India approves ₹100 billion fuel stabilisation fund to ease pressure on airlines

India has approved a ₹100 billion ($1.05 billion) fuel stabilisation fund to help airlines cope with rising jet fuel costs, becoming one of the latest governments to intervene as geopolitical tensions drive volatility in global energy markets.

The measure, announced on Wednesday and reported by Reuters, is designed to prevent a sharp increase in aviation fuel costs from disrupting airline operations and air connectivity. The move comes as the conflict involving Iran continues to push up oil prices, adding to cost pressures across the global aviation industry.

Under the scheme, the government will provide financial support through interest-free advances to oil marketing companies, enabling them to absorb part of the gap between market-linked fuel prices and the moderated rates charged to airlines.

The decision reflects growing concern over the impact of fuel inflation on an industry where fuel is often the single largest operating expense.

How the support mechanism will work

According to the government, the fund will be used to compensate oil marketing companies for under-recoveries arising from the difference between prevailing market prices for aviation turbine fuel and the rates charged to airline operators.

The support is not being provided directly to airlines. Instead, oil companies will receive interest-free advances to help manage losses incurred while supplying fuel at moderated prices.

Key features of the programme include:

• Fund size: ₹100 billion ($1.05 billion)
• Beneficiaries: Oil marketing companies supplying aviation fuel
• Type of assistance: Interest-free advances
• Purpose: Cover under-recoveries linked to moderated jet fuel prices
• Policy objective: Maintain domestic and international air connectivity

In a statement cited by Reuters, the government said the initiative would help "protect and sustain domestic and international air connectivity" and ensure continuity of air services.

Aviation sector faces mounting fuel burden

The intervention comes at a time when airlines worldwide are grappling with elevated fuel bills.

According to Reuters, jet fuel can account for up to 40% of an airline's operating costs, making carriers particularly vulnerable to fluctuations in crude oil and refined fuel prices. Even relatively small increases in fuel costs can have a significant impact on profitability, route economics and cash flow.