• Source:JND

The prices of petrol, diesel and gas have recently been hiked by the government due to elevated energy prices on the backdrop of Middle East crisis and now Aviation turbine fuel (ATF) prices were raised by around 10 per cent as state-owned fuel retailers rolled out a price stabilisation regime, offering domestic airlines a fixed fuel rate for up to three years in a move aimed at shielding carriers and passengers from sharp swings in global oil prices.

New ATF Price

Industry told PTI that jet fuel for domestic airlines will now increase from Rs 104,927 to Rs 115 per litre.

The new rates will be locked in for three years for airlines that choose to participate in the government-backed price stabilisation scheme. Airlines that opt out will have to pay the same market-linked price as international airlines, which is currently around Rs 142 per litre.

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Participants in the price stabilisation scheme will continue to receive ATF at Rs 115 per litre, protected from fluctuations in global benchmarks. Airlines that do not participate will benefit from lower prices but face higher expenses if international rates rise.

News agency PTI quoted sources as saying that the scheme is completely voluntary, and airlines will have to decide whether they want to participate or not.

Under the voluntary scheme, participating airlines will pay a fixed free-on-board (FOB) benchmark price of Rs 86.32 per litre plus airport charges, oil company margins, and applicable taxes, resulting in an effective selling price of Rs 115 per litre in Delhi, Rs 114.5 in Mumbai, and Rs 139 in Chennai.

After allowing a portion of the global fuel price increase due to the outbreak of the West Asian conflict in late February to be passed through, the price in Delhi will be around Rs 105 per litre compared to the market lows. This ban has led to losses for oil marketing companies on aviation turbine fuel (ATF), as pressure has been seen in the petrol, diesel, and LPG segments.

Union Cabinet Approves Price Stabilisation Scheme

To mitigate these losses, the Union Cabinet approved a Rs 10,000 crore price stabilisation scheme. Its purpose is to anchor ATF prices and protect airlines from fluctuations caused by geopolitical tensions, while also supporting the financial health of state-owned oil companies.

Under this scheme, whenever the global benchmark price rises above the base rate of Rs 86.32, the government will compensate oil marketing companies by providing interest-free advances. If prices fall, the difference will be recovered from the companies and returned to the Indian Consolidated Fund.

Typically, ATF accounts for approximately 40 per cent of airline operating costs, and during times of sharp fluctuations, this can increase to 60 per cent.

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International Jet Fuel Price Surge

According to PTI, sources said that before the war, international jet fuel prices had risen to Rs 142 per litre, raising concerns about a potential increase in airline operating costs and fares. They say the new system is not a subsidy but a temporary stabilisation framework aimed at reducing fuel price volatility and ensuring accountability, monitoring, and full recovery of funds.

What Does It Mean for the Passenger

The biggest benefit of this decision for travellers is that it will help mitigate the sudden increases in airfares that often occur due to sharp increases in fuel prices. By mitigating the impact of extreme fuel price fluctuations on airlines, the government aims to minimise the burden of such expenses on travellers and bring more stability to fares.

(With Inputs From PTI)


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