Air India, Indigo Flight Ticket Prices To Be Hiked? How Windfall Tax To Rs 12.5/Litre On ATF Impact Airlines?

The government increased the windfall tax or export duty on jet fuel prices to Rs 12.5 per litre, effective from fortnight 16, 2026. The hike in windfall tax benefits the government's revenue but is a drawback for companies. Due to the windfall tax hike, airlines like IndiGo, Air India and Akasa Air, among others, may pass the impact on to customers. Hence, the chances of airline ticket prices rising are high.

Earlier, the windfall tax on ATF stood at Rs 9.5 per litre.

What Is a Windfall Tax?

Typically, windfall taxes are imposed on companies and industries during unprecedented times such as geopolitical crises, pandemics, wars, or supply shortages. These are applied to companies who are expected to reap gains from external circumstances.

Hence, the main agenda of a windfall tax is to seize extraordinary and unanticipated gains of a business or sector to offer fair distribution of profits in society. Also, a windfall tax boosts the government's revenue book.

Note that a windfall tax is applied in addition to the standard tax rate.

How Does a Windfall Tax Hike Impact?

As per the Bajaj Finserv website explainer, windfall taxes are majorly disadvantageous to companies as they reduce profits. Heavy taxes could also curb innovation as companies may be forced to limit their investment in research and development efforts. Also, companies or industries may transfer the burden to consumers to sustain their profit margins, which will likely spike market costs for consumers.

Air India, Indigo, Akasa Air, Other Airlines Fares To Rise?

There is a growing prediction of airline fares rising after oil marketing companies increased ATF prices by 10% under the new price stabilization regime.

As per PTI earlier, sources said that jet fuel for domestic airlines will now cost Rs 115 per litre, up over 10% from Rs 104.927. This new rate is reportedly going to be locked for three years for airlines that choose to participate in a government-backed price stabilization scheme. Airlines that do not opt for this scheme will be charged with market-linked fares, which are around Rs 142 per litre at present.

Jet fuel accounts for approximately 60% of total expenses of airlines.

Due to West Asia conflict, thousands of flights have been delayed or cancelled, which impacts passenger loading factors of airlines and, hence, profitability. Apart from this, the petroleum shortages further pushed OMCs to hike jet fuel prices, which further pushed airfares higher.

Aviation bodies stated that airlines were choking due to ATF price hikes and were on the brink of collapse. To curb the losses, the Union Cabinet okayed a Rs 10,000 crore price stabilization scheme on June 4th.

Under the new scheme, the government will offer an interest-free advance to Oil Marketing Companies, enabling them to supply ATF to participating Indian airlines at predetermined and stable prices for both domestic and international operations. Whenever international ATF prices rise above the benchmark level, the corpus will compensate OMCs for the difference.

Notably, when fuel prices moderate, the differential amount will be recovered from OMCs and returned to the Consolidated Fund of India through a transparent true-up mechanism. Thus, the arrangement is intended not as a subsidy, but as a temporary stabilisation measure to smoothen the impact of exceptional fuel price volatility while ensuring full accountability, monitoring and recovery of funds.

Earlier in June, the ministry highlighted that ATF constitutes a major component of airline operating costs and the sharp increase in international fuel prices, coupled with longer flight paths for Indian carriers on several international routes, has placed significant pressure on airline operations. The approved mechanism will provide greater predictability in fuel costs through a fixed-price arrangement, enabling airlines to plan their operations more efficiently and continue serving passengers across domestic and international networks.

Jet Fuel Prices In June 2026:

Since April 1, 2026, airlines pay Rs 1,04,927 per litre for jet fuel in Delhi, while the rates are at Rs 1,09,450 in Kolkata, at Rs 98,247 in Mumbai and at Rs 1,09,873 in Chennai.