The Union Cabinet has approved a major relief package for India’s aviation sector, sanctioning a one-time budgetary support of up to Rs 10,000 crore to help oil marketing companies (OMCs) stabilise aviation turbine fuel (ATF) prices for scheduled Indian airlines. The move comes as airlines grapple with soaring fuel costs triggered by the ongoing conflict in West Asia.
Union Minister Ashwini Vaishnaw said on Wednesday that the government intervention is aimed at reducing the financial burden on airlines and preventing the impact of rising fuel prices from being passed on to passengers. International ATF prices have climbed dramatically, rising from Rs 60.5 per litre in March 2026 to Rs 142 per litre in May 2026, representing an increase of nearly 2.5 times in just two months.
Meanwhile, the sharp rise in ATF prices has intensified pressure on the aviation industry, where fuel is one of the largest operating expenses. ATF typically accounts for around 40 per cent of airline operating costs, but during periods of extreme price fluctuations, its share can rise to as much as 60 per cent.
The government noted that the surge has affected not only airlines but also OMCs, prompting the need for a temporary stabilisation mechanism. Under the approved framework, support will be provided as interest-free advances to OMCs through the Ministry of Petroleum and Natural Gas.
The assistance will be available to all willing scheduled Indian airlines operating both domestic and international services.
How The Stabilisation Mechanism Will Work
The approved arrangement introduces a fixed-price fuel procurement mechanism designed to give airlines greater certainty over their fuel expenses. While domestic ATF prices have been capped, airlines operating international flights have continued purchasing fuel at import parity rates, exposing them to higher costs.
Under the new scheme, participating carriers will source ATF exclusively from OMCs for a period of up to three years. The programme will remain in force for 36 months, subject to annual reviews or until the government recovers the entire advance, whichever occurs earlier.
The government has also built a recovery mechanism into the programme. Once international ATF prices decline, the price differential will be recovered from OMCs and transferred back to the Consolidated Fund of India, allowing the scheme to function as a self-sustaining arrangement.
