Govt sets aside Rs 10k crore to cap jet fuel price, keep air fares in check

NEW DELHI: In a bid to ensure airfares don't get completely out of reach for the common citizen and airlines don't collapse, govt on Wednesday decided to set aside Rs 10,000 crore to cap aviation turbine fuel (ATF) or jet fuel prices and prevent them from sharp surges. This one-time budgetary support will be given as interest-free advance to oil marketing companies (OMC) to compensate them for not passing on the hike to Indian carriers whenever the jet fuel price spikes.

And when international ATF prices moderate, the differential amount will be recovered from OMCs and returned to the consolidated fund of India. "ATF price stabilisation support will be in force for a period of 36 months... may be extended beyond 36 months... in case the corpus is not fully trued up within this period," a govt statement said.

This crucial support was cleared at a meeting of the Union cabinet on Wednesday to provide ATF price stabilisation support to scheduled Indian airlines for their domestic and international operations "during the ongoing period of exceptional fuel price volatility arising from the West Asia crisis."

PM Modi said on X: "Cabinet approval for a one-time support mechanism to ensure greater stability in ATF prices for Indian airlines will help maintain affordable air connectivity, support airline operations and reduce the burden on passengers. It will also strengthen connectivity to Tier-II and Tier-III cities, support tourism and employment."

I&B minister Ashwini Vaishnaw said the Centre has capped the ATF price for domestic airlines at Rs 75.6 per litre, significantly below the current market price after it had soared 2.5 times. He said the scheme would help stabilise airline operating costs, reduce fare volatility for passengers and preserve domestic and international air connectivity.

"ATF accounts for nearly 40% of airline operating costs and during periods of extreme fuel volatility, can constitute up to 60% of total operating expenditure. While ATF price has been capped for domestic operations, Indian carriers continue to purchase ATF for international operations at import parity prices (IPP), exposing them to elevated fuel costs," the govt statement added.

Indian carriers led by Air India group and IndiGo are slashing both their international and domestic flights due to prohibitive cost of operations. One airline has been struggling to pay salaries.


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