Aviation cess to be implemented from New Year

New Delhi: An aviation cess of about two percent on all flights will be implemented from January 1, next year, which will be used for promoting regional connectivity, a senior civil aviation ministry official said on Friday.

The cess is proposed under the new draft civil aviation policy which was released on October 30. The policy has been put in public domain to garner feedback and suggestions from all stakeholders before finalisation.

The information about the implementation date of the new cess was disclosed by the Civil Aviation Secretary Rajeev Nayan Choubey during a press briefing on the draft civil aviation policy here.

“The policy will be presented to the cabinet for final approval. We are seeking stakeholders suggestions and feedback till November 21, couple of weeks after that a final draft will be prepared and presented to the cabinet,” the secretary said.

“The cess is expected to be imposed from January 1, 2016. The capital accumulated from the cess will go to a special fund which will be used to promote regional connectivity.”

The new draft civil aviation policy calls for levy of two percent cess on all domestic and international tickets on all routes other than (instrument landing system) Cat IIA and RCS (regional connectivity scheme).

According to the secretary, the funds from the cess will be used primary to promote regional air connectivity and viability gap funding for the operators.

“The policy aims at creating an ecosystem for the growth of aviation. In this we have to take care for the airlines, airport developers and passengers. The funds from the cess will go into funding the RCS scheme,” Choubey said.

“The scheme is expected to come into implementation from April 1, 2016 after cabinet gives its approval, therefore funds should be in place, as and when that happens.”

The policy envisages low tariff of no more than Rs.2,500 per ticket for each flying-hour with a host of incentives and other benefits to both airport developers and operators.

On the controversial the issue of replacing or modifying the overseas flying eligibility rules for airlines, the secretary said the government has given a set of options to the stakeholders to choose from.

“We wanted to get formal suggestions and feedback from all the stakeholders before finalisation of the policy. We have given some options regarding the rule. The stakeholders can also give more suggestions and ways to deal with the rule,” the secretary said.

The draft policy has proposed three ways forward on allowing domestic airline operators to fly abroad: One, to continue with the existing norm of five-year operation with a 20-aircraft fleet. Two, to abolish this altogether. Three, airlines be allowed to fly to SAARC nations if they have earned 300 domestic flying credits and for other countries, 600 domestic flying credits.

A final decision on the 5/20 rule will be taken by the cabinet, the secretary said.

Currently, the norms prescribe that only those carriers that have been in operation for five years and have a fleet of 20 aircraft can fly abroad.

Among the seven main scheduled airlines in the country, only four meet the requirements — Air India, Jet Airways, SpiceJet and IndiGo. Three others are ineligible including GoAir, Vistara and AirAsia India.

Several aviation research institutions such as the Centre for Asia pacific Aviation have described the 5/20 rule as being damaging, discriminatory and anti-competition, besides preventing carriers from optimal fleet utilisation and expansion.

However, any relaxation of the compliance rule is being stiffly resisted by older airlines which cite huge losses on account of meeting the stringent norms.

The secretary elaborated that the policy will be hugely benificial to the sector and the public at large.

“The policy intend to make flying possible for the masses in a most efficient and economically viable way possible. It will also take care of the airline and airport operators,” the secretary said.

“Our aim is to create an ecosystem that will enable 30 crore domestic tickets per annum by 2022 and 50 core by 2027. Similarly, increase the international ticketing to 20 crore by 2017.”

Indian carriers ferried 67.38 million domestic passengers in 2014, to register a growth of 9.7 percent over the 61.43 million in the previous year. In the first nine months of this year, 59.02 million passengers were ferried to log a growth of 20.1 percent.

According to the official Make in India campaign, the domestic Indian civil aviation market — which has around 14 scheduled operators — is the ninth largest in the world and is projected to occupy the third spot by 2020.

Stakeholders and the public have been given three weeks time to send their comments on the draft policy. After these are considered, the ministry intends to notify the policy in about two months time, Choubey added.