Govt Caps ATF Prices At Rs 75.6/Litre For Domestic Operations

The Central Government has capped Aviation Turbine Fuel (ATF) prices at Rs 75.6 per litre for domestic operations, according to a statement from the Minister Ashwini Vaishnaw on Tuesday.  ATF accounts for about 40% of operating cost for airlines. The price surge has adversely affected airlines and oil marketing companies (OMCs)

The Cabinet further approved the Aviation Turbine Fuel Price Stabilisation Fund structured as a self sustaining revolving fund.
It will be available for domestic and international operations.

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How The ATF Price Stabilisation Fund Works

The cabinet approved a one-time budgetary support of Rs 10,000 crore to be provided as an interest-free advance to OMCs This is to support ATF price stabilisation for Scheduled Indian Airlines.

The corpus will compensate OMCs for losses arising from elevated international ATF prices whenever the prevailing Import Parity Price exceeds the benchmark price determined under the approved mechanism, as stated in a press release from the authorities. When international ATF prices moderate, the differential amount will be recovered from OMCs and returned to the Consolidated Fund of India. The arrangement shall continue until the entire support amount is fully recovered and settled.

The mechanism is intended to provide greater predictability in fuel costs by adopting a fixed-price arrangement for domestic and international operations, thereby reducing airline's exposure to sudden fuel price spikes.

The arrangement will be implemented through an MoU between participating Indian airlines and OMCs, with the Ministry of Civil Aviation and the Ministry of Petroleum And Natural Gas as signatories. Under this one-time arrangement, participating airlines will procure ATF only from OMCs for up to three years, subject to annual review or until the advance amount is fully recovered, depending on which is earlier.

A Monitoring Committee comprising representatives of the Ministry of Civil Aviation, Ministry of Petroleum And Natural Gas and Department of Expenditure shall oversee implementation, claim verification, reconciliation and settlement. All claims and recoveries shall be subject to audit.

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ATF price stabilisation support will be in force for a period of thirty-six months with provision for annual review or until the advance amount is fully recovered or settled, as per which occurs earlier . The proposal may be extended beyond thirty-six months with the approval of the competent authority in case the corpus is not fully trued up within this period, the release stated.

Vaishnaw stated that underrecoveries are not covered in this scheme. He further said that it has no relation to air ticket prices. The economic stabilization fund will be financing the ATF fund, according to the Minister of Information and Broadcasting.

(This is a developing story.)

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