Government Freezes Jet Fuel (ATF) Prices for Airlines Under Price Stabilisation Fund

The Union Cabinet, on 3 June 2026, cleared a scheme to freeze the price of Aviation Turbine Fuel (ATF), the fuel used by aircraft, for Indian airlines. The aim is to shield carriers from a sharp spike in fuel costs caused by the energy crisis in West Asia (the Middle East). Under the scheme, government-owned oil marketing companies (OMCs) will sell jet fuel to participating Indian airlines at a fixed price, no matter how international prices move. In Delhi, the all-inclusive fixed price has been set at about Rs 115 per litre.

The freeze is backed by a Rs 10,000-crore Price Stabilisation Fund. When international prices rise above the frozen level, the OMCs are compensated for their losses from this fund. When prices fall back, the gains are used to recover that support, and any balance is returned to the Consolidated Fund of India (the government's main account into which revenues flow and from which spending is made). The scheme is voluntary, open only to Indian carriers (not foreign airlines) and to both domestic and international flights. Airlines that join must buy ATF only from the OMCs for up to three years.

The scheme matters because ATF normally makes up about 40 percent of an Indian airline's running costs, but the fuel surge had pushed this to 55 to 60 percent. The government said the West Asia crisis drove international jet fuel prices from Rs 60.50 per litre in March 2026 to as high as Rs 142 per litre in May 2026, a jump of about 135 percent. The trigger was the closure of the Strait of Hormuz, a narrow but vital sea route through which much of the world's oil passes. OMCs had been selling ATF at a loss for domestic flights, hurting their finances, while airlines bore the full market price on overseas routes.

For India, the move is meant to keep airfares stable by reducing how much of the fuel shock gets passed on to passengers. It also eases pressure on both airlines and OMCs at a difficult time. Officials describe it as a temporary, one-time arrangement that will run for up to three years or until the fund's accounts are squared off, whichever comes first. The fixed price varies by airport because states levy different taxes; for example, it is about Rs 114.50 per litre in Mumbai and around Rs 139 per litre in Chennai.

Aspirants should remember the key terms: ATF is Aviation Turbine Fuel; OMCs are oil marketing companies; the Consolidated Fund of India is where recovered money is returned. Note the Rs 10,000-crore Price Stabilisation Fund, the three-year limit, and the link to the Strait of Hormuz closure that triggered the price surge.