The International Air Transport Association estimates that average jet fuel prices will be 70 per cent higher year-on-year | Photo Credit: VIVEK PRAKASH

In a timely move to shield airlines from soaring fuel costs and protect state-owned oil marketing companies (OMCs) from mounting losses, the Union Cabinet last week announced a ₹10,000-crore Aviation Turbine Fuel (ATF) Price Stabilisation Fund.

The initiative, the latest in a series of policy interventions by the government, will enable airlines to purchase ATF at a fixed price, thereby reducing their exposure to volatility. It also addresses the under-recovery challenge faced by OMCs by providing them interest-free advances through the Demands for Grants of the Ministry of Petroleum and Natural Gas. Continuing tensions in West Asia have kept jet fuel prices elevated. Airlines across the world are under stress. The International Air Transport Association estimates that average jet fuel prices will be 70 per cent higher year-on-year, adding nearly $100 billion to the industry’s fuel bill globally. The airline lobby group has also cut its profit outlook for 2026, projecting net margins to decline from 4.2 per cent to 2 per cent.

Indian carriers are not immune to these price shocks. In fact, given high taxation and airport charges, they may be even more exposed to business risks than many of their global peers. Aircraft lease rentals and a significant portion of maintenance expenses are denominated in US dollars, and the current weakness of the rupee is exerting additional pressure on airline finances. While domestic carriers have raised fares and introduced fuel surcharges, these measures are insufficient to offset rising costs. Air India and IndiGo have suspended operations on some domestic and international routes, underscoring the difficult operating environment. In this context, the government’s move to insulate airlines from steep fuel price increases is welcome. Participation in the scheme is voluntary and will help ease immediate cost pressures for carriers that opt in. From the government’s perspective, it will also help preserve regional air connectivity. Oil companies, already incurring losses on the sale of petrol, diesel and LPG, stand to benefit as well. They will receive interest-free advances from the government to compensate for losses incurred from selling ATF below actual cost. While announcing the scheme, the government said that ATF price stabilisation support would remain in force for 36 months, subject to annual review or until the advance amount is fully recovered or settled, whichever is earlier.

Yet a few questions remain unanswered. Is the ₹10,000-crore support adequate? How long will it last under current market conditions? The ATF price assumptions used in designing the scheme have not been disclosed. Indian carriers have signalled their ambitions through massive aircraft orders and expanding route networks. The one-time price stabilisation fund provides much-needed short-term relief. But if Indian aviation is to sustain its growth trajectory and compete effectively on the global stage, further policy measures will be required.

Published on June 9, 2026