In order to ensure a successful implementation of the regional connectivity scheme (RCS) or the UDAN scheme, four states — Haryana, Tripura, Arunachal Pradesh and Nagaland — have agreed in principle to reduce the value-added tax (VAT) on jet fuel to just 1% from the current levels for flights which will operate on the RCS routes, according to sources in the AAI and the ministry of civil aviation (MoCA). As of now, 20 states have either signed a memorandum of understanding (MoU) or given in-principle approval to MoCA regarding implementation of the scheme. Last month the state government of Delhi reduced VAT applied on aviation turbine fuel (ATF) for flights on the RCS routes to the North-Eastern states.
The government’s policy on RCS has capped the fare on such flights and by reducing the duty on ATF, the state government will be contributing its share to make them viable. Under RCS, fares would be capped at R2,500 for half of the seats on a one-hour flight. To minimise operational cost on these routes, the state and central governments will implement a host of concessions.
“We now have 20 states on board for the implementation of the RCS scheme and will also announce the name of the bidders shortly. Most of the states have given their consent to give concessions barring a few. Hopefully the rest will also come on board before the implementation of the scheme,” said an Airports Authority of India (AAI) official on condition of anonymity.
According to the data provided by the ministry of civil aviation, there are 12 under-served airports and 50 unserved airports across the country. The RCS scheme was conceived in the first civil aviation policy of the country and will be implemented from May.
The central government will restrict excise duty on aviation turbine fuel to 2% and fund 80% of the viability gap funding (VGF), the state-owned airport operator AAI will waive landing and parking charges, among other fees. The state government will share the rest of the VGF and also reduce the VAT on ATF to 1%.
Further, the states will have to provide fire and security services at the airport free of charge. A small cess will be levied on tickets for non-RCS routes.