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Fix upper, lower limit for airfares to aid bleeding airlines: ministry

business Updated: Dec 17, 2014 22:58 IST
Tushar Srivastava
Ajay Singh

With SpiceJet on the verge of a financial collapse, the aviation ministry has proposed a number of steps that should be taken immediately to help India’s bleeding airlines.

The ministry wants the upper and lower limit for airfares fixed. SpiceJet, this year, had come up with over 25 flash sales in a bid to raise working capital, which many believe, was one of the reasons for its downfall.

“Due to severe competition, airline companies have been offering huge discounts on air fares. They are becoming bankrupt from operating flights at loss. If the situation is not contained, most airlines are likely to close down in the near future. Therefore, steps may be taken to fix minimum airfare to be charged by each airline,” according to a note prepared by the aviation ministry, which is likely to be sent to the Prime Minister’s Office.

“There is a need to fix a cap on the maximum airfare at a reasonable price of around `15,000, beyond which the airlines should not be allowed to charge, exploiting the passengers urgency for travel due to various reasons,” it said.

The ministry wants the airline industry to be given infrastructure status, which will enable them to get various benefits such as access to funds at lower interest rates.

“They (airlines) should be allowed to go for external commercial borrowings, with low rates of interest. Tax benefits should also be given, including complete income tax exemptions for a fixed period as in case of SEZs, infrastructure and software companies,” the note said.

The ministry wants banks to fix a maximum interest cap of 8% on loans given to airline companies, rescheduling of dues of airports and oil companies.