New Delhi, India: The Government of India has approved a ₹10,000 crore (approximately US$1.05 billion) Aviation Turbine Fuel (ATF) Price Stabilisation Fund aimed at shielding domestic airlines from an unprecedented surge in jet fuel prices triggered by the ongoing Iran conflict and disruptions to global energy supplies.
The decision, approved by the Union Cabinet on June 3, comes as Indian carriers face mounting operational and financial pressure from rapidly escalating fuel costs, which have more than doubled in recent months and threaten to push airfares higher, reduce capacity and impact aviation-led economic growth.
The relief package follows a sharp increase in ATF prices caused by geopolitical tensions in the Middle East, particularly the conflict involving Iran, which has disrupted oil markets and raised concerns over supplies moving through the Strait of Hormuz.
The strategic waterway handles roughly one-fifth of the world’s oil shipments, making any disruption a major concern for global energy markets. As crude oil prices climbed, ATF costs in India surged from around ₹60.50 per litre in March to nearly ₹142 per litre in May, according to government figures.
Fuel is the single largest expense for most Indian airlines and typically accounts for approximately 35-40 percent of total operating costs. The sudden rise in prices has significantly increased cost pressures across the sector.
Rather than directly subsidising airlines, the government will provide interest-free advances to state-run oil marketing companies. These funds will enable oil suppliers to moderate ATF price increases and reduce the immediate financial burden on airlines purchasing fuel.
Officials said the measure is intended to cushion airlines from extreme fuel-price volatility while maintaining stability across the broader aviation ecosystem.
The government believes the intervention will help:
- Prevent sharp airfare increases for passengers.
- Protect airline profitability and financial stability.
- Maintain domestic and international air connectivity.
- Support employment linked to the aviation sector.
- Sustain growth in one of the world’s fastest-growing aviation markets.
According to Petroleum and Natural Gas Minister Hardeep Singh Puri, the measure aims to safeguard approximately 7.7 million jobs associated with India’s aviation industry.
The government’s move comes after several signs of stress emerged across the airline sector. Recent reports indicated that major carriers, including IndiGo and Air India, had already reduced domestic capacity during the June-July travel period in response to soaring fuel costs and operational challenges.
Globally, airline executives have also identified fuel costs arising from the Iran conflict as one of the industry’s most significant challenges since the COVID-19 pandemic.
India’s largest airline, IndiGo, welcomed the announcement and described it as a significant step for the aviation sector.
An IndiGo spokesperson said, “We are grateful to the Government of India, the Ministry of Civil Aviation, the Ministry of Petroleum and Natural Gas, and all concerned authorities for introducing ATF price stabilisation support for Indian airlines. This timely measure recognizes aviation’s vital role in connectivity and economic growth, while helping airlines serve passengers better and supporting India’s ambition to become a global aviation hub.”
The airline indicated that the measure would help carriers continue investing in network expansion and operational reliability while maintaining affordable air travel for passengers.
While the government has not specified the exact reduction in ATF prices that airlines may receive, the stabilisation mechanism is expected to ease immediate cost pressures and prevent further steep increases. The support may also help carriers avoid passing the full burden of fuel inflation to passengers during the peak travel season.
