This refers to the thought-provoking editorial, "Concessions cannot boost air traffic" (November 6). I fully endorse its views that "this is yet another example of government intervention in the market that should be resisted at all costs". It's equally true that airlines must choose their destinations on the basis of the traffic potential. In fact, various concessions being extended by the government in the form of tax rebates and other subsidies will soon become redundant if the air operators later find the new regional connectivity regime operationally unviable due to lukewarm response from the targeted passengers.
It is learnt that that the government, in its bid to 'woo' the airlines, is doing everything possible like waiving excise duty on aviation turbine fuel (ATF) and service tax on tickets, and also exempting travellers from paying passenger services fee, to enable short-haul air travel of a flying time of less than an hour at a fixed price of Rs 2,500. What is so sacrosanct about this out-of-the-box pricing of air tickets?
Interestingly, the civil aviation ministry is also contemplating levying a charge of two per cent (effective from January 1, 2016) on all domestic and international flights to subidise air travel on the proposed regional routes. This is intended to generate around Rs 1,500 crore per annum for the proposed regional connectivity fund. This fund is earmarked to provide viability gap funding (VGF) to airlines for capping air fares at Rs 2,500 per flying hour between non-metro stations from April 1, 2016. So this levy will start earning revenue for the government in advance.
Mind you, this is a crucial part of the draft national civil aviation policy that is currently under the public domain for seeking its opinion on the matter. It's a different matter that people may not approve of the government's move to go ahead without first properly assessing the expected volume of air traffic that will be generated from the targeted segments. There may also be strong opposition to the levy of a new charge of two per cent on flights currently operating in metros and other prominent cities across the country. Why rob Paul to pay Peter?
Moreover, while the VGF will be indexed to aviation turbine fuel and to inflation, it is pertinent to note that the proposed subsidy to enhance the air connectivity will be offered only to those states that reduce value added tax on ATF to one per cent or less.
While the proposed move is expected to put 50 airports in operational mode in the first two years, the moot question is, will the over-anxious states be able to rise to the occasion? As the editorial justifiably points out, "sops cannot stimulate air traffic", as exemplified by the failed instance of Andal in West Bengal. There could be many more examples.
In all fairness, the government should rationalise excise duty on ATF (across the board) for all domestic sectors, irrespective of the distance involved. Further, if the government ultimately goes ahead with its proposal to levy a charge of two per cent on domestic and international flights operating out of the metros and other key cities, natural justice demands that it be levied on base fare only.
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It is learnt that that the government, in its bid to 'woo' the airlines, is doing everything possible like waiving excise duty on aviation turbine fuel (ATF) and service tax on tickets, and also exempting travellers from paying passenger services fee, to enable short-haul air travel of a flying time of less than an hour at a fixed price of Rs 2,500. What is so sacrosanct about this out-of-the-box pricing of air tickets?
Interestingly, the civil aviation ministry is also contemplating levying a charge of two per cent (effective from January 1, 2016) on all domestic and international flights to subidise air travel on the proposed regional routes. This is intended to generate around Rs 1,500 crore per annum for the proposed regional connectivity fund. This fund is earmarked to provide viability gap funding (VGF) to airlines for capping air fares at Rs 2,500 per flying hour between non-metro stations from April 1, 2016. So this levy will start earning revenue for the government in advance.
Mind you, this is a crucial part of the draft national civil aviation policy that is currently under the public domain for seeking its opinion on the matter. It's a different matter that people may not approve of the government's move to go ahead without first properly assessing the expected volume of air traffic that will be generated from the targeted segments. There may also be strong opposition to the levy of a new charge of two per cent on flights currently operating in metros and other prominent cities across the country. Why rob Paul to pay Peter?
Moreover, while the VGF will be indexed to aviation turbine fuel and to inflation, it is pertinent to note that the proposed subsidy to enhance the air connectivity will be offered only to those states that reduce value added tax on ATF to one per cent or less.
While the proposed move is expected to put 50 airports in operational mode in the first two years, the moot question is, will the over-anxious states be able to rise to the occasion? As the editorial justifiably points out, "sops cannot stimulate air traffic", as exemplified by the failed instance of Andal in West Bengal. There could be many more examples.
In all fairness, the government should rationalise excise duty on ATF (across the board) for all domestic sectors, irrespective of the distance involved. Further, if the government ultimately goes ahead with its proposal to levy a charge of two per cent on domestic and international flights operating out of the metros and other key cities, natural justice demands that it be levied on base fare only.
S Kumar New Delhi
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201
E-mail: letters@bsmail.in
All letters must have a postal address and telephone number