India scraps domestic airfare caps, easing cost pressure on carriers

New Delhi— India will lift temporary caps on domestic airfares from Monday, according to a government order reviewed by Reuters, easing financial pressure on airlines grappling with higher operating costs linked in part to disruptions from the Iran conflict.

The price controls, introduced in December after widespread flight cancellations by market leader IndiGo drove up ticket prices across the sector, will be withdrawn as conditions stabilise, the civil aviation ministry said in the order dated Friday.

“The prevailing situation has since stabilised, with restoration of capacity and normalisation of operations across the sector,” the ministry said. The order has not been made public, and a ministry spokesperson did not respond to a request for comment.

The caps had been imposed following disruptions that tightened seat availability and triggered fare spikes at rival carriers. Authorities intervened to limit price volatility and protect passengers.

Indian carriers had urged the government to remove the caps, arguing they were incurring significant revenue losses amid rising expenses, particularly from higher jet fuel prices.

Analysts at HSBC have estimated that a $1 per barrel change in fuel prices can alter IndiGo’s annual fuel bill by roughly 3 billion rupees.Under the restrictions, one-way fares for routes up to 500 km were capped at 7,500 rupees, while tickets for journeys between 1,000 and 1,500 km, including the busy New Delhi–Mumbai sector, were limited to 15,000 rupees.

The government directed airlines to ensure pricing remains “reasonable, transparent and commensurate with market conditions,” adding that passenger interests should not be adversely affected as the controls are lifted.

The move signals a shift back toward market-driven pricing in India’s aviation sector as operational stability returns, even as cost pressures persist.