To push regional connectivity, govt may provide viability gap funding to airlines

Our Bureaus Kolkata/Delhi | Updated on January 23, 2018 Published on August 27, 2015

Cess likely to get airlines to fly to less ‘popular’ regional airports

The Centre is looking at providing viability gap funding to scheduled airlines to ensure regional connectivity.

The proposal is likely to form part of the draft civil aviation policy, which was discussed at an over three-hour meeting attended by Prime Minister Narendra Modi in the Capital on Tuesday evening.

Industry sources told BusinessLine that the proposals include creation of a fund — by imposing a ‘nominal’ cess on the ticket — that will be used to attract airlines to less popular regional airports such as Raipur, Vizag or Indore. The cess could be as much as 2 per cent of the cost of the ticket, sources indicated.

To keep a check on the subsidy outgo, the government may consider holding a reverse auction. That is, the airline that seeks the least financial support will get the subsidy for connecting particular airport(s).

Incidentally, a similar proposal, mooted during the UPA II regime, remained stillborn.

Currently, the Centre subsidises airliners flying to the seven North-Eastern States, which rely on air travel due to lack of rail or road connectivity. The subsidy is offered through the Ministry of Development of North East Region (DONER). Also, scheduled airlines are required to deploy 10 per cent of the capacity used on profitable trunk routes (connecting major cities) to link up the North-East, Jammu and Kashmir, Andaman and Nicobar and Lakhsadweep.

While no official confirmation was available on the issue, sources said that the Prime Minister wanted the financial impact of the proposals worked out before releasing the draft guidelines are put up for public consultations before the government takes a final view.

Apart from viability gap funding to airlines, there are also proposals for offering infrastructure status to the aviation sector to help it access credit at lower rates of interest. The new policy also looks at reducing the cost of operations for airlines by looking at various issues including taxation of aviation turbine fuel and airport costs.

Published on August 27, 2015
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