JET FUEL PRICE STABILISATION SCHEME FAILS AS OIL PRICES FALL

In a notable development for Indian aviation, the ₹10,000-crore jet fuel price stabilisation programme has failed to attract any airline participants, as falling international oil prices eroded its appeal.

The Union Cabinet had approved the voluntary scheme last month to compensate state-owned fuel retailers for selling aviation turbine fuel (ATF) to airlines at capped prices for up to three years, aiming to shield carriers from surging fuel costs triggered by the West Asia crisis. Participating airlines were to pay a fixed benchmark price of ₹86.32 per litre, resulting in an effective selling price of approximately ₹115 per litre in Delhi.

However, no airline has signed up. International oil prices began falling in mid-June following an interim peace deal between the US and Iran, easing concerns over potential supply disruptions through the Strait of Hormuz. On July 1, ATF prices dropped to ₹110 per litre from the ₹115 rate announced on June 9.

When the scheme was announced, market-linked ATF prices were around ₹142 per litre, making the cap attractive. However, prices have since softened. ATF typically accounts for about 40% of airline operating expenses, rising to as much as 60% during periods of sharp volatility.

B2B Implications

For travel trade stakeholders, the failure of the stabilisation scheme means airlines remain exposed to market fluctuations, though current price declines offer temporary relief. Tour operators should monitor fuel cost trends closely, as they influence airfare pricing and, consequently, package costs. The government’s intent to moderate sudden airfare increases through the scheme indicates continued focus on passenger affordability.