Mumbai: The Union Cabinet approved a one-time Rs 10,000 crore budgetary package to establish an aviation turbine fuel (ATF) price stabilisation fund. The scheme is seen as a sweeping intervention aimed at shielding India’s volatile aviation sector from geopolitical shocks.
The emergency mechanism arrives as a lifeline for scheduled Indian carriers battered by a brutal 135% spike in jet fuel costs triggered by the escalating crisis in West Asia. Under the approved framework, the government will inject up to Rs 10,000 crore as interest-free advances to state-run oil marketing companies (OMCs) through the Ministry of Petroleum and Natural Gas.
This financial cushion is designed to absorb the losses OMCs incur when global import parity prices outpace a newly established domestic benchmark, allowing airlines to lock-in predictable fuel rates for up to 36 months.
The three-year scheme introduces a strict quid-pro-quo between the state, oil suppliers, and commercial airlines. Participating carriers will enter into a strict tri-partite memorandum of understanding with OMCs, overseen by the Ministry of Civil Aviation (MoCA) and the oil ministry. In exchange for price predictability, airlines will have to commit to purchasing their ATF exclusively from participating OMCs for up to three years.
When international oil markets will cool eventually, the differential between the market rate and the benchmark will be clawed back from OMCs and returned to the Consolidated Fund of India until the Rs 10,000 crore advance is fully trued up. A specialised monitoring committee comprising officials from MoCA, the petroleum ministry, and the department of expenditure will audit all claims, verifications, and settlements.
This liquidity injection is the apex of a broader, multi-layered defensive strategy deployed by the union government over recent months to prevent a systemic collapse of its aviation ecosystem. Previously, the government had implemented temporary price caps on domestic ATF. However, while this insulated domestic networks, it forced OMCs to absorb unsustainable under-recoveries and left airlines entirely exposed to brutal market rates for their international operations.
Previously in April, the Ministry had also slashed landing and parking charges for domestic routes of Indian airlines to shield them from the ATF surge. Moreover, the union government also announced the launch of an emergency credit line guarantee scheme worth Rs 5,000 crore for Indian airlines.
The union government’s intervention underscores the sheer velocity of the energy crisis ripping through Indian aviation balance sheets. According to official data, global hostilities have sent international ATF prices skyrocketing from a manageable Rs 60.50 per litre in March 2026 to a staggering Rs 142 per litre by May.
Compounding the crisis is the tactical headache of airspace closures. With Pakistan’s airspace currently blocked to Indian operators, long-haul flights bound for Europe, Central Asia, and North America are being forced into costly, circuitous detours. Moreover, the frequent airspace closures in the Middle East and West Asia are also increasing the operational cost for the airlines.
Following the scheme's announcement, IndiGo expressed gratitude to the union government and various ministries involved for the support. “This timely intervention is a welcome relief that reflects the Government's understanding of the critical role aviation plays in connecting people and enabling economic growth, while also fostering an environment that empowers airlines to serve passengers better and contribute towards India's journey as a global aviation hub,” said an IndiGo spokesperson.
