Finance Ministry okays 2% fee on metro air routes for regional fund

By: |
New Delhi | Published: November 26, 2015 8:23:59 AM

Fares may be capped at Rs 2,500 per flying hour

arun jaitley finance ministryThe Ministry of Finance has given its nod for levying a two per cent fee on air tickets on metro routes and setting up a regional connectivity fund (RCF) to subsidise air travel between identified non-metro destinations. (Reuters)

The Ministry of Finance has given its nod for levying a two per cent fee on air tickets on metro routes and setting up a regional connectivity fund (RCF) to subsidise air travel between identified non-metro destinations.

The FinMin has also consented to waive central excise duty on jet fuel and service tax on tickets on regional routes to cap fares at about Rs 2500 per flying hour and give wing to the civil aviation ministry’s proposal to air link remote and regional areas under the revised regional connectivity scheme (RCS).

Sources in the ministry of civil aviation informed a charge of 2 per cent on all domestic and international flight tickets sold within the country is being considered for levy from Jan 1, 2016. The move will help generate around Rs 1,500 crore per annum in Regional Connectivity Fund (RCF) and 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.

“The FinMin has given its consent to setting up a fund as per the regional connectivity plan. They have also agreed to waiving excise duty on ATF and service tax on tickets on regional flights,” said a senior ministry official who did not want to be identified.

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.

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.

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.

The civil aviation ministry is currently identifying the airports which can be operationalised to enhance regional connectivity. 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”, added the official.

Fares may be capped at Rs 2,500 per flying hour

* FinMin has also consented to waive central excise duty on jet fuel and service tax on tickets on regional routes to cap fares at about Rs 2,500 per flying hour and give wing to the aviation ministry’s proposal to air link remote and regional areas

* The move will help generate around Rs 1,500 crore per annum in Regional Connectivity Fund (RCF) and will be utilised to provide VGF to airlines for capping fares at about Rs 2,500 per flying hour

* The civil aviation ministry is currently identifying the airports which can be operationalised to enhance regional connectivity

Do you know What is Centrally Sponsored Scheme, Non Tax Revenue, Non Debt Capital Receipts, Consolidated Fund of India, Disinvestment? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Next Stories
1FM Arun Jaitley to talk to Congress on GST
2Lodha Developers sells triplex apartment on Mumbai’s Altamount Road for Rs 150 cr
3Neelachal Ispat Nigam goes for 5/25 to avoid becoming an NPA