India’s aviation fuel demand is projected to hit 277,000 barrels per day by 2031, a 44% increase from 2024 levels. To support decarbonization, the government has introduced a mandatory Sustainable Aviation Fuel (SAF) blending target starting in 2027. Investors should monitor how these blending requirements impact operating costs for airlines and capital allocation strategies for oil marketing companies.
India's aviation sector is preparing for significant structural changes, with jet fuel demand expected to climb from approximately 192,000 barrels per day in 2024 to 277,000 barrels per day by 2031. This 44% growth projection is underpinned by several factors, including rising middle-class mobility, the expansion of domestic airline fleets, and the commissioning of major infrastructure projects such as the Navi Mumbai International Airport and the Jewar Airport in Noida. These developments aim to relieve current capacity constraints and support long-term traffic growth.
The Shift to Sustainable Aviation Fuel
A critical change for the energy sector is the government's finalized Sustainable Aviation Fuel (SAF) blending mandate. The regulatory roadmap begins in 2027 with a 1% blending requirement, which will scale to 2% in 2028 and reach 5% by 2030. Industry estimates suggest that the demand for SAF will balloon from 46,000 tonnes in 2027 to 250,000 tonnes by 2030. This policy shift forces a transition for major refiners and oil marketing companies, as they must now factor the production or procurement of sustainable fuels into their long-term operational planning.
Impact on Refiners and Airlines
For major players like Indian Oil, Bharat Petroleum, Hindustan Petroleum, and Reliance Industries, the mandate creates both an industrial opportunity and a necessity for capital spending. These companies will need to either reconfigure existing refinery processes or secure long-term supply partnerships to meet the blending requirements.
Conversely, airlines face a different challenge. Sustainable Aviation Fuel is historically more expensive to produce and procure than traditional aviation turbine fuel. As the mandate takes effect, carriers may experience pressure on fuel expenses, which already constitute a significant portion of their operating costs. Investors should watch whether airlines can absorb these costs or if they will need to pass them on to consumers through ticket pricing. While the long-term demand outlook is stable, the ability of companies to manage this transition while maintaining profit margins will be a key monitorable.
Cyclical Trends vs. Structural Growth
Despite a brief cooling period in mid-2026, where demand dipped to roughly 180,000 barrels per day due to temporary supply disruptions and rising operating costs, the structural growth story appears intact. First-half 2026 data showed a 2% year-over-year growth rate, confirming that the mid-year weakness was cyclical. As the government continues to leverage the UDAN Regional Connectivity Scheme and infrastructure improves, the focus for the industry will now shift toward executing the SAF transition. The primary monitorable for investors moving forward will be the availability of SAF supply and the actual pace at which refineries can meet the 5% blending target by 2030.