Cabinet approves ₹10,000 crore ATF price support package to shield airlines from fuel volatility

New Delhi, June 4. In a major relief measure for the aviation sector amid rising fuel costs triggered by the ongoing West Asia crisis, the Union Cabinet on June 3 approved a one-time budgetary support of up to ₹10,000 crore for oil marketing companies (OMCs) to help stabilise aviation turbine fuel (ATF) prices for Indian airlines.

The decision, taken at a Cabinet meeting chaired by Prime Minister Narendra Modi, is aimed at cushioning scheduled Indian airlines from extreme fluctuations in fuel prices and ensuring uninterrupted domestic and international air services. The government said the mechanism would provide greater predictability in ATF pricing, helping airlines manage operating costs while protecting passengers from sharp increases in airfares.

Announcing the decision, Civil Aviation Minister Ram Mohan Naidu described it as a significant intervention to support the aviation ecosystem during a period of unprecedented volatility in global energy markets.

“Under the leadership of Prime Minister Narendra Modi, the government has consistently taken timely and calibrated measures to safeguard the interests of passengers, airlines and the broader aviation sector. Earlier, nearly ₹5,000 crore was earmarked for airlines under the Emergency Credit Line Guarantee Scheme (ECLGS), and now ₹10,000 crore of interest-free support has been approved for OMCs to stabilise ATF prices,” he said.

According to the government, aviation fuel accounts for around 40 percent of an airline’s operating expenses under normal conditions, but the share can rise to nearly 60 percent during periods of severe fuel price volatility. Such fluctuations can significantly affect airline profitability, route planning and ticket pricing.

The minister noted that the latest package builds on a series of measures already introduced to ease pressure on airlines. These include capping increases in domestic ATF base prices at 25 percent despite steeper rises in global fuel markets, reducing landing and parking charges for domestic carriers by 25 percent, and securing reductions in VAT on ATF to 7 percent in Delhi and Maharashtra, which together account for nearly 75-80 percent of the country’s aviation fuel consumption.

Naidu said the aviation industry had welcomed the Cabinet’s decision, highlighting its wider economic benefits. He noted that the move would have a positive impact on sectors such as tourism, hospitality, trade and exports by ensuring continuity in passenger and cargo air services.

The ATF Price Stabilisation Support Mechanism will remain in force for up to 36 months, subject to annual reviews or until the entire advance amount is recovered, whichever occurs 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, verify claims and manage settlement procedures.

The government said the initiative reflects its continued efforts to strengthen the resilience of India’s aviation sector, maintain affordable air connectivity and support broader economic growth objectives under the Viksit Bharat 2047 vision.

The Ministry of Civil Aviation added that it has been closely monitoring developments arising from the West Asia crisis and remains engaged with airlines and other stakeholders to address operational challenges facing the industry.