Centre makes ₹10,000 crore jet fuel support scheme optional, sets benchmark ATF rates

New Delhi: A day after the Union cabinet approved a ₹10,000 crore jet fuel price stabilization fund, the government said participation under the scheme will be optional for domestic airlines, even as it set benchmark rates that would fix domestic aviation turbine fuel (ATF) at ₹86.32 a litre, excluding taxes.

Under the mechanism, the benchmark price for international operations has been set at ₹104.49 a litre, excluding taxes and certain levies. Officials said the framework effectively establishes a fixed-price system based on a refined import-parity formula.

Once airlines sign a memorandum of understanding (MoU) with oil marketing companies, they will be required to pay the fixed rates even if global prices decline, and can exit the arrangement only after clearing outstanding dues, officials said.

“If we take Delhi as an example, ₹115 (a litre) is the fixed selling price for both domestic and international,” said Rohit Raj, director, ministry for civil aviation.

He said the pricing structure excludes VAT, excise duty, airport charges and other levies, while adding a fixed differential covering freight, insurance and oil marketing companies’ margins.

Depending on state taxes

City-wise prices will vary depending on state taxes. In Mumbai, ATF under the scheme would be about ₹114.5 a litre, while in Chennai it could rise to around ₹139 due to higher VAT, Raj added.

Airlines may choose to join the scheme individually or as a consortium with oil marketing companies, officials said.

The clarification follows the Union cabinet’s approval of one-time budgetary support of up to ₹10,000 crore for oil marketing companies to cushion losses when global ATF prices exceed benchmark levels under the stabilization framework.

Elevated crude prices, driven by tensions in West Asia and disruptions around the Strait of Hormuz, have kept jet fuel costs high, squeezing airline margins.

Separately, petroleum ministry officials said oil marketing companies are facing monthly under-recoveries of about ₹550 crore, while losses on domestic liquefied petroleum gas (LPG) stand at roughly ₹700 per cylinder.

They added that LPG imports—about 90% of which traditionally come from West Asia—have been disrupted, prompting a ₹60 per cylinder increase in domestic cooking gas prices earlier this year.