India to lift domestic airfare caps from Monday as sector stabilises

India will revoke temporary fare caps imposed on domestic air tickets in December, according to a government order reviewed by Reuters, in a move aimed at easing the financial burden on airlines facing higher costs due to disruptions linked to the Iran war.

The caps, which are set to be lifted from Monday, were introduced in December following mass flight cancellations by market leader IndiGo that led to a surge in airfares at other carriers.

“The prevailing situation has since stabilised, with restoration of capacity and normalisation of operations across the sector,” the Indian civil aviation ministry said in its order.

The order, dated Friday and reviewed by Reuters on Saturday, has not been made public. A spokesperson for the ministry did not respond to a request for comment.

Indian airlines had urged the government to withdraw the price caps, arguing they were causing “huge” revenue losses amid higher operational costs, partly due to a rise in jet fuel prices linked to the war, Reuters reported on Friday.

While airlines have not disclosed the extent of losses, HSBC analysts said that a $1 per barrel change in fuel prices could impact IndiGo’s full-year fuel bill by about Rs 3 billion.

Under the caps, a one-way fare for journeys up to 500 kilometres could not exceed Rs 7,500. For routes between 1,000 and 1,500 kilometres, such as New Delhi to Mumbai, fares were capped at Rs 15,000.

The government order directs airlines to ensure fares remain “reasonable, transparent and commensurate with market conditions, and that passenger interests are not adversely impacted.”