Cabinet Approves ₹10,000 Crore ATF Price Stabilisation Fund for Indian Airlines Amid West Asia Crisis – Indian PSU
The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved a one-time budgetary support of up to ₹10,000 crore for Oil Marketing Companies (OMCs) to provide Aviation Turbine Fuel (ATF) price stabilisation support to scheduled Indian airlines operating domestic and international flights.
The support will be provided as an interest-free advance to OMCs through the Ministry of Petroleum and Natural Gas. The move comes in response to unprecedented volatility in global ATF prices triggered by the ongoing West Asia crisis, which has significantly increased operating costs for Indian carriers.
Key Highlights
- ₹10,000 crore Price Stabilisation Fund to support ATF pricing.
- Interest-free advances to OMCs to offset losses arising from elevated ATF prices.
- Applicable to all willing scheduled Indian airlines for both domestic and international operations.
- Fixed-price ATF arrangement to provide predictability in fuel costs.
- Participating airlines will procure ATF exclusively from OMCs for up to three years.
- Recovery mechanism ensures that support is returned to the Consolidated Fund of India once international fuel prices moderate.
- Scheme to remain in force for 36 months, subject to annual review.
Why the Decision Matters
ATF currently accounts for nearly 40% of airline operating costs, and in periods of extreme volatility can rise to almost 60%. International ATF prices have reportedly surged from around ₹60.50 per litre in March 2026 to ₹142 per litre in May 2026, putting severe pressure on airline finances.
The situation has been further aggravated by the closure of Pakistan’s airspace for Indian carriers, forcing longer flight routes to Europe, North America and Central Asia, leading to higher fuel consumption and operational expenses.
Expected Impact
The government expects the mechanism to:
- Ensure stability in airline operations and financial planning.
- Reduce the pass-through of fuel price shocks to passengers.
- Support connectivity to regional, Tier-II and Tier-III cities.
- Protect employment across aviation, tourism, hospitality and logistics sectors.
- Sustain domestic and international air services during the ongoing fuel price crisis.
- Strengthen India’s connectivity with global markets and support economic growth.
The initiative is expected to provide critical relief to India’s aviation sector while balancing the financial interests of OMCs through a structured recovery and audit mechanism.
