The cost of flying out of metros is likely to increase from January 1, 2016, with the civil aviation ministry looking at levying a charge of 2 per cent on all domestic and international flight tickets sold within the country to subsidise air travel on regional routes.
The move is aimed to generate around Rs 1,500 crore per annum for the proposed Regional Connectivity Fund (RCF) which will be utilised to provide viability gap funding (VGF) to airlines for capping fares at about Rs 2,500 per flying hour between non-metro destinations come April 1, 2016. This Regional Connectivity Scheme (RCS) is part of the revised national civil aviation policy which is scheduled to be sent for Cabinet nod by the end of 2015.
Civil aviation secretary RN Choubey said, “India has 476 airstrips or airports of which only 75 have regular flights. About 30 airports with the Airports Authority of India (AAI) receive no schedule flights and are ready to be put to use under the RCS. Besides, there are around 200 airports with state governments. In the first two years, 50 airports can be added to the network of airlines under this scheme.” The VGF will be indexed to aviation turbine fuel (ATF) prices and to inflation. While the Centre would provide 80 per cent of the resources to bridge losses incurred by airlines by flying to these routes, the remaining amount would have to be pitched in by the states. There will be no service tax on tickets on regional flights.
The VGF to be provided to airlines will be calculated through a reverse auction process in case there are multiple operators interested in deploying capacity on a particular regional route. In the event of there being a single operator interested in plying between two non-metro destinations, the government will work out the normative costing and a commensurate subsidy to make flights viable in the said sector.
The subsidy to enhance regional air connectivity will, however, be offered only in those states which reduce VAT on ATF to one per cent or less. “There are states like Madhya Pradesh, Gujarat, Rajasthan, Uttar Pradesh who have been taking initiatives to spur air connectivity. By the time, the regional connectivity scheme takes off next year, at least 5-6 states would have come on-board,” said a senior ministry official. In another significant initiative, India could follow an open sky policy with countries which are at least 5,000 km away from April 1 next year. As per the proposal, India could have open skies arrangement on reciprocal basis with SAARC nations and with European countries.