New Delhi

In a significant relief measure for the aviation sector, the Union Cabinet on Wednesday cleared a Rs 10,000-crore Aviation Turbine Fuel (ATF) Price Stabilisation Programme aimed at helping airlines cope with sharply rising fuel costs triggered by the ongoing conflict in West Asia.

The initiative is designed to ensure operational stability for airlines and prevent steep increases in airfares by cushioning the impact of unprecedented fuel price volatility.

Under the approved framework, state-owned oil marketing companies (OMCs) will receive interest-free financial support of up to Rs 10,000 crore, enabling them to supply ATF to Indian scheduled carriers at a stabilised price for both domestic and international flights.

The decision comes at a time when global aviation fuel prices have more than doubled in recent months. ATF prices, which were around Rs 60.50 per litre in March, have climbed to nearly Rs 142 per litre by May, placing considerable strain on airline finances.

Fuel expenses account for nearly 40 per cent of operating costs for most airlines and can rise to 60 per cent during periods of extreme market volatility.

Announcing the Cabinet decision, Union Minister Ashwini Vaishnaw said the programme would provide crucial support to the aviation industry, which is facing multiple challenges, including elevated fuel prices and longer flight routes due to the continued closure of Pakistani airspace for Indian carriers.

According to the approved mechanism, OMCs will be compensated whenever international import-parity prices for aviation fuel exceed a benchmark level fixed by the government. Once global fuel prices decline, the support provided to OMCs will be recovered through a structured settlement process and returned to the Consolidated Fund of India.

Vaishnaw explained that the scheme is intended as a temporary stabilisation measure and will remain in place only during the period of exceptional volatility. Airlines benefiting from the programme will eventually reimburse the support once market conditions normalise.

The minister noted that the move would help maintain affordable air travel for passengers by limiting fare increases resulting from soaring fuel costs. It is also expected to safeguard employment across the aviation sector, which supports millions of direct and indirect jobs.

The assistance will be routed through budgetary allocations under the Ministry of Petroleum and Natural Gas and provided to oil marketing companies as interest-free advances.

Officials said the stabilisation mechanism would operate for a maximum period of 36 months, subject to annual reviews, or until the entire amount advanced under the programme is recovered.

The government believes the initiative will also help protect investments made in airport infrastructure by ensuring that airlines remain financially viable and continue operating critical domestic and international routes.

Indian carriers have been particularly affected by restrictions on Pakistani airspace, forcing many long-haul flights to Europe, North America and Central Asia to take longer routes. These diversions increase fuel consumption and operational costs, adding to the burden created by rising global oil prices.

While domestic ATF prices have been capped under government measures, airlines continue to procure fuel for international operations at import-parity rates, exposing them to global market fluctuations.

Officials acknowledged that maintaining capped fuel prices indefinitely is not financially sustainable for oil marketing companies, especially during periods of prolonged price spikes. The new fund is therefore intended to balance the interests of both airlines and fuel suppliers while preserving connectivity and passenger affordability.

READ MORE: Chabina Hassan's work helped in securing World Heritage status for the Charaideo Maidam

The government expects the scheme to provide temporary stability to the aviation ecosystem until international fuel markets return to more normal levels.