Aviation turbine fuel (ATF) prices were raised by around 10 per cent on Tuesday as state-owned oil marketing companies introduced a price stabilisation regime offering domestic airlines a fixed fuel rate for up to three years, in a move aimed at cushioning carriers and passengers from sharp swings in global oil prices.
Jet fuel for domestic airlines will now cost Rs 115 per litre, up from Rs 104.927, industry sources told news agency PTI.
Under the new framework, the rate will be locked in for up to three years for airlines that choose to opt into the government-backed price stabilisation scheme.
Airlines that do not participate in the scheme will continue to pay market-linked prices, currently around Rs 142 per litre, similar to international carriers. Those opting in will receive ATF at Rs 115 per litre, insulating them from fluctuations in global benchmarks. However, while participating airlines will be protected from price spikes, they will also miss out on potential gains when global rates fall.
Sources said the scheme is voluntary and airlines will have to decide whether to join.
Under the arrangement, participating carriers will pay a fixed free-on-board (FOB) benchmark price of Rs 86.32 per litre, along with 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.
Govt rolls out Rs 10,000-crore ATF price stabilisation scheme amid fuel volatility
The revised rate compares with about Rs 105 per litre in Delhi earlier, which had remained unchanged for over two months after the government allowed only partial pass-through of higher global fuel costs triggered by geopolitical tensions in West Asia. The freeze had led to losses for oil marketing companies on ATF, similar to pressures in petrol, diesel and LPG segments.
To address these losses, the Union Cabinet has approved a Rs 10,000-crore price stabilisation scheme aimed at capping volatility in ATF prices and supporting both airlines and state-run fuel retailers.
Under the scheme, when global benchmark prices rise above the base rate of Rs 86.32, the government will provide interest-free advances to oil marketing companies to bridge the gap. When prices fall, the differential will be recovered and returned to the Consolidated Fund of India.
ATF typically accounts for about 40 per cent of airline operating costs and can rise to as much as 60 per cent during periods of sharp volatility.
Sources said international jet fuel prices had surged to as high as Rs 142 per litre in May from pre-conflict levels of around Rs 60.50 per litre, raising concerns over airline costs and potential fare increases.
Officials said the arrangement is not a subsidy but a temporary stabilisation mechanism designed to smooth volatility in fuel prices while ensuring accountability and full recovery of funds.
For passengers, the key benefit is expected to be moderation in sudden airfare spikes that typically follow sharp increases in fuel costs, helping improve fare stability over time.
(With PTI inputs)
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