Govt fixes jet fuel price under new scheme to keep aviation sector viable
New Delhi, June 4
The government has fixed the basic price of aviation turbine fuel for domestic airlines at Rs 86.32 per litre for up to three years under the new price stabilisation scheme aimed at keeping airlines financially viable and passenger tickets affordable amid the surge in international prices due to the Middle East crisis.
Under the voluntary scheme, airlines participating in the scheme will pay the fixed free-on-board (FOB) benchmark price as well as airport charges, oil company margins, and applicable taxes, taking the final selling price to about Rs 115 per litre in Delhi, Rs 114.50 in Mumbai, and Rs 139 in Chennai, according to government officials.
While participating airlines will pay the fixed price, those not opting for the scheme will be charged at the prevailing international rate, which is currently around Rs 142 a litre.
Ministry of Civil Aviation Director Rohit Raj said the benchmark price has been fixed at Rs 86.32 per litre at the FOB level for domestic operations and Rs 104.49 per litre for international operations.
The government had frozen the ATF price at about Rs 105 per litre (in Delhi), inclusive of taxes and other charges, for over two months since the Iran war in order to keep air tickets affordable for passengers and also enable operations of airlines to be financially viable in order to prevent job losses.
However, the oil market companies were losing heavily, which prompted the government to come out with the new scheme.
The Union Cabinet has approved a one-time budgetary support mechanism of up to Rs 10,000 crore to provide ATF price stabilisation support to scheduled Indian airlines. This decision has been taken in the larger public interest to protect air connectivity, ensure stability in air services and shield passengers from the impact of extraordinary volatility in global fuel prices arising from the ongoing West Asia crisis, according to an official statement.
The approved mechanism is designed as a temporary and self-correcting arrangement. Under the scheme, the government will provide an interest-free advance to oil marketing companies, enabling them to supply ATF to participating Indian airlines at predetermined and stable prices for both domestic and international operations. Whenever international ATF prices rise above the benchmark level, the corpus will compensate OMCs for the difference.
Importantly, when fuel prices moderate, the differential amount will be recovered from OMCs and returned to the Consolidated Fund of India through a transparent true-up mechanism. Thus, the arrangement is intended not as a subsidy, but as a temporary stabilisation measure to smooth the impact of exceptional fuel price volatility while ensuring full accountability, monitoring, and recovery of funds.
ATF constitutes a major component of airline operating costs, and the sharp increase in international fuel prices, coupled with longer flight paths for Indian carriers on several international routes, has placed significant pressure on airline operations. The approved mechanism will provide greater predictability in fuel costs through a fixed-price arrangement, enabling airlines to plan their operations more efficiently and continue serving passengers across domestic and international networks.
— IANS
Reader Comments
This is a smart move but I'm skeptical. Rs 10,000 crore is a lot of taxpayer money. The government says it's not a subsidy, but an interest-free advance with recovery mechanism. Let's see how transparently this is implemented. Past experiences with such schemes haven't been great. Bureaucracy and delays are our national specialties! 🙄
As someone who travels frequently for work, this is a huge relief! But why only Rs 86.32 per litre for domestic? In Chennai, it's Rs 139 after all charges. That's still very high compared to international standards. The government should also rationalize state taxes on ATF which vary wildly across India. Airlines are bleeding money and that affects our jobs too.
Interesting approach. In US, we don't have such government intervention in fuel pricing for airlines. But given India's unique challenges with Middle East crisis and high volatility, this temporary stabilization makes sense. Hope it achieves its goal without creating long-term dependency. The transparent true-up mechanism sounds good on paper.
Why only airlines? What about us common people who use petrol and diesel for our vehicles? The fuel prices are killing us! ATF gets special treatment but common man's burden keeps increasing. The government should also think about stabilizing petrol and diesel prices for the aam aadmi. Selective benevolence is not fair! 😡
This is a well-thought-out policy. The self-correcting mechanism with recovery when prices fall is smart economics. Plus, protecting jobs in aviation sector is important. However, I hope the government also promotes alternative fuels and
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.