Air Travel To Get More Expensive In India? Jet Fuel Prices Hiked By 10% Under New Fuel Stabilisation Scheme

Will air travel get costlier? Air travel in India could become costlier in the coming months as state-run oil marketing companies (OMCs) have increased Aviation Turbine Fuel (ATF) prices by around 10 per cent as part of the government’s newly launched fuel price stabilisation regime. Airlines gain certainty over the cost of fuel for the next three years, but their immediate operating costs increase. Domestic carriers could end up passing some of the extra fuel burden to passengers in the form of higher ticket prices, particularly on busy domestic routes, say industry experts. This is at a time when fuel prices have risen steeply worldwide as a result of geopolitical problems in West Asia. According to the IATA (International Air Transport Association), prices for jet fuel in April increased 121.1 per cent from April last year, whereas oil prices had increased 77.7 per cent in the same period. Governments and airlines worldwide have been looking for ways to offset volatile energy markets, as fuel expenses make up 40-60 per cent of an airline’s costs.

ATF price hiked to Rs 115 per litre

Domestic airlines opting for the government’s stabilisation scheme will now pay about Rs 115 per litre for jet fuel in Delhi, compared to about Rs 105 per litre earlier, under the new pricing mechanism.

The hike comes after the centre approved a Rs 10,000 crore aviation turbine fuel price stabilisation fund. The move also ends the earlier scheme of passing on higher global fuel costs to domestic airlines to some extent.

Those airlines that decide to opt out of the scheme will continue to buy fuel at market-linked rates, currently estimated at Rs 142 per litre, depending on location and international benchmarks.

What is the new ATF stabilisation scheme?

In June 2026, the government came up with a fuel stabilisation scheme which would secure the Indian airlines against the uncertainties of the fuel prices due to geopolitical conflicts and the rise in crude oil prices.

With the new scheme, the willing airlines would get ATF at fixed prices for up to 3 years. Under the scheme:

• Airlines purchase jet fuel at a fixed benchmark price.
• In case global prices breach the benchmark, the government compensates OMCs.

Airlines will not immediately benefit from lower rates if fuel prices fall. Instead, the government will recoup earlier support through a “true-up” mechanism.

Airlines can choose to participate in the programme, but they are required to sign agreements with oil companies.

The government has said the scheme will run for three years, subject to annual reviews or until it has fully recovered the support amount.

Why the government set up the fund

The main objective of the stabilisation fund is to provide certainty on fuel prices at a time when global energy markets remain highly volatile.

The Iran-US conflict, along with other disturbances in Western Asia, has upset global oil supply chains and sent the prices of jet fuel skyrocketing. Jet fuel price had gone up 121.1% in April compared to the same month in the last year, stated the April passenger and cargo reports of IATA, while crude price increased by 77.7% compared to the same month last year. Airlines can face such volatilities to a large extent if the government helps them plan operations by locking in the prices of ATF. Such measures would also keep a check on fare hikes.

Also Read: Will Airfares Rise Again? Jet Fuel Prices Jump 121% As US-Israel-Iran War Disrupts Global Aviation

Airlines are already slashing capacity

The aviation industry is already feeling the impact of higher fuel costs.

India’s two largest carriers, Air India and IndiGo, announced cuts in flight operations, controlling almost 90% of the domestic aviation market together.

Reports state that Air India plans to reduce its domestic operations by up to 22%. On the other hand, IndiGo is expected to cut 5% to 7% of its services.

Airlines have said higher fuel costs and limited flexibility to raise fares aggressively have had them looking again at capacity and route economics.

What does this change mean for air travellers?

Passengers might not notice it right away, but don’t expect to see domestic airfares drop anytime soon.

The stabilisation scheme is designed to insulate airlines from future fuel price shocks, but the fixed ATF rate under the programme is already higher than the earlier fuel cost. That means airlines may be able to pass on the increased cost through higher fares, especially in peak travel times, summer holidays and busy times of travel.

Air travellers may see:

• Higher average fare on major domestic routes.
• Fewer sales and fare discounts.
• Fewer flights on some routes.
• Higher capacity means more expensive last-minute bookings.

At the same time, the scheme may help avoid sudden and steep fare hikes in the future. The participating airlines will have visibility over fuel costs for three years, insulating passengers from extreme ticket-price volatility from spikes in crude oil prices.

The aviation sector stabilises, but at a cost

The introduction of the government’s ATF price stabilisation initiative is one of the biggest interventions in India’s aviation sector in recent years. The policy offers airlines the much-needed certainty in an environment of geopolitical tensions, volatile crude oil markets and rising operational costs.

But that certainty comes at a higher benchmark fuel price in the near-term. For the airlines it is insurance against future oil shocks. That could translate into somewhat higher airfares for travellers as carriers adjust to the new fuel-cost structure. The extent of price increases from here will depend on demand, competition and the direction of global crude oil prices over the coming months.