Indigo, SpiceJet Share Price in Focus as Cabinet Approves ₹10,000 Crore Price Stabilisation Fund

The Union Cabinet, led by Prime Minister Narendra Modi, has sanctioned a one-time budgetary support of up to ₹10,000 crore for Oil Marketing Companies (OMCs) to stabilise Aviation Turbine Fuel (ATF) prices for Scheduled Indian Airlines.  

This initiative aims to mitigate the effects of volatile fuel prices due to the ongoing West Asia crisis. 

Shares of IndiGo and SpiceJet are in focus following the Union Cabinet's approval of a ₹10,000 crore Price Stabilisation Fund to cap ATF prices at ₹75.6 per litre. 

Price Stabilisation Fund: Key Features 

The approved Price Stabilisation Fund will provide interest-free advances to OMCs, ensuring stable ATF pricing for airlines.  

This support will cover both domestic and international operations of Indian carriers. The fund will compensate OMCs for losses when international ATF prices exceed the benchmark price set by the government. 

When ATF prices moderate, the differential amount will be recovered from OMCs and returned to the Consolidated Fund of India. This mechanism will continue until the entire support amount is fully recovered. 

Impact on Airline Operations 

The scheme offers a fixed ATF price arrangement, reducing airlines' exposure to sudden fuel price spikes.  

Participating airlines will procure ATF exclusively from OMCs for up to 3 years, subject to annual review or until the advance amount is fully recovered. 

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Government Price Caps Fail to Buffer Rising Operational Strains 

In an attempt to shield passengers from sudden ticket price shocks, the government implemented a hard price cap on ATF at ₹75.6 per litre. However, the measure has provided little relief against the ongoing energy crisis. With global fuel volatility remaining high, the capped rate was insufficient to offset the compounding financial losses faced by major carriers. 

Monitoring and Implementation 

A Monitoring Committee, comprising representatives from the Ministry of Civil Aviation, Ministry of Petroleum & Natural Gas, and Department of Expenditure, will oversee the implementation. All claims and recoveries will be subject to audit, ensuring transparency and accountability. 

Conclusion 

The Cabinet's approval of the ₹10,000 crore Price Stabilisation Fund is expected to provide stability in ATF pricing, aiding airlines in better operational and financial planning. This initiative aims to protect air connectivity and moderate fare volatility, benefiting both airlines and passengers. 

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