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  India   Udan: Big boost to air travel

Udan: Big boost to air travel

AGE CORRESPONDENT
Published : Oct 22, 2016, 7:00 am IST
Updated : Oct 22, 2016, 7:00 am IST

The Centre unveiled on Friday its plan to boost air travel, connecting small towns with cities by capping the fare for one-hour flights (about 500 km) at Rs 2,500 for half of the seats in each flight.

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 AI.jpg

The Centre unveiled on Friday its plan to boost air travel, connecting small towns with cities by capping the fare for one-hour flights (about 500 km) at Rs 2,500 for half of the seats in each flight.

As per the Regional Connectivity Scheme (RCS), re-christened as the “Ude Desh ka Aam Naagrik” or Udan, the fare has been capped at Rs 3,500 for a distance of 800 km and beyond for 50% of seats on flights.

The first flight under the Udan scheme will take off in January, 2017, civil aviation minister Ashok Gajapathi Raju said.

The scheme applies to an “unserved” or “underserved” airport to another or to a major airport. The distances covered are from 151 km to 800 km and above and the fare caps vary accordingly. For instance, the fare-cap for the minimum distance of 151 to 175 km is Rs 1,420.

The government now proposes to levy a “very small amount” per flight departure as part of the viability gap funding (VGF) for the scheme. The scheme is part of the Modi government’s bold move to make flying cheaper for the common man on less-frequented aviation routes.

As per the initial proposal, an amount of Rs 8,000 per domestic flight departure was being suggested which will translate to about Rs 60 per passenger if the airlines pass on the cost to the passenger. When asked about objections and reservations raised by some airlines against the proposed cess, civil aviation secretary RN Choubey said the government “did not agree” with such views and that any money raised would “remain within the aviation sector”.

Sources said even if airlines passed on the cost of the levy on passengers, it would only mean that the government was collecting money from one set of passengers travelling on metro routes and giving it as a subsidy to another set of passengers. But speculation was rife that some of the airlines may move court on the issue any cess being levied.

Some aviation-watchers feel the UDAN may not be economically viable, even as Mr Raju said the scheme could only succeed if it was economically viable. But the minister added that the ministry would work towards “proving prophecies of doom wrong”. The Minister added, “We are cautiously optimistic about it (UDAN).” Meanwhile, minister of state for civil aviation Jayant Sinha said, “This is the first of its kind globally... We are doing something not done anywhere else,” he said.

According to news agency reports, while opposing the levy, low cost carrier SpiceJet’s chairman and managing director Ajay Singh said that perhaps the government should fund the scheme from its own budget. “When you build a railway station it is not that you start penalising passengers for that railway station. So, we oppose it from the perspective that surely there could be other ways to fund the scheme which is nationally so important,” Singh was quotes as saying, in his reaction.

The government also said MoU’s had been signed with five states on the UDAN scheme already, adding that “every single state” was on board. States have to pay 20 per cent of the scheme cost with the remaining 80 percent being paid by the Centre, with the North-eastern states having to pay only 10 percent of the costs. The government said it had increased the VGF in the final version of the UDAN scheme compared to the draft version.

There will be a competitive bidding process through a reverse bidding mechanism (lowest Tender quotation or L1) which will take place in January. Proposals and counter-proposals will be invited in the next two to three months. Once the winning bid is selected, the winner will have exclusive rights to operate on that route for three years.

“Unserved” airports refers to airports where no commercial flight has operated for the past one year while “underserved” airport refers to airports that don’t have more than seven commercial flights per week. These will become “Udan” airports once the respective State governments identify them as such.

Concessions are being provided by the Union Government also in the form of reduced excise duty and service tax, while state governments will have to lower the VAT on ATF to one percent or less besides providing security and fire services free of cost while electricity and water are to be provided at concessional rates.

Airport operators have been asked not to impose landing and parking charges in this scheme.

While about 70 airports in the country currently have commercial scheduled operations, the Government plans to add another 50 airports to the UDAN network and is also looking at 350 airstrips across the country.

Location: India, Delhi, New Delhi