MoCA likely to retain Rs 2500 price cap for regional connectivity

Even as the civil aviation ministry mandarins are keeping their cards close to their chest pertaining to the possible provisions in the soon to be unveiled new policy for the sector, at the recently held Civil Aviation Summit in Delhi, there were enough hints from government quarters indicating the measures which could be part of the final package. The government has elicited response from all stakeholders on its draft policy and has by and large been praised for its emphasis on promoting regional connectivity to take the Indian aviation growth story to the next level. However, the proposal to put a cap of Rs.2500 as airfare for movement between two regional centers (less than an hour flight) has not exactly got the thumbs up response from all the stakeholders who would like fares to be determined by market forces.

But responding to the criticism, Gargi Kaul, Joint Secretary & Financial Adviser, Ministry of Civil Aviation emphasised that the price cap is a sound proposition to make penetration in new markets within the country. “I would say this is a progressive move. We clearly want to divert passengers from the high-end segments of the railways and this price bracketing could well entice them. This is the logic of having this price cap,” she emphasised while adding that viability gap funding provision is meant to offset the losses which airlines may incur while developing new routes. The government has proposed a 2 percent special cess from long haul, domestic, and international passengers which will be used for creating a corpus to promote regional connectivity. As per an industry estimate, this provision would create a fund to the tune of Rs.1500 crore in the first year.

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