New Delhi: The government's aviation turbine fuel (ATF) price stabilisation mechanism has moved to the implementation stage, with the Ministry of Civil Aviation (MoCA) having held a meeting with airlines and oil marketing companies (OMCs), Joint Secretary in the Ministry of Petroleum and Natural Gas Sujata Sharma said at an inter-ministerial press briefing on Thursday.
Follow Energy Watch on X
"MoCA has conducted a meeting with airlines and oil marketing companies. Now they will issue detailed guidelines and then we will come to the stage of agreement signing," Sharma said, when asked whether airlines had shown interest in signing up for the fuel stabilisation support mechanism announced by the government recently.
The mechanism flows from the Union Cabinet's approval of a one-time budgetary support of Rs 10,000 crore for OMCs to provide ATF price stabilisation support to Scheduled Indian Airlines for their domestic and international operations, in the form of interest-free advances routed through the Demands for Grants of the Ministry of Petroleum and Natural Gas.
The corpus is meant to compensate OMCs for losses arising from elevated international ATF prices whenever the prevailing Import Parity Price exceeds the benchmark, and the support has been extended during the ongoing period of exceptional fuel price volatility arising from the West Asia crisis.
The stabilisation support will be in force for thirty-six months, with provision for annual review, or until the advance amount is fully recovered or settled, whichever is earlier, and may be extended beyond that period with the approval of the Competent Authority if the corpus is not fully trued up.
The intervention comes against the backdrop of OMCs selling jet fuel below cost for domestic operations. Sharma had earlier said that OMCs were incurring under-recoveries of nearly Rs 30 per litre, or Rs 30,000 per kilolitre, on ATF supplied for domestic flights.
Airlines opting into the voluntary scheme will pay a fixed built-up selling price of Rs 115 per litre in Delhi for up to three years, while carriers staying out will buy at market-linked rates, currently around Rs 142 per litre, Energy Watch had reported earlier. The compensation to OMCs under the mechanism is pegged to benchmark prices of Rs 86.32 per litre for domestic operations and Rs 104.49 per litre for international operations.
The arrangement works both ways: the corpus compensates OMCs when the Import Parity Price runs above the benchmark, while the differential is recovered from OMCs and returned to the Consolidated Fund of India when international prices moderate below it. The mechanism replaces the temporary cap under which the increase in domestic ATF base prices had been limited to 25 percent despite the much steeper rise in global fuel markets.
Follow Energy Watch on LinkedIN
Analysts have said the scheme is more likely to moderate fare spikes than reduce ticket prices, and is best viewed as a liquidity and cash-flow support mechanism for OMCs rather than a permanent subsidy, since it includes a recovery framework under which the financial impact is largely deferred rather than permanently absorbed.
The aviation industry had welcomed the government's earlier move in April to moderate the ATF price increase for domestic operations, with Air India describing it as a timely step for the sector, IndiGo saying it enables greater stability for airlines, and Akasa noting that such measures help carriers manage costs and keep travel affordable.