India may witness a mobile phone like revolution in the skies, as the Narendra Modi government is planning to make air travel affordable for common man by putting a cap on airfares at Rs 2,000 or Rs 2,500 per passenger on short distance flights.
The government will bear the extra charge if the cost incurred by an airline exceeds the proposed limit on air tickets. The amount will be paid by levying a cess on national and international flights.
A proposal being weighed by the civil aviation ministry will permit carriers to bid for license to operate flights between many small towns and cities where the travel time is one hour. The proposal has already received in-principle approval from Prime Minister Narendra Modi.
India can emerge as the world's third-largest aviation market if the country enables its 300 million middle class people to travel by plane "at least once a year" by initiating the above measures, a senior civil aviation ministry official, told The Economic Times.
"The operator seeking lowest viability gap funding for a particular route will be allowed to operate for a period of time. The deficit arrived at through bidding would be funded through a regional connectivity fund to be created by the central government," said the official.
However, there is a limitation for the above scheme, as the government proposes to make it applicable to cities in states that have reduced "VAT on jet fuel to 5 per cent or less." A lowered VAT would cut down the costs of operators resulting in cheaper air fares.
Flights connecting smaller cities in the country are likely to start operating from the next fiscal year as the government may announce "a service tax waiver for these routes" in the FY17 Budget, said the official.
While small aircraft operators are of the view that the new aviation policy will work out well, a passenger body wants to oppose the proposal as the cess planned would lead to an increase in airfares.
"It will not work between smaller cities as alternative models like roads and railways between smaller cities is much more effective than taking a flight. We would also oppose the proposal of a cess, as that would increase fares for passengers," said D Sudhakara Reddy, president, Air Passengers Association of India.
