Union Ports and Shipping Minister Sarbananda Sonowal announced on Wednesday that the Union Cabinet, chaired by Prime Minister Narendra Modi, has approved a one-time budgetary support of up to Rs 10,000 crore for Oil Marketing Companies (OMCs) to extend Aviation Turbine Fuel (ATF) price stabilisation assistance to Scheduled Indian Airlines. The measure covers both domestic and international operations of eligible carriers and was disclosed under the government's #CabinetDecisions briefing.

In his post, Sonowal said the 'Cabinet chaired by Hon'ble PM Shri Narendra Modi ji approves one-time budgetary support not exceeding Rs 10,000 crore for Oil Marketing Companies (OMCs) to provide ATF price stabilisation support to Scheduled Indian Airlines for their domestic and international operations.' The announcement signals a fresh fiscal intervention aimed at cushioning Indian carriers from volatile jet fuel costs.

Context

ATF is consistently flagged by Indian carriers as the single largest line item in their cost structures, typically accounting for 35-40 percent of operating expenses. Sharp swings in global crude prices and a rupee under pressure have repeatedly squeezed airline margins over the past several quarters.

The newly approved support is structured as a budgetary transfer to OMCs — primarily Indian Oil Corporation Ltd (IOCL), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) — which are the principal ATF suppliers at Indian airports. The mechanism allows OMCs to absorb a portion of price shocks while passing on stabilised rates to Scheduled Indian Airlines licensed by the Directorate General of Civil Aviation.

Policy backdrop

The decision continues a pattern of targeted, time-bound fiscal support to the aviation sector rather than a structural overhaul of the ATF tax regime. In 2020, the central government had announced a Rs 20,000 crore liquidity infusion package for civil aviation during the COVID-19 downturn, and in 2021 excise duty on ATF was reduced to ease input costs for domestic carriers amid global crude price volatility.

The civil aviation ecosystem has also been buttressed by the UDAN regional connectivity scheme, launched in 2016, which subsidises air travel and develops smaller airports. Industry stakeholders have long demanded that ATF be brought under the Goods and Services Tax framework to enable input tax credits — a proposal that remains under deliberation at the GST Council.

Stakeholders and impact

The primary beneficiaries are Scheduled Indian Airlines including Air India, IndiGo and Akasa Air, which together operate the bulk of domestic capacity and a growing share of international routes from India. By moderating ATF pricing, the support is expected to ease pressure on quarterly financials and, indirectly, on ticket pricing for passengers.

For the three state-run OMCs, the Rs 10,000 crore ceiling provides a fiscal backstop against revenue erosion when they offer stabilised ATF prices. Air passengers stand to gain indirectly if carriers translate lower fuel costs into restrained fare hikes, particularly on competitive metro and tier-2 routes.

Domestic carriers have repeatedly argued that high ATF taxation places them at a structural disadvantage against Gulf and Southeast Asian airlines operating into India, especially on long-haul routes. A stabilisation buffer could marginally improve their competitiveness on international sectors.

What's next

The Ministry of Petroleum and Natural Gas, in consultation with the Ministry of Civil Aviation, is expected to notify the operational framework — including the trigger price band, eligibility conditions and disbursement schedule for OMCs. Carriers will be watching closely for the fine print on whether the relief is calibrated to a benchmark crude or ATF price.

Investors and analysts will track airline financials in the coming quarters to gauge the support's pass-through, alongside any complementary measures in the next Union Budget or Finance Bill. The intervention reinforces the Centre's willingness to deploy targeted fiscal tools to keep India's fast-expanding aviation market on a stable growth path.