Cabinet approves Price Stabilization Fund

Context

• Recently, the Union Cabinet, chaired by the honourable PM, approved a one-time financial support of up to ₹10,000 crores for Oil Marketing Companies (OMCs).
• This support will help stabilize Aviation Turbine Fuel (ATF) prices for scheduled Indian airlines operating domestic and international flights.

Key Components of the ATF Price Stabilisation Fund

1. ₹10,000 Crore Interest-Free Support: OMCs will receive interest-free advances to compensate for losses when international ATF prices rise above a benchmark level.
2. Recovery Mechanism: When international ATF prices fall, OMCs will repay the support amount to the Consolidated Fund of India until the entire advance is fully recovered.
3. Coverage of Domestic and International Operations: Available to all willing scheduled Indian airlines for both domestic and international operations.
4. Fixed ATF Pricing: Provides airlines with predictable fuel costs and protection from sudden price spikes.
5. Exclusive rights of ATF supply to OMCs: Participating airlines will buy ATF only from OMCs for up to 3 years or until the support amount is fully recovered.
6. Monitoring & Audit: A Monitoring Committee comprising representatives of the Ministry of Civil Aviation, Ministry of Petroleum & Natural Gas and Department of Expenditure shall oversee implementation, claim verification, reconciliation and settlement.
7. Duration of Prise Stabilization support: The scheme will operate for 36 months, subject to annual review, and may be extended if required.

Expected outcome

• The proposed mechanism will provide enhanced stability and predictability in ATF pricing for Indian airlines, enabling better operational and financial planning.
• It will shield Oil Marketing Companies (OMCs) from losses arising from volatile and elevated ATF prices during the ongoing West Asia crisis.
• The measure will help protect and sustain domestic and international air connectivity, ensuring continuity of air services.
• It will reduce the pass-through of fuel price shocks to passengers, thereby helping to moderate fare volatility.
• The arrangement will support continued air connectivity to remote, regional, Tier-II and Tier-III cities, promoting balanced regional development and inclusive growth.

Key Benefits

• Stable airline operations help sustain employment across airlines, airports, ground handling agencies, MROs, travel agencies, hospitality and logistics sectors.
• Continued air connectivity will facilitate movement of passengers, high-value cargo, business travellers and tourists, thereby supporting economic activity across sectors.
• The measure will have positive spill-over effects on tourism, hospitality, trade, exports, regional development and investment.
• It will help ensure optimum utilisation of airport infrastructure developed across the country, including airports operationalised under the UDAN scheme.
• By preserving domestic and international connectivity, the initiative will strengthen India’s integration with global markets and support long-term economic growth.

Consider the following statements regarding the ATF Price Stabilisation Fund:
1. It provides interest-free financial support to Oil Marketing Companies (OMCs). 
2. The scheme is applicable only to domestic airline operations. 
3. The support amount will be recovered when international ATF prices moderate. 
Which of the statements given above are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Answer: (c)
Statement 1 is Correct: The ATF Price Stabilisation Fund provides interest-free financial support to Oil Marketing Companies (OMCs).
Statement 2 is Incorrect: The scheme covers both domestic and international operations of scheduled Indian airlines, not just domestic flights.
Statement 3 is Correct: When international ATF prices decline, the support amount will be recovered from OMCs and returned to the Consolidated Fund of India.