New Delhi: Amid a sharp global surge in aviation turbine fuel (ATF) prices triggered by the ongoing West Asia conflict, the Government of India has opted for a calibrated approach to shield domestic air travellers and airlines from a steep cost burden. The Ministry of Petroleum and Natural Gas (MoPNG) has confirmed that only a partial increase in jet fuel prices will be passed on to scheduled domestic airlines, even as global rates have more than doubled.

The decision comes in response to extraordinary disruptions in global energy markets, particularly following the closure of the Strait of Hormuz, a critical oil transit route. While international and non-scheduled operators will bear the full impact of the price rise, domestic carriers have been offered temporary relief through a staggered pricing mechanism.

Partial hike for domestic airlines

According to the MoPNG, ATF prices in India, which are deregulated and revised monthly based on international benchmarks, were expected to rise by over 100 per cent from April 1. However, public sector oil marketing companies (OMCs), in consultation with the Ministry of Civil Aviation (MoCA), have limited the increase for domestic scheduled airlines to around 25 per cent, translating to an increase of approximately Rs 15 per litre.

This intervention has significantly reduced the immediate financial burden on domestic airlines. For instance, in Delhi, the ATF price initially surged to a record Rs 2.07 lakh per kilolitre early on Wednesday. However, the revised price for domestic airlines stands at Rs 1.05 lakh per kilolitre, reflecting only an 8.6 per cent increase compared to March levels.

Similarly, in Mumbai, the adjusted price for domestic carriers is Rs 98,247 per kilolitre, considerably lower than the full market-linked price of Rs 1.95 lakh.

Full impact on international and charter operations

While domestic carriers have received partial relief, airlines operating international routes and non-scheduled services such as private charters will have to pay the full market-linked ATF price. For international operations, ATF prices in Delhi have surged by over 107 per cent to $1,690.81 per kilolitre.

Non-scheduled operators are also facing a steep increase of nearly 115 per cent compared to March levels, reflecting the direct impact of global fuel price escalation.

Impact on airlines and passengers

Jet fuel accounts for more than 40 per cent of operational costs for Indian airlines, even under normal conditions. Industry experts have warned that a sharp increase in ATF prices could lead to higher airfares, reduced passenger demand, and potential cuts in flight frequencies.

To offset rising fuel costs, major airlines such as IndiGo, Air India, and Akasa Air have already introduced or increased fuel surcharges. These surcharges range from around Rs 200 on domestic routes to up to $200 on long-haul international flights.

Despite the partial relief for domestic operations, there are concerns that airfares may still rise, especially for international travel. Airlines are also closely monitoring passenger demand, as higher ticket prices could discourage travel amid broader economic uncertainties.

Government balancing act

Civil Aviation Minister Ram Mohan Naidu described the move as a “pragmatic and forward-looking” step. He stated that the calibrated pricing approach aims to protect passengers from sudden fare hikes while ensuring the stability of the aviation sector.

The government’s strategy also seeks to maintain essential air connectivity and support cargo movement, which is critical for trade and logistics.

However, this approach raises questions about the financial impact on OMCs, which may face under-recoveries due to selling ATF at below market rates to domestic airlines. The situation is further complicated by existing losses on petrol and diesel sales, as retail prices have remained unchanged despite rising global crude oil prices.

To provide some relief to fuel retailers, the government recently reduced excise duty on petrol and diesel by Rs 10 per litre.

Global factors driving the surge

The surge in ATF prices is closely linked to global oil market dynamics. Jet fuel prices are benchmarked against the Mean of Platts Arab Gulf (MOPAG), which reflects fuel rates in West Asia.

Data from the International Air Transport Association shows that global jet fuel prices rose to $195.19 per barrel for the week ending March 27, marking a 103.9 per cent increase from February averages and a 116.8 per cent rise compared to last year.

Since the onset of the conflict on February 28, prices have nearly doubled from $99.40 per barrel. Additionally, the crack spread — the margin between crude oil and refined products — has tripled, further intensifying cost pressures.

Supply position and future outlook

Despite the global turmoil, India remains relatively secure in terms of jet fuel supply. The country produces more ATF than it consumes, reducing the risk of shortages. To ensure domestic availability, the government has imposed an export duty of Rs 29.5 per litre on ATF, discouraging exports.

Looking ahead, the situation remains uncertain. Airlines have indicated that the full financial impact of rising fuel costs may be felt in the coming months. There is also growing demand within the aviation industry to reconsider the current pricing model and explore alternatives that reduce dependence on global benchmarks.

Conclusion

The government’s decision to partially cap ATF price hikes for domestic airlines reflects a careful balancing act between market realities and economic stability. While it offers immediate relief to airlines and passengers, the long-term sustainability of this approach will depend on global fuel trends and policy support for oil companies.

As the West Asia conflict continues to disrupt energy markets, India’s aviation sector may need to adapt to prolonged volatility, with both airlines and passengers bracing for potential changes in travel costs.