New Delhi, Jun 3 (UNI) In a major relief measure for the aviation sector grappling with soaring fuel costs amid the ongoing West Asia crisis, the union Cabinet on Wednesday approved a one-time budgetary support package of up to Rs 10,000 crore for Oil Marketing Companies (OMCs) to facilitate Aviation Turbine Fuel (ATF) price stabilisation for scheduled Indian airlines.
Announcing the decision after a Cabinet meeting, Information and Broadcasting Minister Ashwini Vaishnaw said the government had approved the creation of a Price Stabilisation Fund that would provide interest-free advances to OMCs, enabling them to offer more predictable fuel prices to Indian carriers operating both domestic and international services.
"The union Cabinet has approved one-time budgetary support not exceeding Rs 10,000 crore for Oil Marketing Companies to provide ATF price stabilisation support to Scheduled Indian Airlines for their domestic and international operations," Vaishnaw told reporters.
According to the Cabinet decision, the assistance will be routed through the Demands for Grants of the Ministry of Petroleum and Natural Gas and will be provided as an interest-free advance to OMCs. The support is aimed at mitigating the impact of extraordinary fuel price volatility triggered by geopolitical tensions in West Asia, which have sharply increased global ATF prices and placed severe financial pressure on airlines.
Under the approved mechanism, OMCs will be compensated whenever the prevailing Import Parity Price (IPP) of ATF exceeds a benchmark price fixed under the scheme. The compensation will be drawn from the approved corpus, helping shield both airlines and fuel suppliers from sudden price shocks.
The government said the arrangement includes a recovery and true-up mechanism. Once international ATF prices decline, the differential amount will be recovered from OMCs and returned to the Consolidated Fund of India. The process will continue until the entire support amount is fully recovered and settled.
The scheme will be available to all willing scheduled Indian airlines and will cover both domestic and international operations. A key feature of the mechanism is the introduction of a fixed-price arrangement for ATF supplies, giving airlines greater certainty in fuel expenditure and reducing exposure to abrupt price spikes.
As part of the arrangement, participating airlines will sign a memorandum of understanding with OMCs, with the Ministries of Civil Aviation and Petroleum and Natural Gas acting as signatories. Airlines opting into the scheme will procure ATF exclusively from OMCs for a period of up to three years, subject to annual review or until the advance amount is fully recovered, whichever is earlier.
A monitoring committee comprising representatives of the Ministry of Civil Aviation, Ministry of Petroleum and Natural Gas and the Department of Expenditure will oversee implementation, verify claims, conduct reconciliations and supervise settlements. All transactions under the scheme will be subject to audit.
The stabilisation support will remain in force for 36 months, with provisions for annual review. If the corpus is not fully reconciled within that period, the arrangement may be extended with the approval of the competent authority.
According to officials the initiative is expected to bring greater stability and predictability to airline finances at a time when fuel costs have emerged as the sector's biggest challenge. The government believes the mechanism will help airlines undertake better operational planning, sustain route networks and avoid passing on the full impact of fuel price increases to passengers through higher fares.
The Cabinet noted that the aviation sector has been hit by unprecedented volatility in global ATF prices following the escalation of tensions in West Asia. International ATF prices have reportedly risen nearly two-and-a-half times, from Rs 60.50 per litre in March 2026 to around Rs 142 per litre in May 2026. Fuel currently accounts for nearly 40 per cent of airline operating costs and, during periods of extreme volatility, can rise to as much as 60 per cent of total expenditure.
The situation has been compounded by the closure of Pakistani airspace to Indian carriers, forcing longer flight paths to destinations in Europe, North America and Central Asia. The detours have increased fuel consumption and operating costs, contributing to higher ticket prices and prompting some airlines to curtail services on certain international routes.
While ATF prices for domestic operations have been capped by the government, officials said such a measure is not sustainable indefinitely because it exposes OMCs to losses when international prices remain elevated. The newly approved mechanism seeks to balance the interests of both airlines and fuel suppliers while maintaining essential air connectivity.
The government said the measure would help preserve domestic and international air services, particularly connectivity to remote, regional, Tier-II and Tier-III cities, while supporting employment across the aviation ecosystem, including airports, maintenance and repair organisations, ground-handling agencies, travel services, hospitality and logistics sectors.
Officials also highlighted the broader economic benefits of sustaining air connectivity, saying it would support tourism, trade, investment, exports and the utilisation of airport infrastructure developed under initiatives such as the UDAN regional connectivity scheme. By ensuring continuity of airline operations during a period of exceptional fuel market disruption, the government said the initiative would strengthen India's connectivity with global markets and support long-term economic growth. UNI SKA AAB