Airlines Skip Rs 10,000 Crore ATF Price Stabilisation Scheme as Jet Fuel Costs Decline

India’s aviation sector has seen an unexpected development after airlines chose not to participate in the government’s Rs 10,000 crore aviation turbine fuel (ATF) price stabilisation scheme. The programme, introduced to protect airlines from volatile fuel prices, has failed to attract a single participant as global oil prices have eased in recent weeks.

The Union Cabinet approved the one time scheme last month to support both airlines and state owned oil marketing companies during a period of uncertainty in global energy markets. Under the proposal, airlines could voluntarily purchase ATF at a fixed price of around Rs 115 per litre for up to three years, providing protection against sudden increases in international fuel prices.

However, market conditions changed soon after the scheme was announced. International crude oil prices softened following an easing of geopolitical tensions in West Asia, leading to a decline in aviation fuel prices. On 1 July, the market price of ATF fell to around Rs 110 per litre, making the government’s fixed price less attractive than prevailing market rates. As a result, airlines have preferred to continue purchasing fuel at market linked prices rather than commit to the stabilisation programme.

The scheme was designed to provide greater certainty for airline operating costs during periods of sharp fuel price fluctuations. Aviation turbine fuel is one of the largest expenses for airlines, typically accounting for around 40 per cent of operating costs. During periods of significant volatility, the share can rise to as much as 60 per cent, placing considerable pressure on airline finances.

Under the proposed mechanism, participating airlines would have paid a fixed free on board benchmark price along with airport charges, taxes and oil company margins. The government would have compensated state owned fuel retailers whenever international benchmark prices exceeded the agreed level. If fuel prices declined, the difference would have been recovered and returned to the Consolidated Fund of India, making the arrangement a price stabilisation mechanism rather than a subsidy.

Officials believe the framework remains relevant despite the current lack of participation. Fuel markets remain highly sensitive to geopolitical developments, supply disruptions and fluctuations in global crude oil prices. Should international fuel prices rise sharply again, airlines may reconsider joining the scheme to secure greater cost certainty over the longer term.

The development also highlights how quickly global energy markets can influence India’s aviation sector. Changes in international oil prices directly affect airline operating costs, ticket pricing and the financial position of fuel suppliers. While the recent fall in ATF prices has reduced immediate pressure on airlines, volatility remains an ongoing challenge for the industry.

For now, the government’s price stabilisation programme remains available, although it has not yet been activated due to the absence of participating airlines. As the aviation sector continues to recover and passenger demand remains strong, future movements in global oil prices will determine whether the scheme becomes an important tool for managing fuel cost risks in the years ahead.