The civil aviation ministry has decided to scrap the existing rule under which it is mandatory for domestic carriers to deploy 10% of their capacity to non-viable routes which include north eastern states, Jammu & Kashmir and Andaman & Nicobar Island.
Instead airlines wanting to fly designated routes which are considered non-viable will be given subsidy through the recently floated Essential Air Services Fund (EASF). This will be funded partly through central government budgetary support and partly by imposing a cess on passengers who are flying between the country’s metros. Also state governments will be asked to underwrite some seats on these routes to support the domestic carriers.
The list for non-viable routes (which are known as Category 2) apart from the current locations will be extended and re categorized to include other regional connections which do not make money currently.
The changes planned will be incorporated in a new regional connectivity policy which is expected to be announced with a month by the Government.
Explaining the parametres of the new policy a senior civil aviation ministry official said that they have seen a lot of anomalies in airlines trying to comply with the present route dispersal guidelines (RDG) which mandates them to fly 10% of their capacity (Available Seat Kilometers - ASKM) to non-viable sectors like North East etc. “The airlines fly bigger planes to commercially viable destinations like Guhawati and Dibrugarh within the North-East category to adhere to the 10% requirement, while connectivity to other remote areas suffers. That is why we have decided to scrap the 10% rule and come out with a new alternative where they will get subsidy”.
Presently, Air India is the only domestic carrier which is flying around 17-18% of its capacity to commercially non-viable routes.
The civil aviation ministry official said that the change might not have an impact of raising fares in metros; it will only make the process more transparent. “Right now also, the airlines cross-subsidize non-viable routes via metro route travelers but the amount that the traveller has to pay is unknown. With the new system he will know what he is paying. So, we do not expect fares to hike with the levy of this cess,” the ministry official added.
The revamped policy of regional air connectivity will also include concessions for carriers flying in Tier 3 and 4 cities on air traffic control charges. Currently Airport Authority of India (AAI) does not charge any landing or parking charges on 80 or less than 80-seater plane. It is making losses of more than Rs 100 crore on airports of North-East.
Apart from this, state governments will also be asked to reduce sales tax on Aviation Turbine Fuel (ATF) if they intend to attract private carriers to fly to their destination. The sales tax on ATF at around 24% is among the highest in the world, next only to Bangladesh at 27%.
However, some experts believe that passing the buck to the state governments for increase in non-profitable-airports-connectivity may not be practical.
