Civil Aviation Minister Ashok Gajapati Raju on Friday said first flight under the Regional Connectivity Scheme at Rs 2,500-per-hour fare is expected to take off in January 2017. “We are cautiously optimistic about it,” he added while launching UDAN (Ude Desh Ka Aam Naagrik).
His comments came against the backdrop of some airlines expressing unhappiness with the proposal to charge a levy for funding the scheme.
Civil Aviation Secretary RN Choubey said the rules related to the levy will be printed in the gazette in two days and executive order in this regard will be ready by month-end. “The levy will be very small,” he added.
Charging a levy on profitable routes is likely to push up the airfare on major routes.
“This is first of its kind globally... We are doing something not done anywhere else,” said Minister of State Jayant Sinha on the occasion.
The fares will be capped at Rs 2,500 for one-hour flights on un-served and under-served routes. For helicopters, this cap is Rs 5,000 for an hour of
flying.
“The idea of the scheme is to get those, who wear hawai chappals, on to hawai jahaj,” added Sinha.
Airlines operating under the scheme will be provided viability gap funding (VGF), which will be shared by the Centre and the States concerned for a limited period.
The selected airlines will also be extended various concessions, including two per cent excise duty on jet fuel drawn at RCS airports as well as lower VAT on the fuel.
The Civil Aviation Ministry will create a Regional Connectivity Fund (RCF), which will be funded by a “levy or fee per departure on all domestic flights other than the ones on Category II/Category IIA routes under Route Dispersal Guidelines (RDG), RCS routes and flights using small aircraft below 80 passenger seats.
Under UDAN, airfares would be capped at Rs 2,500 for half of the seats in flights travelling a distance of 476-500 kilometre. This translates to around a one-hour journey. But other half of the seats would be market driven.
The scheme envisages providing connectivity to un-served and under-served airports of the country through revival of existing airstrips and airports. The scheme would be in operation for a period of 10 years.
A participating carrier has to bid for at least nine seats and a maximum of 40 seats. In the case of a helicopter, the operator has to bid for a minimum of five seats and a maximum of 13 seats.
“The scheme has to be economically viable,” added Raju. “Airfare for all passenger seats on an RCS flight will not be subject to any levies or charges imposed by the airport operators... Service tax will be levied on 10 per cent of the taxable value (abatement of 90 per cent) of tickets for all
passenger seats on RCS flight, without any input credit,for an initial period of one year from the date of notification of the scheme,” the Minister said.
The Government has invited proposals from operators to fly to airports which do not have regular flights now.
The Government plans to upgrade 50 un-served and under-served airports in the country, which would further boost air connectivity pan-India. There are 394 un-served and 16 under-served airports.
Operators have a six week window (till December 2) to submit their initial proposals. The Government will take two to three days to scrutinise the proposals and the entire process is likely to take 10 weeks to complete.
Two weeks after the initial scrutiny by the Government it will invite counter proposals from various operators keen to operate on RCS routes and announce the winner within 14 days.
“Depending on airlines’ responses we will be able to start regional flights by January,” he said.
The States have a key role under the scheme. The selection of airports where UDAN operations would start would be done in consultation with State Government and after confirmation of their concessions. It may be recalled that revival of dysfunctional airports and starting operations on un-served airports has been a long standing demand of most States and this will be addressed through UDAN to a large extent.
The UDAN is likely to a give a major fillip to tourism and employment generation in the hinterland. Through introduction of helicopters and small aircraft, it is also likely to significantly reduce travel timings in remote and hilly regions, as well as islands and other areas of the country.