Government Fixes ATF Price At Rs 75.6/Litre And Approves Stabilisation Fund

The Central Government has approved a cap on Aviation Turbine Fuel (ATF) prices for domestic operations at ₹75.6 per litre, in a move aimed at easing cost pressures on India’s aviation sector. The announcement was made following a statement from Union Minister Ashwini Vaishnaw on Tuesday. The decision comes at a time when fluctuating global fuel prices have significantly impacted airline operating costs and the financial performance of oil marketing companies.

ATF is one of the most critical components of airline expenditure, accounting for nearly 40% of total operating costs. Recent increases in global crude oil prices have led to a surge in aviation fuel costs, placing additional financial strain on domestic carriers. Officials noted that both airlines and oil marketing companies have been adversely affected by the volatility, prompting the need for a structured stabilisation mechanism.

Alongside the price cap, the Cabinet has also approved the creation of an Aviation Turbine Fuel Price Stabilisation Fund. This fund will function as a self-sustaining revolving mechanism designed to provide financial stability to the sector. It will be applicable to both domestic and international aviation operations, offering a buffer against sudden spikes in global fuel prices.

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Under the approved framework, the government will provide a one-time budgetary support of ₹10,000 crore as an interest-free advance to oil marketing companies. This amount will be used to compensate OMCs for losses incurred when international ATF prices exceed a benchmark level defined under the scheme. When global prices fall below the benchmark, the excess differential will be recovered and returned to the Consolidated Fund of India, ensuring long-term fiscal balance.

The mechanism is designed to provide predictability in fuel pricing for airlines by effectively creating a fixed-price structure for procurement. Participating airlines will be required to source ATF exclusively from designated oil marketing companies under a formal agreement valid for up to three years, subject to annual review or earlier completion of fund recovery. The arrangement aims to reduce the sector’s vulnerability to sudden international price fluctuations.

Implementation of the scheme will be overseen by a Monitoring Committee comprising representatives from the Ministry of Civil Aviation, Ministry of Petroleum and Natural Gas, and the Department of Expenditure. All claims, settlements, and recoveries will be subject to audit and verification. The stabilisation framework will remain in force for 36 months, with provisions for extension if the full amount is not recovered within the stipulated period, marking a significant policy intervention in India’s aviation fuel pricing system.

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