A day after the Union Cabinet approved a ₹10,000-crore jet fuel price stabilisation fund, the government on Thursday said domestic airlines can opt to buy aviation turbine fuel (ATF) at a fixed benchmark rate of ₹86.32 per litre for domestic operations and ₹104.49 per litre for international flights. This is meant to insulate them from global fuel prices that have surged amid the West Asia crisis.
After accounting for airport charges, oil company margins and taxes, the effective selling price under the scheme works out to about ₹115 per litre in Delhi, ₹114.5 per litre in Mumbai and ₹139 per litre in Chennai, officials said.
The announcement comes as international ATF prices have climbed sharply due to the West Asia conflict and the disruption of shipping routes through the Strait of Hormuz, increasing cost pressures on airlines and leading to losses for state-owned fuel retailers.
Briefing reporters, Rohit Raj, Director, Ministry of Civil Aviation, said the scheme would operate through a fixed-price mechanism, and airline participation would remain voluntary.
“Under the new mechanism, we are moving toward a fixed-price mechanism. That is fixed at the FOB level, where we exclude certain charges and taxes, particularly VAT, excise duty, airport charges and a fixed differential, which is basically domestic freight, insurance, and OMC profit margin. After that, we arrive at a price under the scheme. For domestic operation it is fixed at ₹86.32 and for international operation it is fixed at ₹104.49,” Raj said.
“If we take Delhi as an example, ₹115 is the fixed selling price at Delhi for both domestic and international operations,” he added.
Voluntary Lock-in
Officials said airlines opting into the scheme will be required to continue purchasing fuel at the agreed benchmark rates even if international prices decline. Once an airline signs a memorandum of understanding (MoU) with oil marketing companies (OMCs), it can exit the arrangement only after clearing all outstanding dues.
The Cabinet-approved scheme provides a one-time interest-free advance of up to ₹10,000 crore to OMCs. The corpus will compensate fuel retailers whenever the prevailing import parity price of ATF exceeds the benchmark rate under the scheme.
Raj said the stabilisation mechanism would help airlines manage fuel costs more efficiently, sustain domestic and international connectivity and reduce the pass-through of fuel-price shocks to passengers.
True-Up Recovery
“Importantly, when the fuel price moderates, the differential amount will be recovered from oil marketing companies and returned to the Consolidated Fund of India through a transparent mechanism. Thus, the arrangement is intended not as a subsidy but as a temporary stabilisation method to smoothen the impact of exceptional fuel price volatility,” he said.
The scheme will remain operational for up to 36 months or until the entire government support is recovered, whichever is earlier.