Cabinet Approves Rs 10,000-Crore Fuel Price Support For Airlines Amid West Asia Crisis
The Union Cabinet on Wednesday approved a one-time budgetary support package of up to ₹10,000 crore for Oil Marketing Companies (OMCs) to provide Aviation Turbine Fuel (ATF) price stabilization support to scheduled Indian airlines, a move aimed at shielding carriers and passengers from the impact of volatile fuel prices triggered by the ongoing West Asia crisis.
The decision, taken at a meeting chaired by Prime Minister Narendra Modi, seeks to enhance stability and predictability in ATF pricing for domestic and international operations of Indian airlines while ensuring continuity of air services.
Welcoming the decision, Civil Aviation Minister Ram Mohan Naidu said the measure builds on a series of government interventions to support the aviation sector during a period of unprecedented fuel price volatility.
“Earlier, under the Emergency Credit Line Guarantee Scheme (ECLGS), nearly ₹5,000 crore was earmarked for airlines, providing critical liquidity support. Today, the Cabinet has once again taken a far-reaching decision by approving ₹10,000 crore of interest-free support to OMCs for ATF price stabilization. This intervention will bring significant relief to airlines by reducing uncertainty in fuel costs and will ultimately benefit passengers through reduced airfare,” the minister said.
Naidu said the government had adopted a proactive and multi-layered approach since the onset of the crisis. He noted that for domestic operations, increases in ATF base prices were moderated and capped at 25 per cent despite steeper rises in global fuel markets. Landing and parking charges for domestic carriers were also reduced by 25 per cent.
The minister further thanked the governments of Delhi and Maharashtra for reducing Value Added Tax (VAT) on ATF to 7 per cent, noting that nearly 75-80 per cent of the country’s ATF uplift takes place from the two states.
According to the Ministry of Civil Aviation, ATF accounts for nearly 40 per cent of airline operating costs under normal conditions and can rise to as much as 60 per cent during periods of extreme fuel price volatility. Sharp fluctuations in fuel prices can affect airline operations, route planning and fare stability.
The ministry said the ATF Price Stabilization Support Mechanism would remain operational for 36 months, with provisions for annual review or until the advance amount is fully recovered and settled, whichever is earlier.
A monitoring committee comprising representatives from the Ministry of Civil Aviation, Ministry of Petroleum and Natural Gas, and the Department of Expenditure will oversee implementation of the scheme, including claim verification, reconciliation and settlement.
Highlighting the broader impact of the decision, Naidu said the measure had been welcomed by the aviation industry due to its potential spillover benefits for sectors such as tourism, hospitality, trade and exports. He said the support mechanism would help ensure continuity of passenger services as well as high-value air cargo operations.
The ministry said it has been in regular contact with airlines and other stakeholders to assess operational challenges arising from the ongoing crisis and to ensure the resilience of the aviation sector.
