New Delhi: The Union Cabinet has approved a one-time support package of up to ₹10,000 crore for the aviation sector to help cushion airlines from the sharp rise in aviation turbine fuel (ATF) prices triggered by ongoing geopolitical tensions in West Asia. The measure is aimed at stabilising fuel costs and preventing a significant increase in airfares for passengers.
Announcing the decision, Union Minister Ashwini Vaishnaw said the financial assistance will be provided to oil marketing companies (OMCs), enabling them to support scheduled Indian airlines facing unprecedented fuel cost pressures.
ATF prices surge amid West Asia conflict
The government’s intervention comes after a steep increase in global aviation fuel prices over the past two months.
According to official estimates, international ATF prices rose from approximately ₹60.5 per litre in March 2026 to ₹142 per litre in May 2026, representing an increase of nearly 135 per cent.
Fuel is one of the largest expenses for airlines, typically accounting for around 40 per cent of operating costs. During periods of extreme volatility, however, its share can climb to nearly 60 per cent, significantly affecting airline profitability and operational sustainability.
Industry experts have warned that prolonged high fuel prices could force carriers to increase ticket prices, reduce flight frequencies or delay expansion plans.
How the ₹10,000 crore package will work
Under the approved framework, the government will provide interest-free advances to OMCs through the Ministry of Petroleum and Natural Gas.
The support mechanism is designed to stabilise fuel procurement costs for airlines while ensuring that OMCs are compensated for the price differential arising from the intervention.
The scheme will be available to all willing scheduled Indian airlines operating domestic and international services.
Officials said the objective is to reduce immediate financial stress on airlines without directly subsidising carriers, while also protecting consumers from steep fare hikes.
Fixed-price fuel mechanism introduced
A key feature of the package is the introduction of a fixed-price fuel procurement arrangement.
Under the mechanism, participating airlines will procure ATF exclusively from OMCs for a period of up to three years. The arrangement is intended to provide greater predictability in fuel expenses and help airlines plan operations more effectively despite global market volatility.
While domestic ATF pricing has been relatively stable through regulatory measures, airlines operating international routes have remained exposed to import parity pricing, making them particularly vulnerable to global fuel price fluctuations.
The new scheme seeks to reduce that exposure and create a more stable pricing environment.
Recovery plan built into the scheme
The government has also incorporated a recovery mechanism to ensure that the package remains fiscally responsible.
Once international ATF prices decline, the price differential created by the support arrangement will be recovered from OMCs and transferred back to the Consolidated Fund of India.
Officials said this feature would allow the programme to function as a temporary stabilisation measure rather than a permanent subsidy.
The scheme will remain operational for up to 36 months and will be reviewed annually. It may also conclude earlier if the government fully recovers the advances provided under the programme.
Relief for airlines and passengers
The aviation sector has been facing mounting cost pressures due to rising fuel prices, supply chain challenges and geopolitical uncertainties. Airlines have repeatedly highlighted the impact of ATF costs on profitability, particularly at a time when passenger demand remains strong.
The Cabinet’s decision is expected to provide immediate relief to carriers while helping maintain fare stability for travellers.
Industry observers believe the move could support continued growth in India’s aviation sector by preventing sudden increases in operating costs and ensuring airlines can maintain services without passing the full burden on to consumers.
Government aims to ensure sector stability
The support package reflects the government’s effort to safeguard a sector that plays a critical role in connectivity, tourism, trade and economic growth.
With fuel prices remaining volatile due to developments in West Asia, policymakers have opted for a temporary intervention aimed at balancing the interests of airlines, fuel suppliers and passengers.
The effectiveness of the scheme will depend largely on future movements in global crude oil and aviation fuel prices, as well as the pace at which international markets stabilise.
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