New Delhi, June 05: In a major relief for the aviation sector, the government has fixed the benchmark price of Aviation Turbine Fuel (ATF) at Rs 86.32 per litre for domestic airlines under a newly approved price stabilisation scheme designed to cushion carriers from volatile international fuel markets.
The move comes amid rising global crude oil prices linked to ongoing tensions in West Asia and aims to ensure financial stability for airlines while preventing sharp increases in airfares for passengers.
Fixed ATF Price to Remain in Place for Up to Three Years
Under the voluntary scheme, participating airlines will purchase ATF at a fixed Free-on-Board (FOB) benchmark price of Rs 86.32 per litre for domestic operations.
For international operations, the benchmark price has been fixed at Rs 104.49 per litre.
According to officials, airlines opting into the scheme will also pay airport charges, oil marketing company margins, and applicable taxes, resulting in final retail prices of approximately:
- Rs 115 per litre in Delhi
- Rs 114.50 per litre in Mumbai
- Rs 139 per litre in Chennai
Airlines that choose not to participate in the scheme will continue purchasing ATF at prevailing international market prices, currently estimated at around Rs 142 per litre.
Government Steps In After Fuel Price Surge
The scheme follows a period during which the government effectively froze ATF prices at around Rs 105 per litre in Delhi, including taxes and other charges, for more than two months.
The temporary intervention was introduced to protect airlines and consumers from the impact of soaring fuel prices following the Iran-related geopolitical crisis.
However, the arrangement reportedly resulted in substantial financial losses for oil marketing companies (OMCs), prompting the government to design a more structured stabilisation mechanism.
Cabinet Approves Rs 10,000 Crore Support Mechanism
The Union Cabinet has approved a one-time budgetary support framework of up to Rs 10,000 crore to facilitate the scheme.
Under the mechanism:
- The government will provide interest-free advances to oil marketing companies.
- OMCs will supply ATF to participating airlines at fixed benchmark rates.
- When global ATF prices exceed the benchmark level, the support corpus will compensate OMCs for the difference.
Officials emphasized that the arrangement is not a subsidy but a temporary stabilisation measure intended to absorb extraordinary market shocks.
Self-Correcting Recovery Framework Included
A key feature of the scheme is its built-in recovery mechanism.
When international fuel prices decline below benchmark levels, the differential amount will be recovered from oil marketing companies and returned to the Consolidated Fund of India through a transparent true-up process.
The government said this approach ensures accountability, limits fiscal exposure, and prevents long-term distortions in fuel pricing.
Relief for Airlines Facing Rising Costs
Aviation Turbine Fuel accounts for a significant share of airline operating expenses, often representing one of the largest cost components for carriers.
The recent surge in global fuel prices, coupled with longer flight routes and airspace restrictions affecting Indian airlines on several international sectors, has intensified financial pressure on operators.
Officials believe the fixed-price mechanism will:
- Improve cost predictability for airlines
- Support operational planning
- Reduce fare volatility
- Maintain domestic and international connectivity
- Protect employment within the aviation sector
The measure is expected to help airlines continue serving passengers efficiently despite challenging global conditions.
Airfare Stability Expected to Benefit Passengers
The government stated that the scheme has been introduced in the larger public interest to shield passengers from sudden increases in ticket prices resulting from volatile fuel costs.
By providing airlines with greater certainty over one of their biggest expenses, authorities expect the mechanism to help maintain affordable air travel and support continued growth in India’s aviation sector.
Key Highlights
- Government fixes domestic ATF benchmark price at Rs 86.32 per litre.
- International operations benchmark set at Rs 104.49 per litre.
- Scheme valid for up to three years.
- Union Cabinet approves support mechanism worth up to Rs 10,000 crore.
- Participating airlines will pay stable fuel prices despite global volatility.
- Airlines outside the scheme will continue paying market rates.
- Final ATF price estimated at Rs 115/litre in Delhi and Rs 114.50/litre in Mumbai.
- Scheme aims to keep airfares affordable and protect airline operations.
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