The Union Cabinet on Wednesday approved a ₹39,290 crore package spanning aviation, highway infrastructure and transport modernisation, with the largest allocation going towards the creation of an Aviation Turbine Fuel (ATF) Price Stabilisation Fund. According to details of the Cabinet decisions, the government approved a ₹10,000 crore ATF Price Stabilisation Fund, aimed at addressing volatility in aviation fuel prices and providing greater predictability for airlines, for whom fuel remains one of the largest operating costs. The comprehensive package includes multiple infrastructure projects across different sectors, demonstrating the government's focus on both aviation sector stability and broader transport infrastructure development.
The approved mechanism introduces a fixed-price arrangement for ATF, aimed at providing greater predictability in fuel costs and reducing airlines' exposure to sudden price fluctuations. Participating airlines will procure ATF exclusively from OMCs for a period of up to three years, subject to annual review or until the advance amount is fully recovered, whichever is earlier. The framework will be formalized through an MoU involving airlines, OMCs, the Ministry of Civil Aviation, and the Ministry of Petroleum and Natural Gas. A monitoring committee comprising representatives from these ministries and the Department of Expenditure will oversee implementation, including claim verification, reconciliation, and audit. The fund will be channelled through interest-free advances to Oil Marketing Companies and will be used to compensate OMCs whenever international ATF prices remain significantly above the benchmark level prescribed under the scheme.
Beyond the ATF fund, the Cabinet approved several significant highway projects as part of the ₹39,290 crore package. The ₹19,834 crore highway projects approved include the ₹8,301 crore coastal highway project connecting Rameshwaram, Konark and Paradip, which has been delayed by a decade over alignment issues but is now set to take off. The ₹7,597 crore Telangana highway project involves widening the existing Armoor-Jagtial-Mancherial section of NH-63 and the Jagtial-Karimnagar section of NH-563 under the build-operate-transfer model, with a combined length of 190.76 km. Additionally, the ₹3,936 crore Bihar project will upgrade the 143.5-km Khagaria-Purnea section of NH-31 and NH-231 to four-lane standards under the BOT (toll) mode.
The ₹8,301 crore Odisha coastal highway project represents a landmark infrastructure development that has been delayed by more than 10 years. The 160.18-km section will be constructed under the hybrid annuity model (HAM) in two packages - a 79.4-km four-lane access-controlled carriageway from Rameshwar to Konark and an 80.78-km two-lane highway with paved shoulders from Konark to Paradip, ensuring a design speed of 100 kmph. The project passes through Khurda, Puri, Kendrapada and Jagatsinghpur districts and will act as a parallel carriageway to the existing six-lane NH-16, connecting nine economic nodes and five logistics nodes including Puri railway station, Puri airport, Astaranga port, Paradip port and the proposed multi-modal logistics park in Jagatsinghpur district. Upon completion, travel time is expected to reduce by about 2.5 hours between Rameshwar and Paradip, with Package I costing ₹5,304.8 crore and Package II at ₹2,995.99 crore.
Indian carriers were forced to reduce flights through March and April due to low demand, with domestic air traffic dropping 4.2% to little over 1.38 crore in April compared to March amid multiple headwinds including relatively softer travel demand and rising operational costs due to higher fuel prices. Last month, ATF prices for domestic airlines were raised by ₹8,289.04 per kilolitre, or 8.56%, to ₹1,04,927.18 per kl from ₹96,638.14 per kl. However, the latest data shows international ATF prices have surged nearly 2.5 times from ₹60.50/litre in March 2026 to ₹142/litre in May 2026 due to the ongoing West Asia crisis. The aviation sector has been significantly impacted by sharp volatility in global ATF prices, with ATF accounting for nearly 40% of airline operating costs, which can rise to as much as 60% in extreme conditions. The ₹10,000 crore Aviation Turbine Fuel Price Stabilisation Fund aims to prevent sudden spikes in fuel costs from disrupting airline operations at a time when global energy markets remain highly volatile.
