Saturday, December 17, 2011

India: Pay cess to make airlines reach smaller towns

If rise in international fuel prices leading to increase in cost of flying was not enough, a Planning Commission committee wants domestic flyers to pay cess to ensure that flights to smaller cities and far-flung areas are financially viable.

A plan panel committee on civil aviation has recommended creation of an "exclusive fund" to provide explicit and direct subsidy to airlines to fly to economically unviable routes and developing airports and heliports at tier-II and tier-III cities.

"The government should provide a token amount of Rs 100 crore for starting the Essential Air Service Fund (EASF)," a panel's working group chaired civil aviation secretary SNA Zaidi, has recommended.

The report also said that world over it was not uncommon to provide direct intervention mechanism by the government to provide air connectivity to underserved and unserved destinations.

"In order to further encourage provision of air transport service on such un-economical but essential routes it would be desirable to consider providing explicit subsidy support from the fund," the report said, while mentioning United States and Australia as two countries where such subsidy mechanism is available.

India's civil aviation industry is among the 10 largest aviation markets in the world and has capacity to be ranked among top five. India's passenger handling capacity has increased from 72 million in 2006 to 233 million in 2011 and cargo handling facility has witnessed seven-fold increase during the same time period.

Although the biggest growth has been in low cost airline in domestic sector, the panel felt the annual passenger load would double by 2017 if air access to smaller towns and cities is provided. This will require Rs 67,000 crore investment to develop new airports of which Rs 50,000 is expected from the private sector.

Despite the growth, the committee said, the industry has failed to reach common person (aam aadmi) and has suggestion promoting setting up of regional airlines and having a heliport in each district with the help of the new fund. "Such support should be allocated through a transparent process of minimum subsidy bidding," the report said.

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