Levy on domestic flights to fund connectivity in regional areas

NEW DELHI: The regional connectivity fund (RCF) that would be set up to subsidise regional flights would be raised by imposing a levy on domestic flights and not

NEW DELHI: The regional connectivity fund (RCF) that would be set up to subsidise regional flights would be raised by imposing a levy on domestic flights and not by imposing a cess on air tickets, the aviation ministry has said in an official notification.

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The notification, which contains the draft rules, provides for the first time, details of the mechanism that the government plans to put in place to raise the RCF that would be used to fund air connectivity to smaller cities by capping fares at Rs 2,500 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 rates as may be notified... having regard to the seating capacity and the routes,” 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 be challenged in courts. Government is considering a levy of Rs 7,000-8,000 per domestic departure to build the RCF.