India Allocates $1 Billion to Shield Airlines from Fuel Costs

New Delhi, India: The Indian government is stepping in to ease the financial burden on airlines by allocating 100 billion rupees ($1 billion) towards capping fuel prices and preventing potential flight suspensions. This measure aims to stabilize fuel costs for carriers while shielding passengers from fare increases.

According to Ashwini Vaishnaw, India's Information Minister, the government has set a capped price of 75.6 rupees per liter for jet fuel, significantly lower than the current price of 104.9 rupees per liter at New Delhi airport. The fund will be channelled through state-owned refiners to reimburse them for losses incurred from selling fuel below market rates.

Significant Impact on Aviation Industry

Airlines, facing a 40% share of their operational costs attributed to fuel, have been vocal about the challenges. A recent warning by the aviation industry highlighted the potential for service disruptions without government intervention on pricing. Adding to these pressures, a weakened rupee makes it more expensive for airlines to pay overseas charges and lease aircraft.

The financial support will come as an advance payment to refiners who must return any excess funds upon stabilization of prices. Airlines can exclusively source jet fuel from state refiners for up to three years, offering a measure of stability in the sector.

Since the Iran conflict began, India has taken several measures to support the aviation industry, including reducing landing and parking fees at airports, capping increases in jet fuel prices, and providing tax breaks on fuel for flights taking off from domestic hubs like Delhi and Mumbai.