Cabinet Approves ₹10,000-Crore ATF Price Stabilisation Fund to Support India's Aviation Sector

The Union Cabinet has approved a significant one-time ₹10,000-crore Price Stabilisation Fund for Aviation Turbine Fuel (ATF) to help Indian airlines navigate the current period of high global fuel volatility. This measure is expected to bring greater stability to airline operations and offer relief to passengers amid rising costs.

Image from TheHindu BusinessLine

Background of the Initiative

The decision comes in response to a sharp surge in international ATF prices, which have risen dramatically due to geopolitical developments in West Asia. Prices have increased from around ₹60.50 per litre in March 2026 to approximately ₹142 per litre in May 2026. ATF typically accounts for 40 to 60 percent of an airline’s operating costs, making it one of the most critical factors affecting the industry’s financial health.

By providing interest-free budgetary support to public sector Oil Marketing Companies (OMCs), the government aims to moderate ATF prices for scheduled Indian airlines operating both domestic and international flights. This intervention is designed to ensure continuity in air services and protect the broader ecosystem that relies on robust aviation connectivity.

Key Features of the Scheme

The fund will extend support to OMCs such as Indian Oil, Bharat Petroleum, and Hindustan Petroleum in the form of an interest-free advance. This will allow them to maintain stable pricing for airlines when international import parity prices rise above a predetermined benchmark.

Participating airlines will enter into formal agreements to procure ATF exclusively from these government OMCs for a period of up to three years, subject to annual review. The scheme incorporates a built-in recovery mechanism: as global prices moderate, the support provided will be recouped and returned to the Consolidated Fund of India. This structure ensures the arrangement functions as a self-sustaining revolving fund.

A dedicated monitoring committee, comprising officials from the Ministries of Civil Aviation, Petroleum and Natural Gas, and the Department of Expenditure, will oversee implementation, process claims, and manage settlements. The entire mechanism will remain in operation for 36 months or until the advance is fully recovered, whichever is earlier, and may be extended based on prevailing conditions.

Challenges Faced by the Aviation Industry

In recent weeks, major carriers have adjusted their schedules to manage elevated costs. Air India has reduced its domestic flights for June and July by around 22 percent, while IndiGo has scaled back domestic capacity by 5-7 percent and international operations more significantly. These adjustments reflect the combined pressure of high fuel prices, longer flight routes due to airspace restrictions, and the need to maintain operational viability.

The aviation sector plays a vital role in India’s economy, contributing approximately 1.5 percent to GDP and supporting around 77 lakh jobs across aviation, tourism, and related industries. Ensuring its stability is important for sustaining economic growth, promoting regional connectivity, and facilitating business and leisure travel.

Expected Benefits and Outlook

This fund is anticipated to provide cost predictability to airlines, helping them avoid frequent fare hikes and maintain services to smaller cities. Passengers can expect some relief from extreme price fluctuations in the coming months. Union ministers have highlighted that the initiative will safeguard jobs and support the long-term health of the industry during this challenging period.

The MGMM Outlook 

The Cabinet’s approval of a ₹10,000-crore ATF Price Stabilisation Fund reflects a proactive effort to shield India’s aviation sector from the impact of global fuel price volatility. With Aviation Turbine Fuel forming a substantial portion of airline operating costs, the sharp rise in international prices has placed significant pressure on carriers, forcing route adjustments and capacity reductions. By providing interest-free support to public sector oil companies, the government is helping create a more predictable cost environment that can enable airlines to sustain operations and reduce the burden of sudden fare increases on passengers.

The initiative also highlights the importance of aviation as a key driver of economic growth, employment, tourism, and regional connectivity. The revolving-fund structure, combined with a recovery mechanism linked to future price moderation, seeks to balance industry support with fiscal prudence. If implemented effectively, the scheme can strengthen the resilience of Indian airlines, protect millions of jobs connected to the sector, and ensure that air travel remains accessible and reliable during a period of global economic uncertainty.

(Sources: TheHindu BusinessLine, Economic Times, NDTV)