The draft Regional Air Connectivity Scheme (RCS) has been presented by the Ministry of Civil Aviation in New Delhi. The objective of scheme is affordable air travel, tourism promotion, increased employment and promotion of balanced regional growth. It also intends to revive un-served and under-served airports across the country, as presented in the Union Budget 2016.
To operationalise the scheme, aircraft and helicopter operators would be required to assess the demand on various routes and submit their proposal for providing connectivity on such routes. They would be required to earmark certain number of seats on every flight for the RCS. The fare for such seats would be capped based on flight distance and time. An index has also been prepared for airfare caps for the RCS seats for fixed wing aircrafts and helicopters depending upon the distance.
Airports Authority of India (AAI) will be the implementing agency for the scheme. The RCS route would have to include un-served airports (airports with no scheduled commercial flight) or under-served airports (airports with seven or less scheduled commercial flights per week). The RCS routes would cover a length between 200 to 800 km, but this criteria would not apply to hilly areas, islands, North-east region and helicopter operations.
The procedure for selecting airline operators would be based on reverse bidding mechanism. Two half-yearly cycles would be the basis for inviting and evaluating the proposal. Depending upon suggestions given by stakeholders, the parameters for financial proposal could be: viability gap fund (VGF) per RCS seat, total VGF per week, and combination of both. The selected airlines will enjoy a period of exclusivity on the awarded routes. The exact period would be fixed on the basis of suggestions by stakeholders.
The central government will support the RCS Scheme by levying an excise duty of only two per cent on aviation turbine fuel (ATF) purchased at RCS airports for a period of three years. The service tax will be levied at 10 per cent of the taxable value of tickets for RCS seats for a period of one year. The operating airline will be free to enter into code sharing arrangement with domestic and international airlines.
State governments will charge VAT of one per cent or less on ATF at RCS Airports for a period of 10 years. It will also provide security and fire services free of cost, besides providing electricity, water and other utility services at concessional rates.
Airline operators will exempt RCS flights from landing charges, parking charges, and terminal navigation landing charges. The selected airlines on their part would be expected to commit 50 per cent of the seats on RCS flights to be sold at the specified airfare cap. They would also be required to maintain a frequency of minimum three flights per week and maximum seven flights per week.
A Regional Connectivity Fund would be created to subsidise the operation of the RCS.
VGF would be calculated on normative basis, and VGF support for respective routes would be indexed to inflation and ATF prices which would be reviewed periodically. VGF support would also be linked to the passenger load factor.
The exit mechanism for selected airlines would be made easy after a period of one year. RCS draft will be placed in public domain for three weeks to enable stakeholders to give their suggestions, after which, details of the scheme will be finalised.