Cabinet Clears ₹10,000-Crore Fund to Shield Airlines Amid West Asia Turmoil
Cabinet approves ₹10,000-crore fund to stabilise aviation turbine fuel prices for Indian airlines.
advertisement
The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved a one-time budgetary support of ₹10,000 crore to stabilise aviation turbine fuel (ATF) prices for Indian airlines. The fund aims to shield airlines from extreme fuel price volatility, particularly in the context of recent global disruptions and the ongoing West Asia crisis.
The support will be provided as interest-free advances to oil marketing companies (OMCs) and will cover both domestic and international airline operations.
According to Hindustan Times, the scheme is designed to compensate OMCs for losses incurred when international ATF prices exceed a government-determined benchmark. The arrangement will be implemented through a memorandum of understanding between participating airlines, OMCs, the Ministry of Civil Aviation, and the Ministry of Petroleum and Natural Gas. The support mechanism is set to operate for up to three years, subject to annual review or until the advance is fully recovered.
As reported by Financial Express, the stabilisation package will provide airlines with greater predictability in fuel costs by adopting a fixed-price arrangement. This is expected to reduce the sector’s exposure to sudden price spikes and enable better operational and financial planning. The scheme will be available to all scheduled Indian airlines, and participating carriers must procure ATF exclusively from OMCs during the scheme’s tenure.
Details provided through official statements indicate that the fund was established in response to a sharp increase in international ATF prices, which rose from ₹60.50 per litre in March 2026 to ₹142 per litre in May 2026. This surge has placed significant cost pressure on airlines, as ATF accounts for nearly 40% of their operating expenses and can rise to 60% during periods of volatility. The closure of Pakistan’s airspace has further increased operational costs by forcing longer flight routes for Indian carriers.
Industry feedback, as coverage revealed, has been positive. Air India described the measure as “much-needed support” for the aviation sector, highlighting its role in maintaining connectivity and enabling airlines to serve passengers more effectively. The government expects the initiative to benefit tourism, trade, regional connectivity, and the utilisation of airport infrastructure, including facilities developed under the UDAN scheme.
“This progressive measure provides a much-needed support to the Indian aviation ecosystem and reinforces the Government’s commitment to strengthening connectivity for the people of India, while enabling airlines to serve passengers more effectively,” Air India stated.
Further analysis showed that the scheme includes a clawback mechanism. If international ATF prices moderate, the differential amount will be recovered from OMCs and returned to the Consolidated Fund of India. The arrangement will continue until the entire support amount is fully reconciled and settled, with oversight by a monitoring committee comprising representatives from relevant ministries and the Department of Expenditure.
Implementation details at the end confirm that all claims and recoveries under the scheme will be subject to audit. The government has stated that the measure will help moderate fare volatility, support employment across aviation-linked sectors, and sustain both domestic and international air connectivity during periods of global uncertainty.
Note: This article is produced using AI-assisted tools and is based on publicly available information. It has been reviewed by The Quint's editorial team before publishing.