The Indian government has introduced a new fixed pricing mechanism for Aviation Turbine Fuel (ATF) that will result in a uniform selling price of approximately ₹115 per litre in Delhi for both domestic and international airline operations.
The move forms part of the newly approved ATF Price Stabilisation Fund, a scheme designed to shield airlines from extreme fuel price volatility triggered by the ongoing crisis in West Asia.
Speaking during an inter-ministerial briefing on the regional situation, Rohit Raj, Director in the Ministry of Civil Aviation, outlined how the government arrived at the revised pricing framework after discontinuing the earlier capped-price mechanism.
The announcement comes a day after the Union Cabinet approved up to ₹10,000 crore in one-time budgetary support for Oil Marketing Companies (OMCs) to stabilise aviation fuel costs for scheduled Indian airlines.
The latest mechanism marks a significant shift in the government's approach to managing ATF prices.
Previously, the Centre had introduced a cap to limit the impact of rapidly rising fuel prices on airlines. Under that arrangement, ATF price increases were restricted to 25 per cent above the base price recorded before the West Asia crisis disrupted energy markets.
According to Rohit Raj, several fuel price figures emerged in public discussions following the Cabinet's decision, creating confusion about the actual pricing framework.
The key benchmark prices included:
• ₹60.50 per litre as the ATF base price on 1 March 2026
• ₹75.62 per litre representing the capped fuel price before taxes
• ₹104 per litre as the resulting Delhi selling price under the capped system
• ₹142 per litre as the international parity price published on 1 May 2026
Raj explained that the March base price was established before fuel markets experienced sharp volatility linked to developments in West Asia.
According to the Ministry of Civil Aviation, ATF prices experienced significant fluctuations following the escalation of tensions in West Asia after February.
Rohit Raj stated that international parity prices rose sharply during April, reflecting volatility in global fuel markets.
The government said international ATF prices increased from ₹60.50 per litre in March 2026 to ₹142 per litre in May 2026.
The rise prompted authorities to intervene to prevent airlines from bearing the full impact of escalating fuel costs.
Under the earlier emergency arrangement, the government limited the increase in ATF prices to 25 per cent above the March benchmark.
That cap helped keep the effective Delhi selling price at approximately ₹104 per litre despite the sharp increase in international fuel prices.
The government has now moved away from the temporary capping model and adopted a fixed-price structure under the stabilisation scheme.
According to Raj, the revised mechanism establishes fuel prices at the Free on Board (FOB) level after excluding taxes and certain additional charges.
Under the new framework:
• Domestic ATF has been fixed at ₹86.32 per litre
• International ATF has been fixed at ₹104.49 per litre
• Airport charges and other applicable costs are added afterwards
• The final selling price in Delhi works out to approximately ₹115 per litre
Raj said that, in practical terms, airlines operating both domestic and international services in Delhi will face the same effective selling price under the scheme.
The objective is to provide greater certainty to carriers while reducing exposure to sudden market swings.
Fuel remains one of the largest operating expenses for airlines.
According to government data cited during the briefing, ATF typically accounts for around 40 per cent of airline operating costs. During periods of extreme market volatility, that share can rise to as much as 60 per cent.
The sharp increase in fuel prices over recent months has placed additional pressure on airline finances at a time when carriers are already managing rising operational expenses.
Industry participants have long highlighted fuel price volatility as one of the biggest challenges affecting profitability and route planning.
The stabilisation mechanism is intended to provide a degree of predictability in fuel expenditure while broader market conditions remain uncertain.
The pricing reform is supported by a substantial government-backed financial package.
Announcing the decision, Union Minister Ashwini Vaishnaw said the Cabinet had approved one-time budgetary support not exceeding ₹10,000 crore for Oil Marketing Companies.
The support will enable OMCs to provide ATF price stabilisation assistance to scheduled Indian airlines operating both domestic and international services.
The government has positioned the measure as a response to extraordinary fuel market volatility resulting from geopolitical developments in West Asia.
Officials believe the intervention will help maintain stability in airline operations while reducing the risk of severe cost escalation for carriers.
The introduction of a fixed ATF pricing framework represents one of the most significant aviation fuel interventions undertaken by the government in recent years.
By replacing the previous capped-price arrangement with a fixed selling price model, policymakers are seeking to provide airlines with greater visibility over one of their largest operating expenses.
The effectiveness of the scheme will ultimately depend on how global fuel markets evolve and whether volatility linked to the West Asia crisis persists.
For now, airlines operating in India have been given a clearer fuel pricing structure, with the Delhi benchmark effectively set at ₹115 per litre as authorities work to cushion the industry from further market disruptions.
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