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Indians will have to shell out more for domestic and international air travel if a proposal in the draft aviation policy to levy a 2 per cent cess on flight tickets is accepted. The funds are to be spent for improving regional air travel infrastructure.
However, the proposal seeks to exempt flights operating on CAT IIA routes and under the regional connectivity scheme. Routes connecting airports within the North-East, Jammu and Kashmir, Andaman and Nicobar Islands, and Lakshadweep are termed CAT IIA.
The ₹1,500 crore collected annually from the cess will be used for viability gap funding (VGF) to operate flights in remote areas. The draft policy proposes to create a Regional Connectivity Fund for VGF. It wants the VGF shared by the Centre and the States in the 80:20 ratio. The draft policy, which will be in public domain for the next three weeks for stakeholders’ comments, has also suggested creating a regional connectivity scheme from next April, with fares capped at ₹2,500 for flights of about one hour in remote areas.
Boost to MRO sector To give a boost to the domestic maintenance, repair and overhaul (MRO) sector, the draft policy says MRO services will be service tax exempt. It adds that States will be persuaded not to levy VAT.
It also proposes that MRO, ground handling, cargo and ATF infrastructure at an airport get infrastructure status, with benefits under Section 80-IA of the Income-Tax Act.
The draft policy proposes ‘open skies’ for countries within a 5,000-km radius with effect from April 1, 2020.
Further, it suggests increasing FDI in the domestic aviation sector to above 50 per cent if the government decides to go in for open skies.
The draft also talks of adding more routes, and plans to bring in greater operational efficiencies by allowing airlines to change routes between CAT II and CAT III airports by intimating the Civil Aviation Ministry and the Directorate-General of Civil Aviation 30 days in advance.
The draft says the permission of the Ministry will be required for withdrawing operations to and within the North-East region, Andaman & Nicobar Islands, and Ladakh.
5/20 rule The draft policy has come up with three alternatives to the 5/20 rule — retain it, scrap it, or allow airlines to fly to SAARC nations if they have earned 300 domestic flying credits.
For flying to other international destinations, 600 domestic flying credits are required.
A final decision on the 5/20 rule will be taken by the Cabinet.
An airline earns more domestic flying credits if it operates to remote areas than what it earns if it operates between metro cities or between tier II cities.
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