Govt may drop plan to impose 2% levy on air tickets

A government proposal to levy a 2 percent cess on domestic and international tickets to fund increased regional connectivity that would have led to a hike in air fares is likely to be dropped.

PTI| Last Updated: Mar 02, 2016, 22:09 PM IST
Govt may drop plan to impose 2% levy on air tickets

New Delhi: A government proposal to levy a 2 percent cess on domestic and international tickets to fund increased regional connectivity that would have led to a hike in air fares is likely to be dropped.

An indication to this effect was today given by Civil Aviation Secretary R N Choubey who said other means to raise funds for boosting regional air connectivity are being explored after the conclusion of discussions with stakeholders.

The Government in the revised draft policy, unveiled on October 30 last, had proposed 2 percent levy on all airfares to mop up funds for its regional connectivity scheme.

The proposal has, however, been opposed by various stake holders on the ground that an additional charge would only increase the ticket prices with the global airlines body IATA terming it as "against the International Civil Aviation Organisation's norms."

"The manner of raising that resource (funds for Viability Gap Funding) that the draft policy proposes by levying 2 percent cess is something that we are discussing," Choubey said.

The government had earlier planned to levy the proposed cess from January this year. However, it deferred the move due to its failure to finalise the draft civil aviation policy.

Regional Connectivity Scheme is one of the thrust areas of the draft policy.

Choubey said that the Ministry had received the stakeholders' comments, and "therefore we are discussing the manner in which the funds required for viability gap funding will be raised."

He said that regional connectivity can't take place unless there was "collective" money to do so.

"There is a need for collective money for VGF because the regional connectivity is not likely to happen without VGF," he said.

Choubey also said that the draft civil aviation policy is expected to be taken to the Union Cabinet for its approval by the end of this month.

"We are hopeful of getting Cabinet approval to the policy by the end of this month," he said, adding,"From April onwards, we hope it to be effective."

The Ministry has assigned various possible deadlines for seeking Government's nod to the draft policy on several occasions in the past with the last being January.

On the vexed issue of 5/20 norm, which makes it mandatory for an Indian airline to have five years of domestic operational experience and at least 20 aircraft in the fleet for international flying, Civil Aviation Minister Ashok Gajpathi Raju evaded a direct response.

"We have to come to a conclusion. Regulations have to be meaningful," Raju, who is in favour of removing the regulations, said without giving any timeline for a final call on the issue.

The rule has divided the industry in two groups, with the startup carriers Vistara and AirAsia India lobbying for its removal while older airlines under Federation of Indian Airlines (FIA) want it to be retained.

Seeking to defend the inordinate delay in the finalisation

of the policy, which claims to change the landscape of the Indian aviation, Choubey said that "government's effort is to find the best possible solution to various issues so that the civil aviation sector takes off.

The draft policy proposes providing viability gap funding for airlines for regional connectivity, setting up of no-frills airports, making India as a hub for maintenance, repair and overhaul (MRO) industry besides various tax sops to spur the growth of the industry, among others,

Besides, the policy also proposes capping of airfares at Rs 2,500 for one-hour flight under regional connectivity scheme for places that are un-served currently as well as auctioning of bilateral rights.

Pointing out that the country never had an "integrated national civil aviation policy but only sectoral ones", Choubey said the government is trying to bring an integrated policy which is "bound to take time."

After taking comments from all stakeholders including airlines, airport operators, general aviation firms, ground-handling agencies, among others, a group of ministers under Union Home Minister Rajnath Singh had discussed the draft policy late last month.