The Union cabinet on Wednesday approved up to ₹10,000 crore for oil marketing companies (OMCs) to help stabilize jet fuel prices, in a relief for airlines and oil companies as the Iran war upends energy markets worldwide.
The price stabilization fund (PSF) will offer interest-free advances to OMCs, helping them offer steady aviation turbine fuel (ATF) prices to airlines which count fuel as their biggest operating cost.
Mint had earlier reported that the a PSF for petroleum products.
In another key decision to reduce the import of crude oil and enhance energy efficiency, the Cabinet approved a new scheme with a financial outlay of ₹9,585 crore to incentivize owners of trucks and buses registered in Delhi-NCR that comply with BS-IV or earlier emission norms to replace them with BS-VI or stricter emission-compliant vehicles run on CNG, or electric vehicles (EVs).
Sharp price hike
The PSF for the is yet another government attempt to reduce financial stress faced by airlines due to the sharp increase in ATF prices. Earlier, it had approved a special ₹5,000 crore carve-out for the sector under the new ECLGS 5.0 scheme.
Briefing the media, information and broadcasting, IT and railway minister Ashwini Vaishnaw said that due to crisis in West Asia, international ATF prices have increased 2.5 times from ₹60.5 a litre in March to ₹142 a litre in May, and the PSF would aim to curb this volatility. The government has already capped ATF prices at ₹75.6 a litre for domestic operations.
The PSF will compensate OMCs for losses arising from elevated international ATF prices whenever the prevailing import parity price exceeds the benchmark price determined under the approved mechanism. When international ATF prices moderate, the differential amount shall be recovered from OMCs and returned to the Consolidated Fund of India. The arrangement will continue until the entire support amount is fully recovered and settled, a government statement said.
The PSF scheme will be available to all willing scheduled Indian carriers for both domestic and international operations. It is expected to provide greater predictability in fuel costs by adopting a fixed-price arrangement for domestic and international operations.
The arrangement will be implemented through an agreement between participating Indian airlines and OMCs, with the ministries of aviation and petroleum as signatories. Under this one-time arrangement, participating airlines will procure ATF only from OMCs for up to three years, subject to annual review or until the advance amount is fully recovered, whichever is earlier.
36 months
The price support will stay for 36 months, with provision for annual review or until the advance amount is fully recovered/settled, whichever is earlier. The proposal may be extended further if the corpus is not fully used within this period, the government statement said.
Vaishnaw said the scheme will reduce the pass-through of fuel price shocks to passengers, moderating fare volatility, while it would also shield OMCs from losses arising from costly ATF prices during the West Asia crisis. The PSF would get its funding from Economic Stabilisation Fund set up in March, with initial allocated ₹57,381 crore by the Centre, to absorb global shocks and protect the domestic industry.
While ATF price has been capped for domestic operations, Indian carriers continue to purchase ATF for international operations at import parity prices, exposing them to elevated fuel costs. The PSF aims to curb this volatility.
Clean Delhi
In another decision, Cabinet approved a two-year scheme aimed at reducing air pollution in the Delhi–NCR region and promoting cleaner mobility. With a total financial outlay of ₹9,585 crore, including ₹5,041 crore from the central government and an estimated ₹1,601 crore in tax concessions from the participating states, the scheme aims to incentivize owners of trucks and buses registered in the Delhi–NCR region that comply with BS-IV or earlier emission norms to replace them with BS-VI or stricter emission-compliant vehicles, or EVs.
By accelerating the transition to cleaner transport technologies, the scheme is expected to significantly reduce vehicular emissions and contribute to improved air quality across Delhi-NCR, Vaishnaw said.
The scheme will benefit approximately 207,000 (191,000 trucks and 16,329 buses) owners in Delhi-NCR (comprising Delhi, Haryana, Rajasthan, and Uttar Pradesh), he added.
Under the scheme, Centre will provide 5% interest subvention on loans for five years, monthly fuel vouchers worth up to ₹4,800 depending on vehicle category, and lump‑sum benefits for EV purchases or certificate of deposit trading. States will waive registration fees and grant up to 100% motor vehicle tax concessions for new vehicles and 50% for used vehicles for 10 years. State government will also waive of pending liabilities on the old vehicles participating in the scheme. In addition, participating automobile companies will offer 8% discounts on ex‑showroom prices of new vehicles.
Road projects
In other decisions, the Cabinet Committee on Economic Affairs (CCEA), which also met on Wednesday, cleared highway projects including a coastal highway project in Odisha with an investment of over ₹24,000 crore. The new coastal highway project from Rameshwar to Paradeep in Odisha would be developed on Hybrid Annuity Model (HAM) under two packages with a combined total length of 160.18km and combined total capital cost of ₹8,300.79 crore.
The other highway projects that got CCEA approval include upgradation of the Khagaria-Purnea Section of NH-31 and NH-231 to the 4-Lane Standard (143. 529km) in Bihar on BOT (Toll) Mode at a cost of ₹3,936.05 crore, the widening of the existing Armoor-Jagtial-Mancherial Section of National Highway (NH)-63 on Hybrid Annuity Model (HAM) and Jagtial-Karimnagar Section of National Highway (NH)-563 on Build-Operate-Transfer (Toll) [BOT (Toll)] to the 4-lane standard in Telangana under three work packages with a combined total length of 190.76km and combined total capital cost of ₹7,597.16 crore and upgradation of the existing intermediate lane to 2 Lane with Paved Shoulder Standard (125.01km) of Hiwarkhedi -Roshni-Ashapur-Rudhy Section of NH-347B and widening of existing 2 lane to 4 lanes from Deshgaon-Julwaniya Section of NH-347B of length (108. 643km) in Madhya Pradesh on Hybrid Annuity Mode at a cost of ₹4,415.60 crore.