Govt caps ATF price at Rs 75.60 per litre; approves Rs 10,000 crore funds for OMCs to support domestic airlines

With aviation fuel costs soaring amid the ongoing West Asia crisis, the Union Cabinet has stepped in with a major intervention aimed at protecting India’s aviation sector from sharp cost escalation. In a significant relief measure for airlines, the government has capped the price of Aviation Turbine Fuel (ATF) at Rs 75.60 per litre for domestic operations and simultaneously approved a Rs 10,000 crore price stabilisation mechanism to cushion the impact of volatile global fuel markets.

Announcing the decision, Union Minister Ashwini Vaishnav said the Cabinet has cleared a one-time budgetary support package for Oil Marketing Companies (OMCs) to ensure stable ATF pricing for Indian carriers during the current period of extraordinary fuel price fluctuations.

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One-time budgetary support package

Union Minister Ashwini Vaishnav said the government has approved budgetary assistance of up to Rs 10,000 crore for OMCs to facilitate ATF price stabilisation support for Scheduled Indian Airlines operating both domestic and international services.

According to the government, the move is intended to prevent sudden fuel cost spikes from severely impacting airline operations at a time when international ATF prices remain under pressure.

How the support mechanism will work

• The financial assistance will be provided to Oil Marketing Companies in the form of interest-free advances through the Demands for Grants of the Ministry of Petroleum and Natural Gas.

• The support is intended to help OMCs maintain stable ATF pricing for airlines during the current phase of exceptional fuel market volatility.

• Once international ATF prices decline and market conditions normalise, the differential amount will be recovered from OMCs and returned to the Consolidated Fund of India.

• The recovery mechanism will remain in place until the entire support amount is fully reimbursed.

• The arrangement will be open to all willing Scheduled Indian carriers for both domestic and international operations.

• The framework will be implemented through a Memorandum of Understanding (MoU) between participating airlines and OMCs.

• The Ministry of Civil Aviation and the Ministry of Petroleum and Natural Gas will be signatories to the arrangement.

Three-year fuel procurement condition

• Airlines opting for the scheme will procure ATF exclusively from OMCs under the one-time arrangement.

• The provision will remain applicable for up to three years.

• The arrangement will be subject to annual review or continue until the advance amount is fully recovered, whichever occurs earlier.

Fuel costs surged amid West Asia crisis

According to official figures, global ATF prices increased from Rs 60.50 per litre in March 2026 to nearly Rs 142 per litre in May 2026, representing a rise of almost 2.5 times within a short period.

Fuel remains one of the biggest expenses for airlines, accounting for nearly 40 per cent of operating costs under normal conditions. During periods of extreme volatility, that share can climb to as much as 60 per cent of total expenditure, putting significant pressure on airline finances.