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Low-fare aviation policy cleared

Published : Jun 16, 2016, 9:13 am IST
Updated : Jun 16, 2016, 9:13 am IST

In a major push for aviation reforms, the Union Cabinet on Wednesday gave the go-ahead to India’s first-ever civil aviation policy since Independence, that provides for fares to be capped at Rs 2,500

In a major push for aviation reforms, the Union Cabinet on Wednesday gave the go-ahead to India’s first-ever civil aviation policy since Independence, that provides for fares to be capped at Rs 2,500 per hour under a new Regional Connnectivity Scheme (RCS) between a “served” airport (where flights operate) and an “unserved” airport (in small towns with no air connectivity recently), while tweaking the rules for domestic airlines to fly abroad. The proposed RCS will be funded through “viability gap funding”, essentially a subsidy through a small levy per departure on all domestic routes other than flights to small towns and on smaller aircraft.

While this may mean passengers have to pay more while flying on metro routes, the government says this levy will not be much and will be specified soon. Tax sops are also being given to airline operators for RCS. In another move, the government abolished the contentious “5/20” rule to fly abroad, under which airlines needed to have at least 20 aircraft and five years of domestic flying experience to be allowed to fly overseas, replacing it with a “0/20” rule, with the time-limit eligibility for overseas operations abolished, but an airline must have at least 20 aircraft that fly domestically before the 21st aircraft it buys or already has can fly abroad. Communications minister Ravi Shankar Prasad said the “questionable legacy” of the 5/20 rule had been “thrown into the dustbin”. The government is walking a tightrope between long-established airlines flying for several years that opposed removal of the 5/20 rule and relatively new airlines which were rooting for the removal of the rule.

Prime Minister Narendra Modi tweeted that the “Civil Aviation Policy gives an impetus to affordability, regional connectivity, safety, infrastructure, which is vital for transforming India”, adding that it would “transform the sector and greatly benefit passengers”. The government wants the number of air tickets sold annually rising from 80 million to 300 million by 2022. Civil aviation minister Ashok Gajapathi Raju said the policy aims to take flying to the masses by making it affordable and convenient.

The Centre has set a precondition for states that if they want to avail of RCS, they must lower VAT on aviation turbine fuel (ATF) to one per cent or less. It hopes to roll out RCS in the second quarter of the financial year. The government also made it clear the VGF to be shared by the Centre and state governments will be in the ratio of 80:20 while for Northeastern states it will be 90:10. The government hopes to tap in to the “gold mine” of 350 unused airfields/airports in remote areas that have existed since World War II.

On the dropping of the 5/20 rule, Vistara CEO Phee Teik Yeoh called it “encouraging”, but added he would have preferred the 5/20 rule to be “completely abolished”.

In other features, an Open Skies Policy will be brought in on a reciprocal basis for Saarc countries and all countries beyond 5,000 km from New Delhi, a major push to make India an aircraft MRO (Maintenance, Repair and Overhaul) hub, a new ground-handling policy in which all domestic scheduled airlines and helicopter operators will be free to carry out self-handling at all airports and roping in of private security agencies for non-core aviation security functions.

Location: India, Delhi, New Delhi