NEW DELHI, Oct 30: Fliers may have to pay 2 per cent more towards a new regional connectivity levy proposed under the much-awaited draft civil aviation policy, which also proposes various tax sops and over 50 per cent FDI for the Indian carriers.
Among other measures, the policy proposes setting up of no-frills airports and providing viability gap funding for airlines for regional connectivity. Further, fare would be capped at Rs 2,500 for one-hour flight under regional connectivity scheme for places that are unserved currently.
In a possible game changing move, the Ministry has also pitched for over 50 per cent FDI in domestic carriers in case open skies policy is implemented. Under open skies policy, overseas airlines can operate unlimited number of flights into and out of India. At present FDI limit is 49 per cent.
The policy, which was unveiled here today by the Civil Aviation Ministry and was described as ‘progressive’ by leading carriers IndiGo and SpiceJet, however did not provide a finality on the fate of the contentious 5/20 norm that makes it mandatory for airlines to have minimum five years of flying experience and 20 aircraft to fly abroad.
The Ministry has now sought comments on three options — abolish the 5/20 norm completely, continue with it, or link the overseas flying rights with domestic flying credits.
The Ministry said the policy, which has been in making for almost a year after issuing the original draft, is aimed at taking “flying to the masses”. The proposed 2 per cent levy on all domestic and international tickets can bring in Rs 1,500 crore a year that would be used to expand regional routes.
The final policy is expected to be decided in a couple of months after looking into comments on all draft proposals. Public comments have been invited over the next three weeks, after which inter-ministerial consultations would be held.
Noting that the revised draft policy has been rolled out after wide range of consultations which were “never done before”, Civil Aviation Minister Ashok Gajapathi Raju said, “we have proposed. Let us get the feed back.”
Civil Aviation Secretary Rajeev Nayan Choubey said, “The draft policy is in line with the Prime Minister’s directives that it (policy) should promote aviation in a big way and take flying to masses.”
“The Government expects about Rs 1,500 crore annually from charging 2 per cent levy ” Choubey added.
To make MRO (Maintenance Repair, Overhaul) cheaper, the Government has proposed to exempt such activities from service tax net and not levy any VAT. The policy also envisages making India an Asia hub for MRO business.
Start up carriers like Vistara or AirAsia India have been pitching for removal of 5/20 norms — whereby local airlines can fly overseas only when they have five years of operational experience and at least a fleet of 20 aircraft.
To boost regional connectivity, the policy has proposed various concessions such as state Governments providing free land and lowering the valued added tax (VAT) on ATF to 1 per cent or less.
There would be no service tax on tickets under the Regional Connectivity Scheme (RCS), apart from service tax exemption for scheduled commuter airlines taking jet fuel from RCS airports.
For regional connectivity, 80 per cent of the viability gap funding would be shared by the Centre and the rest by the states concerned. No-frills airports are also being proposed to be set up at a cost of Rs 50 crore.
The revised policy has floated the concept of Scheduled Commuter Airlines (SCAs) which would have relaxed norms and those entities would not be liable to pay airport charges for operations under RCS.
SCAs can be set up with a minimum paid-up capital of Rs 2 crore and their aircraft would have a capacity of 100 seats or less. These entities can also enter into code-share arrangements with other airlines.
Seeking to provide a more friendly Maintenance, Repair and Overhaul (MRO) regime in the domestic market, the ministry has proposed exemption from service tax for those activities and simplified Customs clearance procedures.
“MRO, ground handling, cargo and ATF infrastructure co-located at an airport will also get the benefit of infrastructure sector, with benefits under Section 80-IA of Income Tax Act,” Choubey said.
Various measures have been mooted for rationalisation under route dispersal guidelines as well as for liberalised bilateral rights framework.
Domestic carriers would be allowed to enter into code-share pacts with foreign airlines without prior approvals.
“A review will be carried out after five years to consider the requirement of further liberalisation in code share agreements and drop the requirement of reciprocity,” Choubey said. (PTI)
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