Centre gives big push to remote connectivity

Cap on fares for 200-800 km flights, with Central and state subsidy provision for airlines

The government today unveiled the draft regional connectivity scheme with a fare of Rs 2,500 for 500 km flights operating from regional airports.

Airlines will be provided subsidy by both the Centre and States after a ceiling is imposed on fares for 200-800 km air travel. Airlines will charge Rs 2,500 for a flight covering a distance of 500 km (around one hour flight) and the cap will be proportional to the air distance.

The cap on airfares will be applicable on half the seats and passengers will get subsidised fare on a first-come-first-serve basis.

While the Centre will provide 80 per cent of the subsidy by setting up a regional connectivity fund, the balance 20 per cent will flow from the states. For the North Eastern states it will be shared in the proportion of 90:10.

The regional connectivity fund will be financed by charging some levy per departure to airlines on all domestic routes, except remote and north-eastern States. This may marginally increase airfares on such routes as the airlines may pass on the costs to the customers. The civil aviation ministry will decide the levy from time to time.

"The loss due to funding from government coffers will be compensated due to higher economic activity in the remote areas," said Mahesh Sharma, minister of state for civil aviation.

The states will also have to provide concessions such as police and fire services free of cost, and power, water and other utilities at minimal rates.

Airlines that wish to fly on regional routes will have to deposit a bank guarantee of Rs 50 lakh per route to the government. The airline will get exclusive rights to fly on the route.
 
The subsidy to airlines will be provided through a reverse bidding process, which means if there is a demand from multiple airlines to fly on regional routes the ones asking for the least financial support will get the subsidy.