India opens USD 1 billion fund to stabilize airline fuel costs

Dhaka: The government of India has launched an INR 100 billion, equivalent to USD 1 billion, price stabilization fund to shield the country's airlines from surging jet fuel costs amid the ongoing West Asia crisis.

According to a government statement issued on June 3, the fund will provide interest-free advances to oil marketing companies to facilitate stable aviation turbine fuel pricing during the current period of exceptional fuel price volatility.

The one-time measure, open to all scheduled Indian carriers, will remain in place for three years. It adopts a fixed-price arrangement for domestic and international operations, reducing airlines' exposure to sudden fuel price spikes, and is aimed at stabilizing airfares and protecting air connectivity.

The announcement comes as Indian airlines have been forced to cut capacity following months of soaring fuel prices. Air India said last month it would reduce its international operations through August in response to high fuel prices and airspace restrictions.

Low-cost carrier IndiGo also trimmed its capacity growth expectations for the first quarter of fiscal year 2027 and unveiled plans to phase out less fuel-efficient leased aircraft after reporting a full-year net loss of INR 23.9 billion.

IndiGo introduced a revised fuel surcharge in April, recovering a significant portion of the increased costs domestically. However, the carrier said it has been unable to fully offset rising costs on its international routes.