India lifts domestic jet fuel price 10%, airlines face higher costs

India's oil marketing companies raised the price of aviation turbine fuel (ATF) by 10% to Rs 115 per litre under a new three‑year price‑stabilisation regime. The government has created a Rs 10,000‑crore fund to back the scheme, allowing airlines that opt in to lock the price for up to three years while non‑participants will pay market‑linked rates, currently around Rs 142 per litre.

ATF accounts for roughly 40% of airline operating expenses and can rise to 60% during periods of volatility. After the hike, Indian carriers such as Air India and IndiGo began cutting domestic services – Air India by up to 22% and IndiGo by 5‑7% – to curb cost pressures. The higher fuel cost is expected to push airfares upward, though the stabilisation framework aims to smooth price swings for passengers.

The move follows global oil price spikes linked to the Iran‑US conflict, and the policy seeks to protect the domestic aviation sector from sharp fuel‑price swings while shifting some risk to the government fund.