Cabinet clears ATF support scheme, but participation remains optional

The Union Cabinet on June 3 approved one-time budgetary support of up to ₹10,000 crore for oil marketing companies to provide aviation turbine fuel (ATF) price stabilisation support to scheduled Indian airlines for domestic and international operations, according to the government.

The support will be extended as interest-free advances to oil marketing companies through the Ministry of Petroleum and Natural Gas, and the Centre said the move is meant to address exceptional fuel price volatility linked to the West Asia crisis.

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Fuel shield with a fixed-price twist

The official release said the mechanism is designed to cushion airlines from sharp swings in ATF prices while also protecting oil marketing companies from losses when international fuel prices remain elevated.

Under the approved framework, the arrangement will operate through a fixed-price system, with participating airlines sourcing ATF only from oil marketing companies under a memorandum of understanding.

The scheme will cover domestic and international operations and will remain in force for 36 months, with annual review and recovery provisions built in.

Carriers may choose their own course

The civil aviation ministry has also clarified that the support will not be mandatory. Speaking at a briefing, ministry director Rohit Raj said, “Airlines may or may not opt for the scheme,” while adding that the government was still working on the final operational details and waiting for carriers to show interest.

The proposed fund will be optional for airlines. The government had set benchmark rates of ₹86.32 a litre for domestic ATF and ₹104.49 a litre for international operations, excluding taxes.

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The long game behind the fund

According to the Cabinet note, the price-stabilisation support is intended to provide greater predictability in fuel costs, reduce the pass-through of fuel shocks to passengers, and help sustain air connectivity, including to remote, regional, and tier-II and tier-III cities.

The government said the arrangement will be monitored by a committee comprising representatives of the ministries of civil aviation, petroleum and natural gas, and the Department of Expenditure, with all claims and recoveries subject to audit.

The Centre added that the proposal may be extended beyond 36 months if the corpus is not fully trued up within that time.