Government drops plan to cap airfares

A govt official says there is consensus among the airlines and the ministry that fixing an upper limit in airfares will not be a constructive idea

The government has abandoned the plan to cap airfares on domestic routes and will let the market determine the price. According to an official in the ministry of civil aviation, there is consensus among the airlines and the ministry that fixing an upper limit in airfares will not be a constructive idea.

"The airlines are competing among themselves to acquire customers. In such a situation, there is no need to cap fare," said the official.

According to the official, given the lesser number of flights on regional routes, airlines tend to over charge. "The government is keenly observing the fares charged on such routes and will do everything that is necessary to make air travel affordable in remote routes," said the official. The draft civil aviation policy had proposed a cap of Rs 2,500 on one-hour flights in regional routes.

"Earlier, there used to be uproar over higher fares in Parliament, especially during winter sessions. This time, it was different as the fares did not shoot up above average," the official noted.

The civil aviation ministry was divided over capping fare. While aviation minister Ashok Gajapathi Raju had time and again said the government was not in favour of any cap of fare, his junior Mahesh Sharma said predatory pricing was a concern for the ministry.

Sharma had once said Prime Minister Narendra Modi had expressed concern over high air fares saying it was giving a bad name to the sector.

However, in reply to a query in Lok Sabha last month, the minister said the government was not keen to regulate domestic airfares despite a Parliamentary standing committee on transport, tourism and culture suggesting a cap on maximum fares.

The sector welcomed the move saying there should be no regulation over pricing and the government should have faith in the companies. "Other than security issues, there should not be any regulations binding the industry and the government should allow markets to decide," said an executive of an airline.