State-owned oil marketing companies (OMCs) have reduced aviation turbine fuel (ATF) prices by approximately Rs 5 per litre, effective from July 1, 2026, providing relief to domestic airlines. The price cut follows a softening of global crude oil prices amid easing geopolitical tensions in West Asia. According to the latest pricing announcement, the cost of jet fuel in Delhi will now be roughly Rs 110 per litre. Although the exact benefit will depend on each airline's fuel procurement and hedging arrangements, the reduction is expected to lower operating costs for carriers, for which fuel is the single biggest expense.
Price Stabilisation Policy and Regional Variations
Earlier in June, the government introduced a new price stabilisation policy, setting the basic price of ATF for domestic airlines at Rs 86.32 per litre for a maximum of three years. Under this voluntary scheme, the final selling price includes the fixed free-on-board (FOB) benchmark price plus airport fees, oil company margins, and applicable taxes. Government officials stated that the final selling price under this scheme would be approximately Rs 115 per litre in Delhi, Rs 114.50 in Mumbai, and Rs 139 in Chennai.
Impact on Airlines and Passengers
The price reduction is expected to improve the financial viability of airlines and help keep passenger tickets affordable. Fuel accounts for a significant portion of an airline's operating expenses, and any reduction in ATF prices directly enhances margins. The government's stabilisation policy aims to protect airlines from volatile global crude prices, ensuring more predictable costs. However, the actual benefit to individual carriers varies based on their fuel procurement strategies and hedging contracts.
Windfall Tax Adjustments
The Centre has also updated the windfall tax on petroleum product exports. The Special Additional Excise Duty (SAED) on petrol exports has been raised to Rs 4 per litre, while the export duty on diesel and ATF has been reduced to Rs 8.5 per litre and Rs 7.5 per litre, respectively. These adjustments reflect changing global market conditions and aim to balance domestic supply and export competitiveness. Notably, the excise tax on petrol and diesel sold in the domestic market remains unchanged.
Context: Geopolitical Tensions and Global Crude Prices
The reduction in ATF prices is directly linked to the recent easing of geopolitical tensions in West Asia, which had previously caused supply disruption fears and elevated crude oil prices. As tensions subsided, global crude oil prices softened, allowing OMCs to pass on the benefits to domestic consumers. The move underscores the sensitivity of Indian aviation fuel pricing to international oil markets and regional stability.
