The Centre has stepped in to stabilise jet fuel costs for Indian airlines as the West Asia crisis keeps global energy markets volatile and threatens to push aviation expenses higher.
Under the Rs 10,000-crore
aviation turbine fuel , or ATF, stabilisation plan cleared by the Union Cabinet, participating Indian airlines will be able to buy jet fuel at a fixed benchmark price for both domestic and international operations.
The move sounds like relief for airlines, but for passengers, the question is: will it actually make flight tickets cheaper?
What Has The Government Fixed Under The Scheme?
For domestic operations, the fixed free-on-board benchmark price has been set at Rs 86.32 per litre. For international operations, the benchmark is Rs 104.49 per litre.
These are base-level prices. After airport charges, oil company margins, fixed differentials and applicable taxes are added, the effective selling price works out to about Rs 115 per litre in Delhi, Rs 114.50 per litre in Mumbai and Rs 139 per litre in Chennai. The price varies across airports because state levies and airport-linked charges differ.
Airlines that do not join the scheme will have to pay the prevailing international market-linked rate, which officials said is currently around Rs 142 per litre.
The scheme is voluntary and available only to Indian airlines.
Why Was The Scheme Needed?
The scheme comes after a sharp jump in global jet fuel prices linked to the West Asia crisis. According to Civil Aviation Ministry Director Rohit Raj, international jet fuel prices rose from Rs 60.50 per litre in March to as high as Rs 142 per litre in subsequent weeks, an increase of 135 per cent.
ATF usually accounts for about 40 per cent of an airline’s operating costs. During periods of extreme volatility, this share can rise to around 55-60 per cent, according to an Indian airline association cited by The Indian Express.
Indian carriers have also been under pressure because of longer international routes after the closure of Pakistan’s airspace. The West Asia conflict has added to the strain, especially for international operations passing through or near the region.
Will Flight Tickets Get Cheaper?
Not necessarily.
Rohit Raj said the passenger benefit would come from moderating sudden fare increases, not from an assured fare cut.
“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. By reducing the 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,” Raj said.
This means the scheme is best understood as a fare-stability mechanism. If fuel prices surge again, participating airlines may be under less pressure to raise fares sharply or increase fuel surcharges.
Why Is The Fixed Price Higher Than The Current Delhi ATF Rate?
The current Delhi ATF price of about Rs 105 per litre is the result of an earlier temporary cap. When global prices surged, oil marketing companies raised domestic ATF prices by only 25 per cent in April, instead of passing through the full increase linked to international benchmarks.
Raj explained, “If you apply 25% to the March base price of Rs 60.5 (per litre), the figure of Rs 75.62 comes. When you apply excise and VAT at Delhi, the selling price was about Rs 104. This price was because of capping. Under the new mechanism…we are moving towards a fixed price mechanism.”
That earlier cap protected airlines from a sudden domestic fuel shock, but it also meant oil marketing companies were selling ATF at a loss. Petroleum Ministry Joint Secretary Sujata Sharma had said OMCs were incurring under-recoveries of close to Rs 30 per litre, or Rs 30,000 per kilolitre, on domestic ATF sales.
However, the new stabilisation scheme will apply only going forward and will not compensate oil marketing companies for the losses they have already incurred on jet fuel sales, Information and Broadcasting Minister Ashwini Vaishnaw said on Wednesday.
How Will The Rs 10,000-Crore Fund Work?
The fund will not be given directly to airlines. The government will provide a one-time, interest-free advance of up to Rs 10,000 crore to public sector oil marketing companies.
When international ATF prices are above the fixed benchmark, the fund will compensate OMCs for supplying jet fuel to participating airlines at the fixed rate. When global prices moderate, the differential will be recovered and returned to the Consolidated Fund of India.
Raj called it a temporary arrangement. “The approved mechanism is designed as a temporary self-correcting arrangement,” he said.
He added that 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.”
The scheme will remain in force for up to 36 months, or until the entire advance amount is recovered, whichever is earlier.
What Does This Mean For Your Next Booking?
For travellers, the scheme does not mean flight tickets will automatically become cheaper. But by giving participating airlines a fixed fuel-cost framework, the government hopes to reduce sudden fare spikes and limit the pass-through of fuel shocks to passengers.
