The levy will come into effect from December 1, 2016
Flyers will soon have to shell out more for air travel with the government's decision to levy up to Rs 8,500 per flight on major routes to fund its regional connectivity scheme that seeks to make flying more affordable for the masses.
The levy, effective December 1, will be for an entire flight and the price of each ticket could go up depending on the number of seats in that particular flight.
The scheme -- UDAN (Ude Desh ka Aam Naagrik) -- seeks to connect small cities by air as well as make flying more affordable for the common man by way of capping fares at Rs 2,500 for one-hour flights under it.
Civil aviation secretary R N Choubey, on Friday, said the levy will be up to Rs 8,500 per flight depending on the distance flown.
"The levy for an up to 1,000 kilometre length of scheduled flight will be Rs 7,500 per flight, Rs 8,000 for a 1,000-1,500 kilometre flight and Rs 8,500 for flights above 1,500 kilometre," Choubey said.
It will be applicable only on scheduled domestic flights operating on major routes and excludes regional flights, he said.
For UDAN, the government has created the Regional Connectivity Fund (RCF) -- which will be 80 per cent financed by the Centre and the rest by respective states.
With the levy, the government estimates to have Rs 400 crore (Rs 4 billion) for RCF, Choubey said. "On top of it, another 20 per cent (funding) will come from state governments. We are roughly looking at around Rs 500 crore (Rs 5 billion) per year available in the kitty," he said.
Choubey was speaking at a stakeholders' conference and pre-bid meeting on implementation of UDAN, whose final contours were unveiled last month.
To provide viability gap funding for the flights operated under UDAN, the ministry will charge the levy from airlines on every departure on major air routes such as the national capital, Mumbai, Chennai, Hyderabad, Bengaluru and Kolkata.
The levy will push air fares slightly higher as airlines are expected to pass on the burden to flyers.
Stating that the levy will come into effect from December 1, 2016, Choubey said "even if it (levy) is being passed on entirely by airlines without any quantum being absorbed by them (airlines), it (the increase in airfares) should not be more than, let's say, one per cent (of a ticket price). That is the ballpark figure".
The average increase in fares will be one per cent and if the airlines decide to absorb a part of it, then the increase would be much less, Choubey added.
The funding is being provided since the fares of half the seats operated on a particular flight under UDAN will be capped at Rs 2,500 for one-hour duration. This cap will be applicable to distance of 476-500 kilometres.
The limit of RCS airfare will vary from Rs 1,420 to Rs 3,500 for fixed-wing aircraft. For helicopters, half-an-hour ride under the scheme will cost Rs 2,500 and for over one-hour duration, the cap will be Rs 5,000.
RCF is to be funded by the Centre and the respective state government participating in UDAN.
According to Choubey, 11 states have already signed a memorandum of understanding (MoU) with the civil aviation ministry and AAI for implementation of UDAN. Besides, eight states have agreed in-principle to do so.
State-owned Airports Authority of India (AAI) is the nodal agency for implementation of UDAN.
Photograph: Reuters
