ATF Pricing Reform India: Aviation Cost Imperative

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ATF Pricing Reform India: Aviation Cost Imperative

Context:

Indian airlines have urged the government to revise the pricing mechanism of Aviation Turbine Fuel (ATF) due to rising global fuel prices, which are increasing operational costs and financial stress in the aviation sector

  • ATF (Aviation Turbine Fuel) is a refined petroleum product used in aircraft engines; it is one of the largest cost components (≈40–50%) for airlines.
  • Taxes significantly increase ATF prices: Central Excise + State VAT (which varies widely across states).
  • ATF is not included under GST, leading to higher tax burden compared to other fuels.
  • Aviation Turbine Fuel (ATF) rates in India are determined by state-owned Oil Marketing Companies (OMCs) based on a market-linked formula, with prices typically revised on the 1st of every month.
  • While deregulated, the government intervenes during “extraordinary” volatility – such as in April 2026, when they capped the monthly price increase at 25% for domestic flights to prevent massive fare spikes. 
  • Airlines demand uniform pricing and tax rationalisation, as international flights often get ATF cheaper than domestic ones.
  • Global factors like West Asia conflicts, supply disruptions, and currency depreciation (₹ vs $) directly impact ATF prices.

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ATF Pricing Reform India: Aviation Cost Imperative

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