The Cabinet has approved up to ₹10,000 crore in interest-free fiscal support for oil marketing companies to help stabilise aviation turbine fuel prices.
The move comes as elevated crude oil prices and geopolitical tensions in West Asia continue to increase costs for airlines and fuel retailers.
The support is expected to provide greater price stability for airlines, improve operational planning, and help limit the impact of fuel price shocks on passengers.
ATF Price Surge Forces Centre's Hand; Cabinet Approves ₹10,000 Cr Support
The Centre has approved a one-time fiscal support package of up to ₹10,000 crore for oil marketing companies to help stabilise aviation turbine fuel prices amid elevated crude oil prices and mounting pressure on airlines
Indian Airlines
Summary
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The Cabinet has approved a one-time fiscal support package of up to ₹10,000 crore for oil marketing companies (OMCs) to help stabilise soaring aviation turbine fuel (ATF) prices.
The surge in global crude oil prices has put significant pressure on Indian airlines, many of which have been grappling with mounting losses since the onset of the Iran-US conflict.
According to a report by Moneycontrol, the support will be provided as interest-free advances to OMCs through the Demands for Grants of the Ministry of Petroleum and Natural Gas.
“When international ATF prices moderate, the differential amount shall be recovered from OMCs and returned to the Consolidated Fund of India. The arrangement shall continue until the entire support amount is fully recovered and settled,” the government said.
OMCs have been absorbing a large portion of the price shock in recent months. Retail fuel prices have already been increased, with further revisions expected.
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Before the recent fuel price hikes, state-run OMCs were collectively incurring losses of nearly ₹1,000 crore per day as domestic retail prices remained below international crude oil benchmarks.
Brent crude prices have surged to as high as $125 per barrel since the conflict began, reaching multi-month highs.
Having traded in the $65-70 per barrel range before the crisis, Brent has struggled to remain below $100 per barrel over the past three months.
The rise in crude prices has had a significant impact on India, which imports nearly 90% of its crude oil requirements, making the economy particularly vulnerable to global energy market disruptions.
According to the report, the financial support is intended to help OMCs stabilise jet fuel prices for airlines at a time when there are few signs of easing geopolitical tensions in West Asia and oil prices are expected to remain elevated in the near term.
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The measure is expected to improve stability and predictability in ATF pricing, enabling airlines to better manage their operational and financial planning.
Major Indian carriers, including Air India and IndiGo, have reportedly cancelled more than 200 flights since March due to rising fuel costs and operational challenges.
The closure of Pakistani airspace to Indian airlines has further increased costs by forcing carriers to operate longer flight routes.
The government's intervention is expected to help shield domestic airlines from sharp fuel price fluctuations, support the continuity of air services, and reduce the risk of higher ticket prices being passed on to passengers.