Indian airlines are urgently seeking the release of funds derived from VAT relief on Aviation Turbine Fuel (ATF). They claim that oil marketing companies are withholding these refunds to recover losses incurred during June, putting additional financial strain on carriers already impacted by rising fuel costs. Major airlines including IndiGo, Air India, and SpiceJet have responded by raising fuel surcharges for their passengers, reflecting the increasing operational costs.
The government had previously implemented temporary VAT reductions at key aviation hubs and announced a support fund aimed at stabilizing fuel prices. However, these measures have either lapsed or are under review, leading the airlines to call for renewed support. They argue that withholding VAT refunds without prior notice is unfair to passengers who are already bearing higher fares and surcharges.
The rising price of jet fuel, which now constitutes over half of airline operating expenses, is compounded by regional conflicts and currency fluctuations, prompting airlines to consider route adjustments or discontinuations. The Civil Aviation Ministry is examining the possibility of reviving a proposed ATF Price Stabilisation Fund that would provide interest-free advances to oil companies to help control fuel prices. Meanwhile, airlines have already adjusted their fare structures; IndiGo increased fuel charges effective October 6, and Air India revised surcharges for international and domestic flights from October 9.
The industry is united in its calls for the government to implement structural measures such as a cost-plus model for ATF pricing and extended tax relief to help manage the financial turbulence. These developments highlight the economic pressures facing Indian carriers amid geopolitical tensions, high fuel prices, and currency weakness, which threaten their route networks and long-term growth prospects.
