Regional air link scheme may use e-auction path

It will employ MSTC for the bidding process which will start from next month

The civil aviation ministry will start the bidding process of routes under the regional connectivity scheme (RCS) from early next month and it has sought the coal ministry’s suggestions on e-auctioning.

The government will unveil the final RCS policy soon after which it will invite bids from the airlines wanting to fly on regional routes.

The Airports Authority of India (AAI), the nodal body entrusted to implement the ambitious scheme, has written to the coal ministry to share its experience on the modus operandi of the coal block e-auction process.

The civil aviation ministry will do the bidding of the routes through state-owned Metal and Scrap Trading Corporation (MSTC) — the body which conducts the coal mine and iron ore auction. A senior MSTC official confirmed the development and said the corporation was in the final stages of setting up the portal for the bidding process.

Earlier, the coal ministry had consulted the telecom ministry ahead of its bidding for mines, impressed by the latter’s successful 3G spectrum auction conducted a few years ago.

According to a senior AAI official, the idea to approach the coal ministry stemmed from the fact that it has also planned to sell power to distribution companies through reverse bidding process — the model which the civil aviation ministry will emulate for bidding of the RCS routes.

In amended guidelines for procurement of power by distribution utilities (or the discoms) on short-term basis (for a period of up to one year) through a competitive bidding route, the ministry of power said such procurement would be done on an electronic platform-based reverse auction system.

“We have approached the coal ministry for suggestions on the bidding process as it will be the first time this ministry (aviation ministry) will be undertaking such a process,” said a senior official of the civil aviation ministry. The reverse bidding method is used by the government to bring down the requirement of viability gap funding (VGF), which the airlines will require to subsidise their operational cost.

The Centre has proposed to cap fares at Rs 2,500 for a one-hour flight under the RCS. Airlines operating under the RCS will get viability gap funding and a host of other benefits such as lowers taxes and airport charges to promote regional connectivity.

The government has already notified setting up of a regional air connectivity fund for providing VGF to aircraft operators.

The Centre will share 80 per cent of the cost of VGF, while the states will contribute the remaining.