Government Clarifies Optional Participation In Upcoming ATF Stabilisation Scheme

The proposed Aviation Turbine Fuel (ATF) Stabilisation Fund will be optional for airlines, with carriers given the freedom to decide whether they wish to participate in the scheme, according to officials from the Ministry of Civil Aviation. The clarification comes as the government continues to work on finalising the structure and operational modalities of the proposed mechanism.

Rohit Raj, Director at the Ministry of Civil Aviation, said during a recent briefing that the government is currently in the process of developing the framework for the scheme and expects it to be implemented soon. He noted that participation would not be mandatory and that airlines may choose to opt in or opt out based on their commercial requirements.

According to Raj, the ministry is presently seeking feedback from airlines before moving ahead with the final design of the fund. He added that the scheme is intended to function as a flexible arrangement, allowing carriers to assess whether a fixed-price fuel mechanism would be beneficial for their operations over a defined period.

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Industry experts have noted that the proposed stabilisation mechanism is designed as a temporary buffer against volatility in global fuel prices. Kinjal Shah, Senior Vice President and Co-Group Head of Corporate Sector Ratings at ICRA Limited, said the framework would allow airlines to lock in a fixed-price arrangement for up to three years, depending on their participation decisions and hedging requirements.

Shah added that airline participation levels and the proportion of Aviation Turbine Fuel consumption covered under the scheme would be key variables in determining its effectiveness. She also noted that such mechanisms would be closely monitored as carriers evaluate their exposure to fuel price fluctuations and operational cost pressures.

ATF remains one of the most significant cost components for airlines, accounting for nearly 40% of operating expenses under normal conditions. During periods of sharp fuel price volatility, this share can rise to as much as 60%, making fuel cost management a critical factor in airline financial stability and fare pricing strategies.

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