Government Approves ₹10,000-Crore Jet Fuel Subsidy to Soothe Airline Costs
The Indian government's approval of a ₹10,000 crore package for aviation fuel stabilization will significantly aid airlines coping with soaring jet fuel costs caused by the West Asia conflict and Pakistan airspace closure.
Highlights
- •₹10,000-Crore Jet Fuel Subsidy
- •OMC Support to Airlines
- •Stabilized ATF Prices
- •36-Month Scheme
A key milestone in the aviation sector has been reached as India's cabinet approved a one-time budgetary support of up to ₹10,000 crore for oil marketing companies (OMCs) this week. The move is aimed at easing financial pressures on scheduled Indian airlines by stabilizing jet fuel or aviation turbine fuel (ATF) prices.
Context and Impact
The international ATF price hike in May has been an alarming factor for the air travel industry, with costs soaring to ₹142 per litre from ₹60.50 per litre within a short span, significantly impacting airlines that rely heavily on fuel for their operations.
A strong financial burden has thus fallen upon airlines, as jet fuel accounts for nearly 40% of their operating expenses and sometimes even up to 60% during volatile periods. This measure by the government is designed not only to protect airline operations but also safeguard 77 lakh jobs within the aviation ecosystem.
"The scheme provides interest-free advances, enabling OMCs to supply ATF at stabilized prices for both domestic and international flight schedules," said Ashwini Vaishnaw, I&B minister. This not only helps in mitigating financial pressures but ensures continued air connectivity to vital regions like Europe, North America, and Central Asia.
Under the approved mechanism, OMCs will be reimbursed whenever import parity prices exceed a set benchmark level. The scheme is scheduled for a period of 36 months, ensuring steady ATF pricing during current fuel price volatility due to West Asia disturbances like Pakistan's airspace closure.
