The Union Cabinet has approved one?time budgetary support not exceeding Rs 100 billion (bn) as an interest?free advance to Oil Marketing Companies to stabilise aviation turbine fuel pricing for scheduled Indian airlines. The advance will be provided through the Demands for Grants of the Ministry of Petroleum and Natural Gas to address exceptional price volatility arising from the West Asia crisis. The corpus will compensate OMCs for losses when import parity prices exceed the benchmark under the approved mechanism. The measure applies to domestic and international operations of willing scheduled carriers.

Recovery and true up will be carried out when international ATF prices moderate, with differential amounts returned to the Consolidated Fund of India until the advance is settled. A fixed?price arrangement is intended to reduce airlines' exposure to sudden spikes and improve predictability for operational and financial planning. Participating carriers will procure ATF only from OMCs under a memorandum of understanding for up to three years, subject to annual review.

Implementation will be overseen by a monitoring committee with representatives of the ministries and the Department of Expenditure, and all claims and recoveries will be auditable. The support is temporary and recoverable, with provision to extend beyond 36 months only with competent authority approval if the corpus is not fully trued up. The arrangement is aimed at protecting OMCs from losses caused by capped domestic prices alongside high international rates and at ensuring continuity of services.

The Cabinet noted that international ATF prices have surged nearly two point five times from Rs 60.50 per litre in March 2026 to Rs 142 per litre in May 2026 and that ATF accounts for nearly 40 per cent of airline operating costs, rising to as much as 60 per cent in extreme volatility. Closure of neighbouring airspace has increased flight distances and fuel burn, adding to long?haul costs and higher fares. Authorities expect the scheme to sustain connectivity to regional and remote centres, moderate fare volatility for passengers and preserve employment across aviation and related sectors.