Indian equity markets ended lower on Wednesday, with the Sensex closing 303.67 points, or 0.41%, down at 74,346.17 and the Nifty falling 77.95 points, or 0.33%, to 23,405.60. The session was highly volatile, with the Sensex sinking as much as 1,157.24 points intraday to 73,492.60 before recovering sharply into the close. However, a late-afternoon Cabinet decision on aviation fuel provided significant relief to aviation stocks just before market close. InterGlobe Aviation, the IndiGo parent, was among the gainers in the Sensex pack for the day, while SpiceJet shares jumped nearly 5% post the announcement to an intraday high of ₹12.79 before settling at ₹12.42. The Nifty IT index slumped 5.57% on Wednesday, reversing gains accumulated over the previous three sessions, with TCS tumbling 8.43%, Tech Mahindra falling 6.23%, HCL Tech dropping 5.25% and Infosys declining 3.82%.
The Central Government has capped Aviation Turbine Fuel (ATF) prices at ₹86.32 per litre for domestic operations, excluding taxes, according to the latest pricing framework announced by the government. This announcement comes alongside the Cabinet's approval of a ₹10,000 crore Aviation Turbine Fuel Price Stabilisation Fund to provide much-needed relief to the aviation sector. As per Mint, the price surge has adversely affected both airlines and oil marketing companies, prompting the creation of this comprehensive stabilisation mechanism. The scheme is open to all willing scheduled Indian airlines for both domestic and international operations, with the government aiming to provide relief during periods of volatile global fuel prices. Addressing the media after the Cabinet meeting, Information and Broadcasting Minister Ashwini Vaishnaw said the decision was necessitated by the unprecedented rise in fuel prices, stating "Due to the West Asia crisis, ATF prices had skyrocketed."
The government has established a comprehensive pricing framework that sets benchmark rates for domestic ATF at ₹86.32 per litre, excluding taxes, while international operations will be priced at ₹104.49 per litre, excluding taxes and certain levies. According to Mint, Rohit Raj, Director at the Ministry of Civil Aviation, explained that "if we take Delhi as an example, ₹115 (a litre) is the fixed selling price for both domestic and international." The pricing structure excludes VAT, excise duty, airport charges and other levies, while adding a fixed differential covering freight, insurance and oil marketing companies' margins. City-wise prices will vary depending on state taxes, with Mumbai ATF under the scheme costing about ₹114.5 per litre, while Chennai could rise to around ₹139 due to higher VAT, as reported by Mint. Airlines may choose to join the scheme individually or as a consortium with oil marketing companies, with participation remaining optional for carriers.
The newly approved fund will have a corpus of ₹10,000 crore and will be available for both domestic and international aviation operations, according to government details. The Cabinet has approved a one-time budgetary support of up to ₹10,000 crore to be provided as an interest-free advance to OMCs to support ATF price stabilisation for Scheduled Indian Airlines. Under the scheme, the Centre will provide a one-time budgetary support of up to ₹10,000 crore as an interest-free advance to OMCs to compensate Oil Manufacturing Companies whenever the prevailing Import Parity Price of ATF exceeds a benchmark price determined under an approved mechanism. The fund will operate as a self-sustaining revolving mechanism, allowing support to be extended during periods of elevated fuel prices while maintaining long-term viability. According to government officials, detailed operational guidelines to be issued by the Ministry of Civil Aviation will govern the reimbursement process once market conditions normalise.
The stabilisation mechanism will be implemented through an MoU between participating Indian airlines and OMCs, with the Ministry of Civil Aviation and the Ministry of Petroleum And Natural Gas as signatories. Under this one-time arrangement, participating airlines will procure ATF only from OMCs for up to three years or until the advance amount is fully recovered, whichever is earlier. ATF price stabilisation support will be enforced for a period of 36 months, but may be extended beyond 36 months if the corpus is not fully recovered within the initial period. A Monitoring Committee comprising representatives of the Ministry of Civil Aviation, Ministry of Petroleum And Natural Gas and Department of Expenditure will oversee implementation, claim verification, reconciliation and settlement. The arrangement will be in force for thirty-six months with provision for annual review or until the advance amount is fully recovered. The budgetary support shall be provided through the demands for grants of the ministry of petroleum and natural gas, with the corpus compensating OMCs for losses arising from elevated international ATF prices when the prevailing Import Parity Price exceeds the benchmark price. When international ATF prices moderate, the differential amount will be recovered from OMCs and returned to the Consolidated Fund of India.
The proposed Aviation Turbine Fuel (ATF) Stabilisation Fund will be optional for airlines, with carriers free to decide whether they want to participate in the scheme, according to Rohit Raj, Director at the Ministry of Civil Aviation. During a recent briefing, Raj said the government is working on the modalities of the fund and expects the scheme to become operational soon. "Airlines may or may not opt for the scheme," he said, adding that the ministry is currently "waiting for airlines to show their interest" before taking the next steps. The official noted that work on the framework is underway as the government seeks to finalise the operational details of the proposed mechanism. Once airlines sign a memorandum of understanding (MoU) with oil marketing companies, they will be required to pay the fixed rates even if global prices decline, and can exit the arrangement only after clearing outstanding dues, as reported by Mint. This voluntary participation structure allows airlines to make informed decisions based on their operational requirements and financial position, providing flexibility while ensuring the scheme remains financially sustainable.
