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What is the story about?
Domestic airlines will be able to buy aviation turbine fuel (ATF) at a fixed price of ₹86.32 per litre for up to three years under a new government-backed price stabilisation scheme aimed at shielding carriers and passengers from a surge in global fuel costs.
Under the voluntary scheme, participating airlines will pay the fixed free-on-board (FOB) benchmark price plus airport charges, oil company margins and applicable taxes, taking the effective selling price to about ₹115 per litre in Delhi, ₹114.5 in Mumbai and ₹139 in Chennai, according to government officials.
The benchmark compares with the current effective ATF price of about ₹105 per litre in Delhi, which has remained frozen for more than two months after the government allowed only a partial pass-through of soaring global fuel costs triggered by the outbreak of the West Asia conflict in late February.
While participating airlines will pay the fixed price, those not opting for the scheme will be charged prevailing international rate, which is currently around ₹142 a litre.
This is as part of the Union Cabinet-approved ₹10,000-crore fuel price stabilisation programme for airlines that provides financial support to state-owned oil retailers to cap ATF prices and shield carriers from soaring fuel costs linked to the ongoing West Asia crisis.
Under this, a one-time, interest-free advance of up to ₹10,000 crore will be provided to oil marketing companies (OMCs), enabling them to supply jet fuel to scheduled Indian airlines at a fixed price for both domestic and international operations.
Briefing reporters, Rohit Raj, Director in the Ministry of Civil Aviation, said the benchmark has been fixed at ₹86.32 per litre at the FOB level for domestic operations and ₹104.49 per litre for international operations.
After adding airport charges, margins and applicable taxes, the effective selling price in Delhi works out to about ₹115 per litre for both domestic and international operations.
The rate compares to about ₹105 a litre cost of ATF in Delhi currently. The current rate was capped in April when prices were raised by 25% instead of 100%.
Since then oil marketing companies have been supplying jet fuel to airlines at these capped prices, incurring losses.
The new benchmark replaces the temporary fuel-price capping arrangement introduced earlier this year after international ATF prices surged following the West Asia crisis, he said.
International jet fuel prices rose to as high as ₹142 per litre in May from ₹60.50 per litre, prompting concerns over airline operating costs and the risk of higher airfares.
ATF typically accounts for about 40% of airline operating expenses and can rise to as much as 60% during periods of extreme volatility.
He said the support mechanism would provide airlines with greater certainty over fuel costs, helping sustain domestic and international connectivity while limiting the pass-through of fuel-price shocks to passengers.
The ₹10,000 crore corpus will be provided as an interest-free advance to OMCs. Any compensation paid during periods of elevated fuel prices will be recovered once international prices moderate, with funds returned to the Consolidated Fund of India through a prescribed mechanism.
The scheme will remain in force for up to 36 months or until the entire amount advanced by the government is recovered, whichever is earlier. Participation by airlines will be voluntary.
Raj said the decision of the Cabinet was taken in a larger public interest to protect air connectivity, ensure stability in air services, and shield passengers from the impact of extraordinary volatility in the global fuel crisis arising out of the ongoing crisis.
”The approved mechanism is designed as a temporary self-correcting arrangement,” he said.
”Under the scheme, the government will provide an interest-free advance to all marketing companies, enabling them to supply ATF to participating Indian airlines at a predetermined and stable price for both domestic and international operations whenever international ATF prices rise above the benchmark level. That is the fixed price under this arrangement.” The corpus, he said, will compensate oil marketing companies (OMCs) for the difference.
”Importantly, when the fuel price moderates, the differential amount will be recovered from oil marketing companies and returned to the Consolidated Fund of India through a transparent mechanism. Thus, the arrangement is intended not as a subsidy but a temporary stabilisation method to smoothen the impact of exceptional fuel price volatility while ensuring full accountability, monitoring, and recovery of funds,” he said.
The official said ATF constitutes a major component of airline operating cost, and the sharp increase in the international fuel prices, coupled with longer flight paths for Indian carriers on account of the closure of Pakistan airspace, has placed significant pressure on airline operations.
”The approved mechanism will provide greater predictability in the fuel cost through a fixed price arrangement, enabling airlines to plan their operation in a more efficient manner and continue serving passengers across domestic and international sectors,” he said.
For passengers, the most important benefit of this decision is that it will help to moderate sudden increases in the airfare that often result from sharp spikes in fuel prices. exposure of airlines to extreme fuel price fluctuations, the government aims to minimise the pass-through of such costs to travellers and provide a greater fare stability.
Also Read: The fire next door: Delhi's deadly cycle of neglect
Under the voluntary scheme, participating airlines will pay the fixed free-on-board (FOB) benchmark price plus airport charges, oil company margins and applicable taxes, taking the effective selling price to about ₹115 per litre in Delhi, ₹114.5 in Mumbai and ₹139 in Chennai, according to government officials.
The benchmark compares with the current effective ATF price of about ₹105 per litre in Delhi, which has remained frozen for more than two months after the government allowed only a partial pass-through of soaring global fuel costs triggered by the outbreak of the West Asia conflict in late February.
While participating airlines will pay the fixed price, those not opting for the scheme will be charged prevailing international rate, which is currently around ₹142 a litre.
This is as part of the Union Cabinet-approved ₹10,000-crore fuel price stabilisation programme for airlines that provides financial support to state-owned oil retailers to cap ATF prices and shield carriers from soaring fuel costs linked to the ongoing West Asia crisis.
Under this, a one-time, interest-free advance of up to ₹10,000 crore will be provided to oil marketing companies (OMCs), enabling them to supply jet fuel to scheduled Indian airlines at a fixed price for both domestic and international operations.
Briefing reporters, Rohit Raj, Director in the Ministry of Civil Aviation, said the benchmark has been fixed at ₹86.32 per litre at the FOB level for domestic operations and ₹104.49 per litre for international operations.
After adding airport charges, margins and applicable taxes, the effective selling price in Delhi works out to about ₹115 per litre for both domestic and international operations.
The rate compares to about ₹105 a litre cost of ATF in Delhi currently. The current rate was capped in April when prices were raised by 25% instead of 100%.
Since then oil marketing companies have been supplying jet fuel to airlines at these capped prices, incurring losses.
The new benchmark replaces the temporary fuel-price capping arrangement introduced earlier this year after international ATF prices surged following the West Asia crisis, he said.
International jet fuel prices rose to as high as ₹142 per litre in May from ₹60.50 per litre, prompting concerns over airline operating costs and the risk of higher airfares.
ATF typically accounts for about 40% of airline operating expenses and can rise to as much as 60% during periods of extreme volatility.
He said the support mechanism would provide airlines with greater certainty over fuel costs, helping sustain domestic and international connectivity while limiting the pass-through of fuel-price shocks to passengers.
The ₹10,000 crore corpus will be provided as an interest-free advance to OMCs. Any compensation paid during periods of elevated fuel prices will be recovered once international prices moderate, with funds returned to the Consolidated Fund of India through a prescribed mechanism.
The scheme will remain in force for up to 36 months or until the entire amount advanced by the government is recovered, whichever is earlier. Participation by airlines will be voluntary.
Raj said the decision of the Cabinet was taken in a larger public interest to protect air connectivity, ensure stability in air services, and shield passengers from the impact of extraordinary volatility in the global fuel crisis arising out of the ongoing crisis.
”The approved mechanism is designed as a temporary self-correcting arrangement,” he said.
”Under the scheme, the government will provide an interest-free advance to all marketing companies, enabling them to supply ATF to participating Indian airlines at a predetermined and stable price for both domestic and international operations whenever international ATF prices rise above the benchmark level. That is the fixed price under this arrangement.” The corpus, he said, will compensate oil marketing companies (OMCs) for the difference.
”Importantly, when the fuel price moderates, the differential amount will be recovered from oil marketing companies and returned to the Consolidated Fund of India through a transparent mechanism. Thus, the arrangement is intended not as a subsidy but a temporary stabilisation method to smoothen the impact of exceptional fuel price volatility while ensuring full accountability, monitoring, and recovery of funds,” he said.
The official said ATF constitutes a major component of airline operating cost, and the sharp increase in the international fuel prices, coupled with longer flight paths for Indian carriers on account of the closure of Pakistan airspace, has placed significant pressure on airline operations.
”The approved mechanism will provide greater predictability in the fuel cost through a fixed price arrangement, enabling airlines to plan their operation in a more efficient manner and continue serving passengers across domestic and international sectors,” he said.
For passengers, the most important benefit of this decision is that it will help to moderate sudden increases in the airfare that often result from sharp spikes in fuel prices. exposure of airlines to extreme fuel price fluctuations, the government aims to minimise the pass-through of such costs to travellers and provide a greater fare stability.
Also Read: The fire next door: Delhi's deadly cycle of neglect
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