₹10,000 Crore Jet Fuel Price Stabilisation Scheme Falls Flat As Crude Prices Ease
· Free Press Journal
The Union government’s ₹10,000-crore aviation turbine fuel (ATF) price stabilisation scheme has failed to attract any airline participation, with no carrier opting into the voluntary programme, according to sources.
The scheme, designed to protect airlines from fuel price volatility, has not yet been implemented.
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The Cabinet had approved the initiative last month to cap ATF prices for participating airlines at around ₹115 per litre for up to three years.
The objective was to shield carriers from sharp fluctuations in fuel costs triggered by geopolitical tensions in West Asia, while also compensating state-owned oil marketing companies for selling fuel at controlled rates.
Under the scheme, airlines were required to sign agreements with oil marketing companies.
They would pay a fixed free-on-board (FOB) benchmark of ₹86.32 per litre, along with airport charges, taxes, and margins, resulting in an effective price of ₹115 in Delhi, ₹114.5 in Mumbai, and ₹139 in Chennai. Airlines not opting in would continue to pay market-linked prices.
However, sources said airlines have stayed away because international crude and jet fuel prices declined sharply after mid-June, making the capped rate unattractive.
On July 1, ATF prices in Delhi fell to ₹110 per litre, down from the ₹115 level announced earlier in June.
At the time the scheme was proposed in early June, market-linked ATF prices were around ₹142 per litre.
IndiGo Launches 'Lite Fare' For Cabin-Only Travelers As ATF Prices DropSince then, easing geopolitical tensions following a temporary US-Iran understanding have reduced concerns over supply disruptions in key shipping routes like the Strait of Hormuz, leading to softer fuel prices globally.
The scheme was intended to provide price certainty for airlines for up to three years, insulating them from sudden spikes while exposing non-participating carriers to market volatility.
However, with falling prices, airlines appear to prefer floating rates instead of locking into a higher fixed cap.
Officials noted that since no airline has signed up, the scheme has not formally been operationalised. Initially, ATF prices in Delhi were about ₹105 per litre when the scheme was announced, but earlier spikes had pushed global prices as high as ₹142 per litre in May.
The stabilisation mechanism was also designed to reduce under-recoveries for state-run fuel retailers. It provided for government-backed interest-free advances when prices rose above the base benchmark and recovery when prices fell, ensuring fiscal neutrality over time.
Experts have described the programme as a stabilisation mechanism rather than a subsidy, aimed at smoothing volatility while maintaining financial discipline. However, with current market conditions shifting, its relevance has diminished for airlines.