India’s Aviation Sector Gets a ₹10,000-Crore Buffer Against Global Fuel Volatility

In a significant move to protect the aviation sector from soaring global energy costs, the Union Cabinet has approved a ₹10,000-crore Aviation Turbine Fuel (ATF) Price Stabilisation Fund , offering Indian airlines access to jet fuel at a fixed benchmark price for up to three years. The initiative aims to reduce the impact of volatile fuel markets on carriers while helping prevent sharp increases in airfares for passengers.

The decision comes amid a dramatic rise in international jet fuel prices following the ongoing West Asia conflict , which has disrupted global energy markets and pushed ATF prices to as high as ₹142 per litre in recent months, up from about ₹60.50 per litre earlier this year.

Under the voluntary scheme, participating airlines will be able to purchase ATF at a fixed FOB benchmark price of ₹86.32 per litre for domestic operations and ₹104.49 per litre for international operations. After accounting for airport charges, oil company margins and taxes, the effective fuel price will be around ₹115 per litre in Delhi , ₹114.5 in Mumbai , and ₹139 in Chennai .

Airlines that choose not to join the programme will continue to buy fuel at prevailing market rates, currently close to ₹142 per litre . The government will provide an interest-free advance of up to ₹10,000 crore to oil marketing companies (OMCs) to compensate them for supplying fuel below market prices during periods of elevated costs.

Officials have stressed that the mechanism is not a subsidy but a temporary stabilisation tool. Any compensation provided to OMCs will be recovered once international fuel prices ease, with funds returned to the Consolidated Fund of India. The scheme will remain in force for 36 months or until the entire amount is recovered.

The government believes the measure will provide much-needed certainty to airlines at a time when fuel accounts for nearly 40% of operating expenses , a figure that can rise to 60% during extreme price volatility . The burden has been compounded by the closure of Pakistan's airspace , forcing Indian carriers to operate longer routes and consume more fuel on several international services.

Industry experts say the programme effectively acts as a government-backed fuel hedge, allowing airlines to better plan operations and manage costs. It could also help moderate sudden fare increases, which are often triggered by spikes in fuel prices.

While the scheme is unlikely to permanently lower ticket prices, it is expected to provide greater stability for both airlines and passengers during one of the most turbulent periods for global aviation fuel markets in recent years.