Context: The Union Cabinet has approved a one-time budgetary support package not exceeding ₹10,000 crore to establish a Price Stabilization Fund for Aviation Turbine Fuel (ATF).
About The Price Stabilization Fund for Scheduled Indian Airlines:
What It Is?
- The Price Stabilization Fund for Scheduled Indian Airlines is a temporary, single-window micro-economic buffer mechanism implemented by the Central Government.
- It was established as a direct policy response to unprecedented global fuel market volatility following the escalation of the West Asia crisis, which caused international ATF prices to surge 2.5 times from ₹60.50 per litre in March 2026 to ₹142 per litre in May 2026.
Aim:
- The aim of the fund is to provide price stability and structural predictability for fuel procurement, shielding both domestic carriers and OMCs from severe financial losses.
- By neutralizing sudden fuel spikes, it seeks to maintain India’s air connectivity networks, stabilize passenger ticket fares, and protect the broader civil aviation ecosystem.
Key Features of the Fund:
- Interest-Free Advance to OMCs: Allocates up to ₹10,000 crore through the Demands for Grants of the Ministry of Petroleum and Natural Gas. This corpus directly offsets OMC losses when the international Import Parity Price (IPP) exceeds the fund’s designated benchmark.
- Recovery and True-Up Mechanism: Operates as a revolving, non-deficit model. When global ATF rates drop below the threshold, the differential cushion is recovered from the OMCs and returned to the Consolidated Fund of India until the advance is settled.
- Universal Flight Operations Coverage: Unlike previous ad-hoc relief packages, this stabilization window is available to all willing scheduled Indian carriers for both their domestic and international flight paths.
- Fixed-Price Fuel Arrangement: Establishes fixed-price fuel agreements to eliminate an airline’s daily exposure to open-market trading volatility, providing clear cost predictability for corporate forecasting.
- Exclusive OMC Sourcing Lock-In: Implemented through a formal Memorandum of Understanding (MoU) signed by participating airlines, OMCs, the Ministry of Civil Aviation, and the Ministry of Petroleum & Natural Gas. In exchange for stable pricing, airlines commit to purchasing ATF exclusively from participating OMCs for up to three years.
- Rigorous Tri-Ministerial Oversight: Features a dedicated Monitoring Committee with representatives from the Ministry of Civil Aviation, Ministry of Petroleum & Natural Gas, and the Department of Expenditure to verify claims and mandate strict independent audits.
- Defined Operation Lifespan: The fund is slated to remain active for 36 months. However, it features a provision for annual reviews or early closure upon full cash recovery, with an extension option if the corpus hasn’t fully trued up within three years.
