**Executive Summary**
On June 3, 2026, the Union Cabinet approved a one-time budgetary support of up to Rs. 10,000 crore to establish a Price Stabilization Fund for Aviation Turbine Fuel (ATF). The initiative provides interest-free advances to Oil Marketing Companies (OMCs) to stabilize fuel costs for Scheduled Indian Airlines amidst volatility caused by the West Asia crisis. The support is slated for a 36-month duration, subject to annual reviews and a recovery mechanism to return funds to the government.
**Key Points / Main Content**
**Financial Framework and Funding**
* **Budgetary Support:** A corpus of up to Rs. 10,000 crore is allocated as interest-free advances to OMCs.
* **Loss Compensation:** The fund compensates OMCs when the international Import Parity Price (IPP) exceeds the determined benchmark price.
* **Source of Funds:** Disbursed through the Demands for Grants of the Ministry of Petroleum and Natural Gas.
**Operational Mechanism**
* **Recovery and True-Up:** When international ATF prices moderate, the differential amount will be recovered from OMCs and returned to the Consolidated Fund of India.
* **Fixed-Price Arrangement:** The scheme adopts a fixed-price model for domestic and international operations to provide airlines with cost predictability.
* **Exclusivity Clause:** Participating airlines must agree to procure ATF exclusively from OMCs for up to three years or until the advance is recovered.
**Eligibility and Scope**
* **Aviation Coverage:** Open to all willing Scheduled Indian carriers for both domestic and international routes.
* **Duration:** The support will be in force for 36 months, with the possibility of extension if the corpus is not fully settled within that period.
**Governance and Oversight**
* **Monitoring Committee:** Comprising representatives from the Ministry of Civil Aviation, Ministry of Petroleum & Natural Gas, and Department of Expenditure.
* **Audit and Settlement:** The committee oversees implementation, claim verification, and reconciliation; all claims are subject to audit.
**Impact Analysis**
**Scheduled Indian Airlines**
**Impact:**
Airlines benefit from reduced exposure to sudden fuel price spikes (which currently account for 40-60% of operating costs) and improved financial planning for domestic and long-haul international routes.
**Action Required:**
Must enter into a Memorandum of Understanding (MoU) with OMCs and relevant Ministries; commit to exclusive ATF procurement from OMCs for the duration of the arrangement.
**Oil Marketing Companies (OMCs)**
**Impact:**
OMCs are shielded from losses arising from volatile international prices and government-imposed price caps.
**Action Required:**
Provide stable ATF pricing to airlines; manage claim settlements and return excess differential amounts to the government as international prices moderate.
**Passengers**
**Impact:**
Reduced pass-through of fuel shocks results in moderated fare volatility and sustained air connectivity, particularly to regional and remote Tier-II/III cities.
**Action Required:**
No direct action required.
**Ministry of Civil Aviation / Ministry of Petroleum & Natural Gas / Department of Expenditure**
**Impact:**
Responsible for the fiscal and operational integrity of the stabilization fund.
**Action Required:**
Form a Monitoring Committee to oversee implementation, verify claims, and manage the recovery of funds to the Consolidated Fund of India.
Key Entities Referenced
Price Stabilization Fund for Scheduled Indian Airlines: A fund providing one-time budgetary support of up to Rs. 10,000 crore to stabilize Aviation Turbine Fuel (ATF) pricing for Indian carriers.
Oil Marketing Companies (OMCs): Intermediaries that receive interest-free advances to facilitate stable ATF pricing and implement the recovery and true-up mechanism.
Scheduled Indian Airlines: The primary beneficiaries of the scheme, comprising domestic and international carriers eligible for fixed-price fuel arrangements.
Monitoring Committee: A committee comprising representatives from the Ministries of Civil Aviation, Petroleum & Natural Gas, and Department of Expenditure to oversee policy implementation.
UDAN scheme: A referenced regional connectivity initiative whose operationalized airports are expected to benefit from sustained air connectivity under this policy.
Cabinet
Cabinet approves Price Stabilization Fund for
Scheduled Indian Airlines towards ATF pricing
प्रव तथ: 03 JUN 2026 3:12PM by National
The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has approved one-time budgetary
support not exceeding Rs.10,000 crore for Oil Marketing Companies (OMCs) to provide ATF price
stabilisation support to Scheduled Indian Airlines for their domestic and international operations. The
budgetary support shall be in the form of interest-free advances to OMCs through the Demands for Grants
of the Ministry of Petroleum and Natural Gas. The support shall be provided to OMCs to facilitate stable
ATF pricing for airlines during the ongoing period of exceptional fuel price volatility arising from the
West Asia crisis.
Key component of the approved of Price Stabilization Fund:
(i) Interest-Free advance to OMCs
A one-time budgetary support of up to Rs.10,000 crore shall be provided as an interest-free advance to
OMCs to support ATF price stabilisation for Scheduled Indian Airlines. The corpus shall compensate
OMCs for losses arising from elevated international ATF prices whenever the prevailing Import Parity
Price exceeds the benchmark price determined under the approved mechanism.
(ii) Recovery and True-Up Mechanism
When international ATF prices moderate, the differential amount shall be recovered from OMCs and
returned to the Consolidated Fund of India. The arrangement shall continue until the entire support
amount is fully recovered and settled.
(iii) Coverage of Domestic and International Operations
The scheme shall be available to all willing Scheduled Indian carriers for both domestic and international
operations.
(iv) Fixed ATF Price Arrangement
The mechanism provides greater predictability in fuel costs by adopting a fixed-price arrangement for
domestic and international operations, thereby reducing airline’s exposure to sudden fuel price spikes.
(v) Exclusive rights of ATF supply to OMCs
The arrangement will be implemented through an MoU between participating Indian airlines and OMCs,
with the Ministry of Civil Aviation and the Ministry of Petroleum & Natural Gas as signatories. Under this
one-time arrangement, participating airlines will procure ATF only from OMCs for up to three years,
subject to annual review or until the advance amount is fully recovered, whichever is earlier.
(vi) Monitoring and AuditA Monitoring Committee comprising representatives of the Ministry of Civil Aviation, Ministry of
Petroleum & Natural Gas and Department of Expenditure shall oversee implementation, claim
verification, reconciliation and settlement. All claims and recoveries shall be subject to audit.
(vii) Duration of Prise Stabilization support
ATF price stabilisation support will be in force for a period of thirty-six months with provision for annual
review or until the advance amount is fully recovered/settled, whichever is earlier. The proposal may be
extended beyond thirty-six months with the approval of the Competent Authority in case the corpus is not
fully trued up within this period.
Expected outcome:
The proposed mechanism will provide enhanced stability and predictability in ATF pricing for
Indian airlines, enabling better operational and financial planning.
It will shield Oil Marketing Companies (OMCs) from losses arising from volatile and elevated ATF
prices during the ongoing West Asia crisis.
The measure will help protect and sustain domestic and international air connectivity, ensuring
continuity of air services.
It will reduce the pass-through of fuel price shocks to passengers, thereby helping to moderate fare
volatility.
The arrangement will support continued air connectivity to remote, regional, Tier-II and Tier-III
cities, promoting balanced regional development and inclusive growth.
Key Benefits:
Stable airline operations help sustain employment across airlines, airports, ground handling
agencies, MROs, travel agencies, hospitality and logistics sectors.
Continued air connectivity will facilitates movement of passengers, high-value cargo, business
travellers and tourists, thereby supporting economic activity across sectors.
The measure will have positive spill-over effects on tourism, hospitality, trade, exports, regional
development and investment.
It will help ensure optimum utilisation of airport infrastructure developed across the country,
including airports operationalised under the UDAN scheme.
By preserving domestic and international connectivity, the initiative will strengthen India's
integration with global markets and support long-term economic growth.
Background:
The aviation sector has been impacted by unprecedented volatility in global ATF prices following the
West Asia crisis.
Due to the ongoing West Asia crisis, international ATF prices have surged nearly 2.5 times from
Rs.60.50/ litre in March 2026 to Rs.142/litre in May 2026. ATF accounts for nearly 40% of an
airline's operating cost. Therefore, this volatility in ATF prices has resulted in high cost pressure on
airline financials.
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.
However, the capping of ATF prices is a temporary measure and not sustainable in the long run for
OMCs. Due to the capping of ATF prices, OMCs are also incurring losses particularly with volatile
and surging ATF prices during the West Asia crisis.Closure of Pakistan airspace for Indian carriers has resulted in longer flight paths to Europe, North
America and Central Asia, increasing fuel burn and operational costs.
Long-haul passenger fares have increased substantially, international demand has declined and
airlines have reduced or suspended services on several international routes.
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MJPS
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