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Regional Air Connectivity Scheme to Make Regional Air Travel Affordable

The Union Minister for Civil Aviation, Shri Ashok Gajapathi Raju Pusapati and the Minister of State for Culture (Independent Charge), Tourism (Independent Charge) and Civil Aviation, Dr. Mahesh Sharma addressing the media on Regional Connectivity, in New Delhi on July 01, 2016. The Secretary, Ministry of Civil Aviation, Shri R.N. Choubey is also seen.

Civil Aviation Minister Ashok Gajapathi Raju Pusapati and MoS Civil Aviation Dr Mahesh Sharma addressing the media on Regional Connectivity in New Delhi as Civil Aviation Secretary RN Choubey looks on

New Delhi. The Draft Regional Air Connectivity Scheme (RCS) was presented by the Ministry of Civil Aviation in the presence of the Minister for Civil Aviation Ashok Gajapathi Raju and Minister of State, Civil Aviation Dr Mahesh Sharma in New Delhi July 1.

The objective of Regional Connectivity Scheme is to make flying affordable for the masses, to promote tourism, increase employment and promote balanced regional growth.  It also intends to put life into un-served and under-served airports.

To operationalise the Scheme, aircraft and helicopter operators would be required to assess the demand on various routes and submit their proposal for providing connectivity on such routes. They would be required to earmark certain number of seats on every flight for the RCS. The fare for such seats would be capped based on flight distance and time. An index has also been prepared for airfare caps for the RCS seats for fixed wing aircrafts and helicopters depending upon the distance (details can be seen in the presentation enclosed below).

Airport Authority of India will be the implementing Agency for the Scheme. The RCS route would have to include un-served airports i.e. airports where there is no scheduled commercial flight or under-served airports i.e. airports which have seven or less scheduled commercial flights per week. The RCS routes would cover a length between 200 to 800 km. But this criteria would not apply to hilly areas, islands, north-east region and for helicopter operations.

The procedure for selecting airline operators would be based on reverse bidding mechanism. Two half-yearly cycles would be the basis for inviting and evaluating the proposal. Depending upon suggestions given by stakeholders the parameters for financial proposal could be (1) VGF per RCS seat (2) Total VGF per week (3) combination of (1) and (2).  The selected airlines will enjoy a period of exclusivity on the awarded routes. The exact period would be fixed on the basis of suggestions by stakeholders.

The Central Government will support the RCS Scheme by levying an excise duty of only two per cent on Aviation Turbine Fuel (ATF) purchased at RCS Airports for a period of three years. The service tax will be levied at only 10 per cent of the taxable value of tickets for RCS seats for a period of one year. The operating airline will be free to enter into code sharing arrangement with domestic and international airlines.

The state governments will charge VAT of one per cent or less on ATF at RCS airports for a period of 10 years.  It will also provide security and fire services free of cost, besides providing electricity, water and other utility services at concessional rates.

Airline Operators will exempt RCS flights from landing charges, parking charges, and terminal navigation landing charges.

The selected airlines on their part would be expected to commit 50 per cent of the seats on RCS flights to be sold at the specified airfare cap. They would also be required to maintain a frequency of minimum, three flights per week and maximum seven flights per week.

A Regional Connectivity Fund would be created to subsidise the operation of the RCS.

The Viability Gap Fund (VGF) would be calculated on normative basis. The VGF support for respective routes would be indexed to inflation and ATF prices which would be reviewed periodically. The VGF support would also be linked to the passenger load factor.

The Exit Mechanism for selected airlines would be made easy after a period of one year.

The Draft Regional Air Connectivity Scheme will be placed in public domain for three weeks to enable stakeholders to give their suggestions. After this the details of the scheme would be finalised.