Regional connectivity: Uttar Pradesh has own air plan, offers tax sops for intra-state airlines

The air service operators have been told to submit their bids by August 27, while the bids will be opened on August 29.

Written by Sunny Verma | New Delhi | Published:July 21, 2016 1:56 am
National Civil Aviation Policy, regional connectivity scheme, aviation, civil aviation, subsidised airfare, Uttar Pradesh government, india news Uttar Pradesh government has invited proposals from operators for intra-state connectivity to five cities – Agra, Varanasi, Gorakhpur, Lucknow and Allahabad.

EVEN AS the Centre is working on the fine print of its proposed regional connectivity scheme with subsidised airfare of Rs 2,500 per ticket per hour, the Uttar Pradesh government has come up with a similar proposal, inviting proposals from air service operators for intra-state connectivity to five cities — Agra, Varanasi, Gorakhpur, Lucknow and Allahabad.

Under the UP government scheme, which seems to draw inspiration from the Centre’s regional connectivity plan, the state will provide fiscal incentives to operators, including viability gap funding (VGF), lower value added tax at 4 per cent on aviation turbine fuel as against 21 per cent, and no landing or parking charges. These concessions will only be available for airlines operating within the state. On July 6, the state government invited proposals, through the UP State Tourism Development Corporation Ltd (UPSTDC), from scheduled and non-scheduled airline operators using 18-20 seater passenger aircraft.

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“The state government will bear all the costs for intra-state connectivity. Air operators who bid the lowest in terms of per hour of subsidy, and satisfy technical and financial parameters, will get permission to fly. The ticketing will be done by the state,” said Avinash Chandra Misra, Joint Director, Travel Trade, Uttar Pradesh Tourism. He said more cities could be added after a year.

“We are looking at ticket collection of Rs 5-10 crore in the first year, while the total cost is expected to touch Rs 40 crore — the difference of Rs 30 crore will be viability gap funding. The ticket price will be kept extremely reasonable, and once the scheme picks up, the government hopes the VGF component will fall in due course,” he said.

Airline operators will not have to pay landing/parking costs for Allahabad, Gorakhpur and Agra airports, which are under the Indian Air Force. At the remaining airports like Lucknow, which are under the Airports Authority of India, the state government will cover the parking/ landing costs.

The request for proposal (RFP) document issued by UPSTDC says the subsidy quoted will be restricted to maximum flying hours of 300 per month or actual flying hours, whichever is less. The subsidy will not be provided for training flights, test flights or any operation other than commercial operations.

The air service operators have been told to submit their bids by August 27, while the bids will be opened on August 29.

Last month, the central government approved the National Civil Aviation Policy 2016, making its regional connectivity scheme, to be run in coordination with the states, a “centrepiece of the policy”.

The Centre had also proposed to provide VGF to airlines, while asking states to give tax sops in the form of lower excise duty at 2 per cent and VAT at 1 per cent on aviation turbine fuel picked up at RCS airports. The central government and the states will share the VGF burden (80:20). The Union Ministry of Civil Aviation released its draft regional connectivity scheme on July 1, inviting public comments on it by July 22.

Misra, however, claimed the state government’s connectivity plan was distinct from the Centre’s regional connectivity scheme.

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