Govt fixes ATF benchmark prices: Will flight tickets get cheaper?

The government has fixed benchmark jet fuel prices for Indian airlines, but experts say the move may curb fare spikes rather than make tickets cheaper

The government has approved a one-time budgetary support of ₹10,000 crore to public sector oil marketing companies (OMCs) to provide stable fuel pricing to Indian airlines. Under the aviation turbine fuel (ATF) stabilisation plan, participating Indian airlines will be able to buy jet fuel at a fixed benchmark price.

 

The move is aimed at shielding airlines from sharp fuel-price volatility triggered by the West Asia conflict and helping moderate sudden spikes in airfares.

 

But the key question is: Will this make flight tickets cheaper?

 

Will airfares get cheaper?

 

Not necessarily. Experts said the scheme is more likely to moderate fare spikes than reduce ticket prices.

   

Speaking to Business Standard, Jainam Shah, aviation analyst at Equirus Securities, said, "The primary impact is likely to be the moderation of fare spikes rather than a broad-based reduction in ticket prices."

 

"Importantly, international operations, where ATF pricing was previously linked to prevailing market rates and therefore more exposed to volatility, are now covered under the stabilisation mechanism. This could lead to some moderation in operating costs on international routes and potentially support lower fares relative to what they would otherwise have been. However, any sustained reduction in ticket prices will ultimately depend on competitive intensity, capacity deployment and demand conditions rather than the scheme alone," he added.

 

Vipul Saxena, an aviation expert, said the government should explicitly ask airlines to cap fares so that benefits are passed on to passengers. "Airlines may increase ticket prices in one way or another, such as through higher cargo charges. In that way, the benefits may not be passed on to passengers," he said.

 

Notably, Civil Aviation Ministry Director Rohit Raj had said, "For passengers, the most important benefit of this decision is that it will help moderate sudden increases in airfares that often result from sharp spikes in fuel prices."

 

How will the ATF scheme work?

 

Under the scheme, OMCs will sell jet fuel to participating Indian airlines at fixed benchmark prices for domestic and international flights, insulating them from global fuel-market fluctuations.

 

The free-on-board benchmark price has been fixed at ₹86.32 per litre for domestic operations and ₹104.49 per litre for international flights. Airlines that stay out of the scheme will continue to pay prevailing international rates, currently around ₹142 per litre.

 

After airport charges, OMC margins, fixed differentials and applicable taxes, final ATF prices will vary across airports because of state levies and airport-linked charges:

 

• Delhi: Around ₹115 per litre
• Mumbai: Around ₹114.50 per litre
• Chennai: Around ₹139 per litre

 

The facility is voluntary and limited to Indian airlines. Participating carriers must sign agreements with OMCs and buy ATF exclusively from public sector OMCs for up to three years, subject to annual review, or until the advance is fully recovered, whichever is earlier.

 

The government has not announced a clear rollout timeline, though the scheme is expected soon. It will replace the temporary fuel-price cap introduced earlier this year after international ATF prices surged following the West Asia crisis.

 

Under the arrangement, OMCs will receive a one-time, interest-free advance of up to ₹10,000 crore. Compensation paid during high-price periods will be recovered once international prices moderate, with funds returned to the Consolidated Fund of India through a prescribed mechanism.

 

Information and Broadcasting Minister Ashwini Vaishnaw said the mechanism will be prospective and will not cover under-recoveries or past losses already incurred by OMCs on jet fuel sales.

 

Why has the government intervened now?

 

The scheme comes after a sharp rise in global jet fuel prices linked to the West Asia conflict and the continued closure of the Strait of Hormuz, one of the world's busiest energy supply routes.

 

According to Rohit Raj, international jet fuel prices rose from ₹60.50 per litre in March to as high as ₹142 per litre in subsequent weeks, an increase of 135 per cent. ATF typically accounts for around 40 per cent of an airline's operating costs. During periods of extreme volatility, that share can rise to 55-60 per cent, according to an Indian airline association cited by The Indian Express.

 

Apart from the West Asia crisis, Indian airlines' international operations have also been under pressure because of the closure of Pakistan's airspace since late April last year.

 

What it means for airlines

 

Major Indian airlines such as Air India and IndiGo have announced route reductions and lower flight frequencies because of soaring jet fuel costs and airspace disruptions in West Asia.

 

Speaking about the government's intervention, Saxena said, "The measure is a positive step from the perspective of controlling fuel-price volatility, particularly at a time when the West Asia conflict is creating significant pressure on the aviation sector." "I think the fund is quite substantial and should help airlines. Many carriers have cancelled routes that were less profitable for them, and this decision could encourage airlines to review those decisions."

 

Aviation analysts said the corpus appears adequate to provide immediate support to airlines.

 

"On an immediate basis, this is adequate. However, if the West Asia conflict escalates over a longer period, prices will remain higher and that will have a wider and longer impact," said aviation analyst Ameya Joshi, founder of Network Thoughts.

 

Can the scheme ease pressure on OMCs?

 

Through the price stabilisation mechanism, the government aims to ease pressure on airlines and support OMCs.

 

OMCs have been selling ATF at a loss for domestic flights, affecting their financial health. They are also facing losses on other fuels such as petrol, diesel and cooking gas supplied to households. Ministry of Petroleum and Natural Gas Joint Secretary Sujata Sharma had said last week that OMCs were incurring under-recoveries of nearly ₹30 per litre, or ₹30,000 per kilolitre, on jet fuel supplied for domestic flights.

 

Speaking about the benefits for OMCs, Shah said, "The scheme is best viewed as a liquidity and cash-flow support mechanism rather than a permanent subsidy for OMCs. Since the mechanism includes a recovery framework, the financial impact is largely deferred rather than permanently absorbed."

 

"The support is designed to prevent immediate financial stress and maintain sector stability rather than enhance OMC profitability," he added.

 

Experts said the government must ensure timely compensation to OMCs for the mechanism to work effectively.

 

The ATF stabilisation scheme is a meaningful intervention at a time of uncertainty for the Indian aviation sector. It protects airlines from the worst of fuel-price volatility and gives OMCs breathing room. But without a clear government mandate requiring airlines to pass savings on to passengers, flyers are unlikely to see cheaper fares.