The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the creation of a Rs 10,000 crore Aviation Fuel Price Stabilisation Fund to provide relief to domestic airlines hit by a steep rise in aviation turbine fuel (ATF) prices.
The move comes amid global supply disruptions linked to tensions in West Asia, which have pushed up fuel prices. ATF prices, in particular, touched record highs, with the rate rising about 2.5 times between March and May—from Rs 60.50 per litre in March to around Rs 142 per litre in May.
With airlines spending up to 40% of their revenue on fuel, the Centre had earlier imposed a price cap, fixing ATF at Rs 75.60 per litre to offer temporary relief. To ensure public sector oil marketing companies are not adversely impacted by the cap, the Cabinet has now cleared the stabilisation fund.
Union Minister Ashwini Vaishnaw said the fund will operate as a revolving mechanism: subsidies will be paid to oil companies when prices rise, and when prices fall, the differential amount will be recovered from oil companies and credited back to the fund. The scheme will run initially for 36 months, with annual reviews, and a high-level monitoring committee with representatives from the civil aviation ministry, petroleum ministry and the expenditure department of the finance ministry will oversee implementation.
The government said the fund is expected to reduce fuel-cost pressure on domestic airlines, help protect around 77 lakh jobs linked to the aviation sector, and prevent sudden spikes in airfares from being passed on to passengers. It is also aimed at supporting profitable operations on international routes to Europe, North America and Central Asia amid continued closure of Pakistan’s airspace.
