Noida, June 3 (APAC Media): The Union Cabinet on Wednesday approved a ₹10,000 crore fund to stabilise Aviation Turbine Fuel (ATF) costs, aiming to cushion airlines from sharp fluctuations in global oil prices amid an ongoing energy market crisis.
The decision is intended to provide a financial buffer to oil marketing companies so they can smoothen volatility in jet fuel prices and prevent sudden spikes in airline operating costs, government sources said.
Officials noted the mechanism will function as a support framework for managing extraordinary fuel price shocks, helping maintain price stability in domestic air travel.
A government official said the ATF Price Stabilisation Fund is designed to provide protection against sharp fluctuations in fuel prices and help maintain the smooth continuity of air operations.
The move comes at a time when airlines have been facing rising input costs due to higher crude oil prices driven by geopolitical tensions in key producing regions.
Fuel typically accounts for a significant portion of airline expenses, making carriers highly sensitive to changes in ATF rates.
Industry stakeholders have repeatedly flagged concerns over unstable fuel pricing, stating that sudden increases often force airlines to raise fares or absorb losses.
An industry executive said, “Fuel price volatility has been one of the biggest challenges for the aviation sector. A stabilisation mechanism will help improve predictability in operations.”
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According to the government, international Aviation Turbine Fuel (ATF) prices rose sharply to ₹142 per litre in May 2026 from ₹60.50 per litre in March 2026, driven by the ongoing West Asia crisis.
Officials noted that ATF accounts for nearly 40 per cent of an airline’s operating costs and can rise to as much as 60 per cent during periods of extreme fuel price volatility.
The government further said that the closure of Pakistan’s airspace for Indian carriers has forced airlines to take longer routes to destinations in Europe, North America and Central Asia, leading to higher fuel consumption and increased operational costs.
It added that elevated fuel costs have contributed to higher long-haul passenger fares, a softening in international travel demand, and curtailment of services on several overseas routes.
The decision is part of a broader set of infrastructure and transport-related measures approved by the Cabinet. Officials said the initiative is designed to strengthen the resilience of India’s aviation sector and ensure smoother operations during external shocks.
With domestic air travel demand rising steadily, policymakers said the measure is expected to support fare affordability and market stability in the aviation sector, while cushioning both airlines and passengers from sharp fluctuations in fuel prices.
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