can rise to as much as 60 per cent during periods of extreme fuel price volatility.
The government also said that the closure of Pakistan’s airspace for Indian carriers has resulted in longer flight routes to Europe, North America and Central Asia, increasing fuel consumption and operational costs. It said higher fuel costs have contributed to a rise in long-haul passenger fares, a decline in international demand and reductions in services on several overseas routes.
