India’s two biggest aviation hubs, Delhi and Mumbai, have cut VAT on aviation turbine fuel. This decision may ease rising cost pressure on airlines. Moreover, it comes when global fuel prices, rupee weakness, and operational expenses have increased sharply. Therefore, airlines could see some relief during a difficult fuel-cost phase.
How Much Tax Has Changed?
Delhi has cut VAT on ATF from 25 percent to 7 percent. This relief will remain valid for six months. Meanwhile, Maharashtra has reduced VAT on ATF for domestic flights in Mumbai. The rate has moved from 18 percent to 7 percent. The decision came after airlines warned the government about rising costs.
Airlines Face A Fuel Crisis
The aviation sector currently faces a serious fuel crisis. The Federation of Indian Airlines, or FIA, had warned the government about rising fuel costs. FIA includes Air India, Indigo, and SpiceJet. According to FIA, several routes have started becoming economically unviable because of higher fuel expenses.
Earlier, fuel costs formed nearly 30 to 40 percent of total airline expenses. However, that share has now jumped to 55 to 60 percent. As a result, airlines face deeper pressure on operations, routes, and cost planning.
Global Tensions Push Jet Fuel Higher
Middle East tensions have also affected jet fuel prices. Supply problems around the Strait of Hormuz added further pressure. A large share of global oil and LNG supply moves through this route. Consequently, jet fuel prices rose sharply in recent months.
At the end of February 2026, jet fuel cost nearly $99 per barrel. By May 2026, the price had reached around $263 per barrel. This steep rise made fuel one of the biggest challenges for airlines.
Why Delhi And Mumbai Matter
Delhi and Mumbai carry major importance for Indian aviation. According to figures shared by Chief Minister Rekha Gupta, Delhi’s Indira Gandhi International Airport handled nearly 8 crore passengers in 2024-25. Mumbai airport handled 5.55 crore passengers in 2025. It also recorded more than 3,31,000 aircraft movements.
Most domestic and international flights operate from these two cities. Hence, a tax cut on fuel here can affect the wider aviation sector. Airlines operating from these hubs may benefit from lower fuel-related pressure.
ATF Demand Keeps Rising
India’s ATF demand continues to grow. Government data shows the country consumed nearly 764 thousand metric tonnes of ATF in February 2026. Meanwhile, domestic airlines carried around 167 million passengers in 2025. With such strong demand, even limited fuel-cost relief can create meaningful savings for airlines.
