Cess to boost regional flights may push up air fares

NEW DELHI: A cess of Rs 8,000 on each domestic flight could be the alternative to the aviation ministry's proposed 2% surcharge on flight tickets to fund regional connectivity. This charge will reportedly be levied on airlines, who in turn will pass it on to passengers pushing up the cost of flying by up to Rs 100 per person. Coupled with Union Budget 2016-17 raising excise duty on jet fuel, operating cost for airlines could rise by up to 5% and lead to a similar hike in fares.

Sources say the aviation ministry is planning this levy after ministers like Arun Jaitley, Piyush Goyal and Rajiv Pratap Rudy rejected their plan to have a 2% surcharge on air tickets. The ministry wanted to levy this on all those flying to metros, big cities and abroad to raise viability gap funding ( VGF) to cross-subsidise regional flights by capping their fares at Rs 2,500 per hour of flying.

The senior ministers frowned at the 2% cess proposal that would have made flying more expensive as aviation is among the few sectors doing well in the current slowdown due to low oil prices enabling airlines to offer cheap fares.

"Now instead of a direct levy on flyers, the ministry is looking at charging Rs 8,000 per domestic landing from airlines. This will not be a direct charge on passengers but an indirect one which even if passed on to flyers will not lead to a hike of more than Rs 100 per passengers," said a source.

However, airlines are opposing the levy of any additional fee or cess especially after the Union Budget 2016-17 raising excise duty on aviation turbine fuel (ATF) from 8% to 14%.