Consumers
hailing from smaller towns and cities hitherto unconnected by flight have
something to look forward to as they may soon get to fly more often and at
affordable rates. The civil aviation policy has unveiled a regional
connectivity scheme (RCS) that aims to connect smaller towns and cities to the
main hubs and has capped the fare at Rs 2,500 per passenger for one-hour
flights on the RCS routes that include unserved airports.
To implement this policy, the
government plans to revive 160 airports and airstrips each at a cost of Rs
50-100 crore.
What this means is that while there would not be any change in fare for a
Delhi-Chandigarh flight, for a destination not connected by air from Delhi
today that gets connected tomorrow and can be reached in an hour, the fare
would be capped at Rs 2,500 per passenger.
To bridge the gap between
actual cost and the capped fare, the government will provide viability gap
funding (VGF) to airlines plying on the RCS routes. The VGF will be shared
between the ministry of civil aviation and state governments. The burden will
be shared on an 80:20 basis for RCS airports while for the northeastern states
the ratio will be 90:10. The VGF will be funded by a small levy per departure
on all domestic routes, other than Category II and IIA routes, RCS routes and
small aircraft, at a rate decided by the ministry from time to time.
“We plan to impose a small levy
per departure on all domestic flights other than CAT II /CAT IIA routes,” said
Rajeev Nayan Choubey, civil aviation secretary. However, he added that this
will be so small as to have any impact on the fares of flights plying on these
routes.
In the draft, the aviation
ministry had proposed a cess of 2% on most of the domestic and international
routes to raise funds to improve regional air connectivity, which it has
dropped.
“We have right now only come out
with the broad contours of the RCS, we will be coming out with the detailed
scheme within 10 days,” said Ashok Gajapathi Raju, Union minister for civil
aviation.
“The scheme will connect
India’s remote unconnected regions, boost tourism, create jobs and stimulate
the economy in tier 2-3 cities. Sub-sectors like MRO, cargo, helicopters,
general aviation and Make in India, etc, will get a fillip with liberalised
operational norms and tax breaks,” said Amber Dubey, partner and head,
aerospace and defence, at KPMG India.
Besides providing for VGF, the
government also plans to provide for various tax sops ranging from doing away
with airport charges for airports that will fall under the RCS routes to
reducing service tax on tickets and lowering excise duty at 2% on aviation
turbine fuel (ATF) picked at RCS airports.
“We have approached different
states in pursuance to make the RCS a success and only those states will be
included in the RCS routes which are ready to assist the ministry in giving
these various tax sops, which includes reducing the excise duty on ATF,” Raju
said.
Airlines that will fly on the
RCS routes are expected to be provided police and fire services for free by the
state government. The state governments are also expected to provide power,
water and other utilities at concessional rates if they want their airports to
be included in the RCS.
“AirAsia India also flies on
routes which take less than one hour and costs less than Rs 2,500. We think on
the face of it the regional connectivity scheme seems to be viable, but we need
to wait for the government to come up with the intricacies of the scheme before
deciding on anything,” said Amar Abrol, CEO AirAsia India.
Courtesy The Financial Express
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