India’s Ministry of Petroleum, in consultation with the Ministry of Civil Aviation, has taken direct action to cap the increase in domestic airline prices for jet fuel in April 2026. This intervention was necessary due to the current global market conditions, which have been significantly impacted by the US-Iran-Israel conflict and the resulting closure of the Strait of Hormuz.
ATF (Aviation Turbine Fuel) prices in India have been deregulated since 2001 and are normally revised on a monthly basis based on a formula that takes into account international benchmarks such as crude oil prices. However, the current market conditions have caused a significant increase in global fuel prices, which would have resulted in a more than 100 percent increase in domestic ATF prices for Indian airlines. This would have had a severe impact on domestic air travel, with potential fare hikes, route suspensions, and financial distress for airlines.
To prevent this outcome, the government has made a policy decision to absorb the majority of the international price increase and cap the domestic ATF prices at a 25 percent increase, equivalent to Rs 15 per litre. This means that Indian Oil Corporation, Bharat Petroleum, and Hindustan Petroleum, which are the PSU (Public Sector Undertaking) Oil Marketing Companies, will sell domestic ATF to airlines at a price significantly below the international market rates, absorbing the difference on their own balance sheets.
The government’s intervention has created a two-track system for ATF pricing in April 2026. Domestic routes will pay the capped 25 percent increase, while international routes operated by Indian carriers will pay the full market price increase. This decision was made to protect the Indian domestic air travel sector, which serves millions of passengers annually and has significant economic and social dimensions. The government believes that allowing domestic ATF prices to more than double in one month would have had a detrimental impact on the sector.
On the other hand, international routes operate in a global market where all airlines face the same elevated fuel costs. Therefore, Indian carriers flying to international destinations will pay the full market rate for jet fuel, in line with global aviation market norms. This decision prevents Indian carriers from having an artificial cost advantage over their international competitors.
For domestic passengers, the 25 percent increase in ATF prices is better news compared to the initial reports that suggested a more than 100 percent increase. However, airlines will still need to reflect the higher fuel costs in their pricing, and the fuel surcharges that were implemented last month are likely to be revised slightly upward. This is a significant relief for airlines, as ATF is their largest single cost item, and the current period is already financially challenging for the Indian aviation industry.
The government’s decision to intervene in a deregulated market to cap ATF prices for domestic routes is a significant policy signal. It goes against the deregulated framework that was put in place in 2001 to allow market signals to drive efficiency.