The Union Cabinet has approved a ₹10,000-crore price stabilisation scheme to address mounting losses in the aviation fuel sector. According to reports from PTI, this comprehensive measure aims to cap ATF prices and shield airlines from volatility linked to geopolitical tensions, while also supporting the financial health of state-owned oil companies. Under the scheme, whenever global benchmark prices rise above the base rate of ₹86.32 per litre, the government will provide an interest-free advance to oil marketing companies to cover the difference. When prices fall, the differential will be recovered from the companies and returned to the Consolidated Fund of India. The recently approved ₹10,000 crore fund sits at the centre of the government's strategy, providing temporary support to OMCs whenever international fuel prices breach predefined thresholds.
Aviation turbine fuel (ATF) prices for domestic airlines rose by around 10% as state-owned oil marketing companies rolled out the government-backed price stabilisation scheme. The new arrangement allows carriers to lock in fuel rates for up to three years, providing protection against sharp swings in global oil prices and reducing the impact of fuel volatility on airfares. As reported by The Times of India, jet fuel for domestic carriers will now cost ₹115 per litre, up from ₹105 per litre, with the price freeze remaining in effect for the next three years for domestic and international flights of Indian carriers that opt for the new mechanism. The scheme is voluntary and allows airlines to choose between a fixed fuel price and market-based pricing, with participation being entirely optional for carriers. Airlines that choose not to participate will continue purchasing fuel at market prices and remain fully exposed to future fluctuations in global energy markets.
Under the new regime, airlines opting into the scheme will pay a fixed ATF price of about ₹115 per litre, compared with the previous rate of ₹104.927 per litre. According to industry sources cited by PTI, participating airlines will pay a fixed free-on-board (FOB) benchmark price of ₹86.32 per litre, along with airport charges, oil company margins and taxes. This translates to an effective selling price of about ₹115 per litre in Delhi, ₹114.5 per litre in Mumbai and ₹139 per litre in Chennai. The move comes after domestic ATF prices remained largely unchanged for more than two months despite international fuel costs rising significantly. The revised price still remains substantially lower than prevailing international market-linked rates, which are currently hovering around ₹142 per litre.
India's largest airline by market share, IndiGo, reported a net loss of ₹2,536 crore for the fourth quarter of FY26, compared with a net profit of ₹3,067 crore in the corresponding period last year. As reported by The Economic Times, revenue from operations edged up 1% year-on-year to ₹22,438 crore. The airline's operational performance during the quarter was affected by disruptions linked to the ongoing conflict in the Middle East, with capacity measured in available seat kilometres (ASKs) increasing 3.4% year-on-year to 43.6 billion. The airline has been grappling with an already complex environment amid West Asia tensions and has suspended flights to six international destinations as part of a network optimisation exercise, citing a traditionally softer demand environment and challenging cost landscape.
While the stabilisation scheme is aimed at protecting airlines and passengers from sharp fluctuations in global crude oil prices, it is expected to increase operating costs for airlines, with fuel being one of the largest components of their expenditure. As reported by The Economic Times, carriers that choose to join the government-backed scheme will be able to secure the ₹115 per litre rate for up to three years, while those outside the scheme will continue to purchase fuel at market-linked rates currently around ₹142 per litre. IndiGo shares are down 11% in 2026 and about 20% in the last one year, reflecting investor concerns about the airline's operational challenges amid rising fuel costs and geopolitical disruptions affecting travel demand. The immediate answer is that airlines will face somewhat higher fuel costs than previously, potentially placing pressure on profitability, particularly for carriers already dealing with higher operating costs. However, the alternative scenario may have been considerably worse without government intervention.
