Passenger Service Fee (PSF), Development Fee (DF) and User Development Fee (UDF) will not be imposed on the air tickets issued under the Regional Connectivity Scheme (RCS) says the draft policy framework released by the government. This means the airfare under the scheme will purely be distance based. As proposed, a flight up to 225 kms could be capped at less than Rs 2,000 (Rs 1,770) or under Rs 8 per kilometer. And a flight up to 800 kms would cost Rs 4,070) or Rs 5 per kilometer, the draft says.
While the slabs for fixed wing aircraft are measured in kilometers, for chopper services it is measured on time.
Therefore, for the helicopter service under regional connectivity scheme, the first 30 minutes are proposed to be capped at Rs 2,500. For a chopper service between 31 minutes to 35 minutes, the cap will rise by Rs 400 to touch Rs 2,900. And for a chopper ride of 56-60 minutes, the cap will be Rs 5,000.
The draft proposal has sought comments for finalizing these airfares from the stakeholders.
For a fixed wing flight under the scheme, a 501-525 km service could be capped at Rs 2,500 while a 700 km service could be capped at Rs 3,540. When it comes to Viability Gap Funding given to airlines by the government, an airline would get Rs 4,170 for a ticket for a 776-800 km journey on fixed-wing aircraft. For the 501-525 km slab, the VGF could be a maximum of Rs 3,790.
As proposed, the government will not provide any VGF for a chopper ride less than ten minutes. But for a helicopter ride of 11-15 minutes, the VGF would be Rs 1,200, for 16-20 minutes ride, it would be Rs 2,400 and for a 60 minutes chopper service, the VGF could be Rs 7,200.
Basics Of RCSThe Draft Regional Air Connectivity Scheme will be placed in public domain for three weeks to enable Stakeholders to give their suggestions. After this the details of the scheme would be finalized. To operationalize the Scheme Aircrafts 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.
Airport Authority of India will be the implementing Agency for the Scheme. The RCS route would have to include un-served airports i.e. airports where there is no scheduled commercial flight or under-served airports i.e. airports which have 7 or less scheduled commercial flights per week. The RCS routes would cover a length between 200 to 800 km. But these criteria would not apply to hilly areas, islands, North-east region and for helicopter operations.
The Central Government will support the RCS Scheme by levying an excise duty of only 2 per cent on Aviation Turbine Fuel (ATF) purchased at RCS Airports for a period of three years. The service tax will be levied at only 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. The regional connectivity scheme is expected to result in a 3 fold increase in air passengers.
The State Governments will charge Vat of 1 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. The Viability Gap Fund (VGF) would be calculated on normative basis. The VGF support for respective routes would be indexed to inflation and ATF prices which would be reviewed periodically. The 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.
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Ashish Sinha is an experienced business journalist who has covered FMCG, auto, infrastructure, tourism, telecom among several other beats. Ashish has keen interest in the regulatory scenario impacting different sectors. He writes on aviation, railways, post and telegraph, infrastructure, defence, media & entertainment, among a wide variety of other subjects.
