Cabinet Approves ₹10,000-Crore Package To Stabilise Jet Fuel Prices and Shield Airlines From West Asia Crisis
However, the government aims to somehow ease the financial burden on these airliners to smoothly help operate their businesses.
New Delhi: Airliners have a reason to cheer as the Union Cabinet on Wednesday approved one-time budgetary support not exceeding Rs 10,000 crore for oil marketing companies (OMCs) to provide jet fuel or aviation turbine fuel (ATF) price stabilisation support to scheduled Indian airlines for their domestic and international operations.
The move by the government comes after observing that international ATF prices have skyrocketed in May, resulting in financial pressure on airlines of their operating costs during periods of extreme volatility triggered by the ongoing West Asia crisis. However, the government aims to somehow ease the financial burden on these airliners to smoothly help operate their businesses.
The government, however, said that the scheme would provide interest-free advances of up to Rs 10,000 crore to state-owned OMCs, enabling them to supply ATF to scheduled Indian airlines at a stabilised price for domestic and international operations. “Under the scheme, the OMCs will be compensated whenever international import parity prices exceed a benchmark level set under the approved mechanism,” the government said in a statement.
In the recent days, international ATF prices have surged to about Rs 142 per litre in May from Rs 60.50 per litre in March, increasing financial pressure on airlines at a time when fuel accounts for nearly 40 per cent of operating costs and, in some cases, as much as 60 per cent during periods of extreme volatility. “Any support extended to OMCs will be recovered once global fuel prices moderate, with proceeds returned to the consolidated fund of India through a defined true-up process,” the official statement said.
Announcing the decision after the Cabinet meeting, I&B minister Ashwini Vaishnaw said that the budgetary support would help airlines in the backdrop of a rise in ATF prices due to the conflict and closure of airspace by Pakistan for Indian carriers. “The fund would help stabilise ATF prices for scheduled Indian carriers and prevent disruption of airline operations,” Vaishnaw said.
The minister further said that with the fund, airlines would get a stable ATF price as long as the turmoil is there, and once the crisis is over, then the participating airlines would have to reimburse the amount. “The fund would shield air passengers from fare spikes, driven by the global oil price surge, and also protect 77 lakh jobs dependent on the aviation ecosystem,” he said.
The ATF price stabilisation support will be in force for a period of 36 months with provision for annual review or until the advance amount is fully recovered/settled, whichever is earlier. “The fund would help safeguard public investment in airport infrastructure by keeping airline operations viable and maintaining air connectivity to Europe, North America and Central Asia amid the Pakistan airspace closure,” the minister said.
As per the official statement, the budgetary support will be in the form of interest-free advances to the OMCs through the demands for grants of the ministry of petroleum and natural gas. “The support will be provided to OMCs to facilitate stable ATF pricing for airlines during the ongoing period of exceptional fuel price volatility arising from the West Asia crisis,” it said.
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. “When international ATF prices moderate, the differential amount shall 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,” it added.