Regional connectivity plan does not cover all routes

The new civil aviation policy aims to cap the fare for a one-hour flight to around Rs 2,500 under the Regional Connectivity Scheme (RCS), but all such journeys will not come under the ambit.

The Ministry of Civil Aviation will be enforcing the upper limit on fares on routes selected under the scheme only after the state concerned, too, shows interest. The cap on fares for a 30-minute journey could be Rs 1,250 and for a 45-minute journey around Rs 1,800.

Airlines will get a Viability Gap Funding (VGF) if they opt for the scheme, and also if it is flying to or from an airport which is presently unserved.  For example, an airline could get VGF if it flies between Delhi and Bhatinda that is at present unserved, but not Delhi-Chandigarh or Bengaluru-Mangaluru.

Though the ministry is planning to roll-out the scheme within three months, there is a lot of ground to cover. The ministry will first bring out a draft paper on how it plans to roll-out the scheme in the next 10 days, and it may take another month before finalising it.

Also, every unserved airport will not come under the scheme as the states will decide on which one to target. The RCS will be made operational only in those states which reduce VAT on Aviation Turbine Fuel (ATF) at such airports to 1% or less for a period of 10 years.

“The VGF indexed to ATF prices and inflation will be provided for a particular route, on a competitive bidding basis if necessary, for a period of up to 10 years from commencement of operation by an airline,” the policy stated. The VGF will be shared between the ministry and the state concerned in the ratio 80:20, and for Northeastern states it will be 90:10.

The full amount will be paid to the airline from the Regional Connectivity Fund (RCF) and the state concerned will be subsequently asked to reimburse its share. The RCF would be raised by imposing a levy.

The RCF levy per departure will be applied on all domestic routes other than CAT-II/CAT-IIA routes (Northeastern, Jammu & Kashmir, Andaman & Nicobar Islands and Lakshadweep), RCS routes and small aircraft below 80 seats, irrespective of the routes.

The rate will be decided by the ministry from time to time, but the draft policy has envisaged a 2% levy.