E-Paper
New levy on domestic flights. How does this impact your air fare?
The regional connectivity fund (RCF) that will be set up to subsidise regional flights would be raised by imposing a levy on domestic flights and not a cess on air tickets.
The regional connectivity fund (RCF) that will be set up to subsidise regional flights would be raised by imposing a levy on domestic flights and not a cess on air tickets, the aviation ministry has said in an official notification.
This RCF will be used to fund air connectivity to smaller cities by capping fares at Rs 2500 for a one-hour flight. The aviation ministry aims to raise Rs 500 crore annually through the levy.
The RCF, the notification says, would provide viability gap funding to airlines to promote regional connectivity.
“In order to fund the Regional Air Connectivity Fund, the central government may impose a levy on scheduled flights being operated within India at such rates as the Central Government may notify having regard to the seating capacity of the aircraft used for the scheduled flights and the routes on which such flights are operated,” said the draft rules.
As reported by HT on August 31, the law ministry has already given its nod to aviation ministry’s proposal to levy a cess. Law ministry’s approval was crucial as it was feared that any move to impose a levy on flights on trunk routes to subsidise regional flights may be challenged in courts.
Government is considering a levy of Rs 7000-8000 per domestic departure to build the RCF.
But what is the difference between a levy and a cess?
As announced by the government, earlier, a 2% cess on the base fare of your air ticket was proposed to be levied for the RCF.
But now it has been proposed that airlines will be charges Rs 7000-8000 per domestic departure which will ultimately be passed on to fliers.
Here’s the impact on your air ticket in case of a RCF levy:
Imagine a trip from Delhi to Goa on November 1.
Base fare: Rs 3500
Fees & surcharges: Rs 1401
RCF levy: Rs 60 (as per internal calculations of the ministry)
Total: Rs 4961
In case of a 2% cess, the levy on your air ticket will change with the base fare.
