**Executive Summary**
The Union Cabinet has approved a one-time budgetary support of up to Rs. 10,000 crore to establish a Price Stabilization Fund for Scheduled Indian Airlines. This interest-free advance to Oil Marketing Companies (OMCs) aims to mitigate the impact of extreme Aviation Turbine Fuel (ATF) price volatility caused by the West Asia crisis. The scheme will remain in effect for 36 months, subject to annual reviews and a recovery mechanism to return the funds to the Consolidated Fund of India.
**Key Points / Main Content**
**Financial Provisions and Recovery**
* **Budgetary Support:** A corpus of up to Rs. 10,000 crore provided as interest-free advances to OMCs through the Ministry of Petroleum and Natural Gas.
* **Loss Compensation:** The fund compensates OMCs when the prevailing Import Parity Price exceeds the determined benchmark price.
* **True-Up Mechanism:** When international ATF prices moderate, OMCs must return the differential amount to the Consolidated Fund of India until the total advance is recovered.
**Operational Mechanism**
* **Fixed-Price Arrangement:** Adopts a fixed-price model for domestic and international operations to provide airlines with fuel cost predictability.
* **Exclusive Procurement:** Participating airlines must procure ATF exclusively from OMCs for up to three years or until the advance is fully recovered.
* **Eligibility:** The scheme is available to all willing Scheduled Indian carriers for both domestic and international operations.
**Governance and Duration**
* **Implementation:** Executed through a Memorandum of Understanding (MoU) signed by participating airlines, OMCs, the Ministry of Civil Aviation (MoCA), and the Ministry of Petroleum & Natural Gas (MoPNG).
* **Monitoring Committee:** A committee featuring representatives from MoCA, MoPNG, and the Department of Expenditure will oversee implementation, claim verification, and audits.
* **Timeline:** The support is set for 36 months, with the possibility of extension if the corpus is not fully trued up within that period.
**Background and Rationale**
* **Price Volatility:** International ATF prices surged from Rs. 60.50/litre in March 2026 to Rs. 142/litre in May 2026 due to the West Asia crisis.
* **Cost Pressures:** ATF constitutes 40% to 60% of an airline's operating expenditure; high costs have previously led to reduced international services and increased fares.
* **Operational Challenges:** Longer flight paths due to the closure of Pakistan airspace have further increased fuel burn and costs.
**Impact Analysis**
**Oil Marketing Companies (OMCs)**
**Impact**
OMCs are shielded from losses resulting from volatile international prices and the sustainability issues of long-term price capping.
**Action Required**
Enter into MoUs with airlines and ministries; manage the supply of ATF and settle recovery amounts with the Consolidated Fund of India.
**Scheduled Indian Airlines**
**Impact**
Airlines receive enhanced financial stability and predictability in fuel costs, allowing for better operational planning and the preservation of domestic and international connectivity.
**Action Required**
Willing carriers must sign MoUs and commit to exclusive ATF procurement from participating OMCs for the duration of the arrangement.
**Ministry of Civil Aviation / Ministry of Petroleum & Natural Gas / Department of Expenditure**
**Impact**
These bodies are responsible for the fiscal oversight and successful implementation of the stabilization mechanism.
**Action Required**
Form a Monitoring Committee to oversee implementation, verify claims, and manage the reconciliation and settlement process.
**Passengers and Logistics Sector**
**Impact**
Beneficiaries of moderated fare volatility and sustained air connectivity to regional, Tier-II, and Tier-III cities, supporting employment and economic activity.
**Action Required**
No direct action required.
Key Entities Referenced
Price Stabilization Fund: A one-time budgetary support mechanism of Rs. 10,000 crore approved to provide interest-free advances to stabilize aviation turbine fuel (ATF) prices for Indian carriers.
Oil Marketing Companies (OMCs): The primary implementing entities that receive budgetary support to compensate for losses from elevated international fuel prices and provide fixed-price ATF to airlines.
Scheduled Indian Airlines: The specific category of domestic and international air carriers eligible for fuel price stabilization support under the approved mechanism.
Monitoring Committee: A tripartite body comprising representatives from the Ministry of Civil Aviation, Ministry of Petroleum & Natural Gas, and Department of Expenditure to oversee implementation and fund recovery.
UDAN scheme: A referenced regional connectivity scheme whose airport infrastructure utilization is intended to be sustained through the air connectivity preserved by this fund.
Ministry of Civil Aviation
Cabinet approves Price Stabilization Fund for
Scheduled Indian Airlines towards ATF pricing
प्रव तथ: 03 JUN 2026 3:14PM 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.
***
MJPS
(रलीज़ आईडी: 2268338) आगंतुक पटल : 820
इस वज्ञ को इन भाषाओ ंम पढ़: Urdu , Marathi , ही , Gujarati , Tamil , Malayalam