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Informist, Wednesday, Jun. 3, 2026

 

--Cabinet OKs price stabilisation fund to control ATF prices 

--Cabinet OKs INR 100 bln for price stabilisation fund to control ATF prices 

--Minister Vaishnaw: Govt capped ATF prices at INR 75.6/ltr for domestic ops 

--Govt: ATF price stabilisation fund to shield passengers from fare spikes 

 

NEW DELHI – The Union Cabinet Wednesday approved a one-time budgetary provision of INR 100 billion for oil marketing companies to provide price stabilisation support for aviation turbine fuel in the wake of the spike in global crude oil prices. "The budgetary support shall be in the form of interest-free advances to OMCs through the Demands for Grants of the Ministry of Petroleum and Natural Gas," the government said in a release. "The support shall be provided to OMCs to facilitate stable ATF pricing for airlines during the ongoing period of exceptional fuel price volatility arising from the West Asia crisis," it said. 

 

After the West Asia war broke out on Feb. 28, crude oil prices rose sharply, to as high as $123 a barrel from $73 a barrel before the war. Currently, the commodity is being traded at $98 a barrel. According to the government, international prices of aviation turbine fuel have surged nearly 2.5 times – from INR 60.50 per litre in March 2026 to INR 142 per litre in May 2026. Aviation turbine fuel accounts for nearly 40% of an airline's operating cost, and during periods of extreme fuel volatility, can constitute up to 60% of total operating expenditure.

 

Given this situation, the government has capped ATF prices at INR 75.6 per litre for domestic operations to protect consumers. "However, the capping of ATF prices is a temporary measure and not sustainable in the long run for OMCs," the government said. "Due to the capping of ATF prices, OMCs are also incurring losses, particularly with volatile and surging ATF prices during the West Asia crisis."

 

Indian carriers also continue to purchase ATF for international operations at import parity prices, exposing them to elevated fuel costs. According to a release, the government will compensate oil marketing companies for losses due to high ATF prices whenever the prevailing import parity price exceeds the benchmark price determined under the approved mechanism. When international ATF prices moderate, the loan will be recovered from oil marketing companies, and the arrangement will continue until the entire support amount is fully recovered and settled.

 

The allocation for the price stabilisation fund will be made from the Economic Stabilisation Fund, Minister of Information and Broadcasting Ashwini Vaishnaw said. The government set up the Economic Stabilisation Fund to meet expenditure arising from uncertain geopolitical conditions, Finance Minister Nirmala Sitharaman had said in the Lok Sabha in March. The government has set a corpus of INR 1 trillion, funded through a combination of a cash outlay of INR 573.81 billion in FY26 and reallocation of funds from savings in other departments. 

The price stabilisation arrangement will provide greater predictability in fuel costs, enabling better operational and financial planning of airlines. It will also reduce the pass-through of fuel price shocks to passengers, helping moderate fare volatility, Vaishnaw said. Under this one-time arrangement, participating airlines will procure ATF only from oil marketing companies for up to three years, subject to annual review or until the advance amount is fully recovered, whichever is earlier. "The proposal may be extended beyond thirty-six months with the approval of the Competent Authority in case the corpus is not fully trued up within this period," it added. 

 

A monitoring committee comprising representatives of the Ministry of Civil Aviation, Ministry of Petroleum and Natural Gas and Department of Expenditure will oversee implementation of the fund, claim verification, reconciliation and settlement. All claims and recoveries will be subject to audit, the government said.  End

 

US$1 = INR 95.71

 

Reported by Priyasmita Dutta and Sagar Sen

Edited by Avishek Dutta

 

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