ATF Price Surge: Government Considers Reviving Stabilisation Fund Amid Airline Fuel Challenges – Report
NEW DELHI: The Indian government is considering a new mechanism to stabilize aviation turbine fuel (ATF) prices amid rising fuel costs driven by the ongoing crisis in West Asia. A senior government official indicated that the Centre is evaluating the reintroduction of the ATF price stabilization fund, although specific details have not yet been disclosed. Civil Aviation Minister K Rammohan Naidu confirmed that discussions are ongoing with airlines and oil marketing companies (OMCs) regarding the escalating ATF prices, which have become a critical concern for the aviation sector.
The government’s renewed focus on ATF pricing follows a previous initiative in June, where a one-time budgetary support of up to Rs 10,000 crore was approved for OMCs to stabilize ATF prices. However, airlines showed little interest in utilizing this support, leading to the scheme’s expiration. Currently, ATF constitutes approximately 40% of an airline’s operating expenses, making fluctuations in fuel prices a significant factor affecting airline profitability and ticket pricing.
ATF Prices Climb, Airlines Pass on Cost
Domestic ATF prices have surged in recent months, with increases of Rs 5 per litre in August and Rs 6.28 per litre in September, bringing the Delhi rate to Rs 121.28 per litre. On October 1, ATF prices rose by an additional Rs 16 per litre, reaching around Rs 137 per litre, marking the highest fuel costs in years. ICRA estimates that fuel typically accounts for 30-40% of an airline’s operating expenses, and these rising costs are being passed on to consumers.
IndiGo, India’s largest airline, announced a hike in fuel charges effective October 6 for both domestic and international flights, citing the ongoing volatility in ATF prices. The airline noted that the latest month-on-month increase in fuel prices exceeded 14%, pushing ATF costs to some of their highest levels in the past decade. Previously, IndiGo had also reduced flight frequencies on certain routes due to increased ATF costs linked to the West Asia crisis. The industry is advocating for a comprehensive review of the jet fuel pricing structure to address these challenges.
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