In a major relief measure for the aviation sector, the Union Cabinet, chaired by Prime Minister Narendra Modi, on Wednesday approved a one-time budgetary support package of up to ₹10,000 crore to help stabilize Aviation Turbine Fuel (ATF) prices for scheduled Indian airlines affected by soaring global fuel costs triggered by the ongoing West Asia crisis.
The assistance will be provided to Oil Marketing Companies (OMCs) in the form of interest-free advances through the Ministry of Petroleum and Natural Gas. The fund aims to cushion airlines from unprecedented fuel price volatility while ensuring uninterrupted domestic and international air connectivity.
According to the government, international ATF prices have surged nearly 2.5 times – from ₹60.50 per litre in March 2026 to ₹142 per litre in May 2026 – placing significant financial pressure on airlines. ATF currently accounts for around 40 per cent of airline operating costs and can rise to as much as 60 per cent during periods of extreme fuel price volatility.
Under the approved mechanism, OMCs will be compensated whenever the prevailing import parity price of ATF exceeds a benchmark price determined by the government. The support will be available to all willing scheduled Indian carriers for both domestic and international operations.
The scheme incorporates a recovery and true-up mechanism under which the financial support will be recovered and returned to the Consolidated Fund of India when international fuel prices moderate. The arrangement will continue until the entire advance is fully recovered.
A key feature of the initiative is the introduction of a fixed-price ATF arrangement, which is expected to provide greater predictability in fuel costs and reduce airlines’ exposure to sudden price spikes. Participating airlines will procure ATF exclusively from OMCs under a memorandum of understanding (MoU) involving the Ministries of Civil Aviation and Petroleum and Natural Gas.
The arrangement will remain in force for up to three years, subject to annual review or until the support amount is fully recovered, whichever is earlier. The government has also kept the option open to extend the scheme beyond 36 months if required.
To ensure transparency and accountability, a monitoring committee comprising representatives from the Ministry of Civil Aviation, Ministry of Petroleum and Natural Gas, and Department of Expenditure will oversee implementation, claim verification, reconciliation and settlement. All claims and recoveries will be subject to audit.
The government said the measure would help airlines manage operational costs more effectively, shield OMCs from losses caused by capped fuel prices, and reduce the transmission of fuel price shocks to passengers through higher airfares.
The initiative is also expected to support connectivity to remote, regional, Tier-II and Tier-III cities, including routes operated under the UDAN scheme, while safeguarding jobs across airlines, airports, maintenance and repair organisations, travel agencies, hospitality and logistics sectors.
The aviation industry has been facing multiple challenges in recent months, including elevated fuel costs and longer international flight routes following the closure of Pakistani airspace for Indian carriers. The resulting increase in fuel consumption has led to higher operating costs, particularly on routes to Europe, North America and Central Asia.
The government said the price stabilization mechanism would help preserve domestic and international connectivity, support tourism and trade, and strengthen India’s integration with global markets during a period of heightened geopolitical uncertainty.
