The Union Cabinet has cleared a ₹10,000 crore Price Stabilisation Fund for the aviation sector, providing a substantial fiscal backstop to shield Indian airlines from the extreme fuel price volatility that has gripped the industry since the Iran war triggered a global crude oil supply shock in late February.
The fund, one of the largest direct government interventions in the aviation sector’s history, will act as a buffer against ATF price surges, preventing repeated cost shocks from passing through fully to airline operating economics and passenger fares. The cabinet also separately capped ATF prices at ₹75.6 per litre for domestic operations, giving carriers a concrete price ceiling on their largest cost input for the first time since the fuel crisis began.
The scale of the intervention reflects the severity of the crisis facing Indian carriers. Aviation turbine fuel, which typically accounts for 30 to 40% of airline operating costs, had risen to consume 55 to 60% of costs as Brent crude surged past $100 per barrel and refining crack spreads widened sharply on Strait of Hormuz supply disruption fears. The Federation of Indian Airlines had warned the government of an emergency situation, with several routes becoming economically unviable and the financial stability of carriers under serious threat.
The ₹10,000 crore fund will be deployed to provide subsidies, support duty adjustments, or intervene directly in ATF pricing to keep costs within a manageable band for airlines, without requiring full global price pass-through each time crude oil spikes. Combined with the domestic ATF price cap of ₹75.6 per litre and the 27% cut in international ATF prices announced days earlier, the fund completes a three-layer relief package for the sector.
For IndiGo, which reported a net loss of ₹2,536.9 crore in Q4 FY26 partly on fuel cost pressures, and for Air India as it continues its post-acquisition turnaround, the fund significantly reduces the tail risk of further fuel-driven losses. The intervention also supports route restoration on domestic sectors that had been cut or suspended as fuel economics deteriorated through March, April, and May.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Please consult a qualified financial advisor before making any investment decisions.
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