Modi push to air-link policy despite NITI demurral on sops

The government’s policy think tank, NITI Aayog, had serious objections to the civil aviation ministry’s Regional Connectivity Scheme (RCS), the draft policy of which was announced last week.

The Aayog’s main objection was on the cross-subsidy idea, of levies on trunk routes to fund connectivity to places where an airline would not otherwise wish to go. But Prime Minister Narendra Modi’s support saved the day for the draft scheme.

The ministry had suggested such connectivity through revival of near or fully defunct airports. It appealed to the Prime Minister’s Office (PMO) and was, after presentations and questions, able to get the support of the PM.

Improving of regional connectivity was a key feature of the National Civil Aviation Policy, unveiled last month. The concept also found place in the ruling Bharatiya Janata Party’s manifesto during the 2014 general elections.

RCS proposes to reduce the cost of operation for airlines to places off the main routes through concessions, including through a Viability Gap Fund (VGF). For the latter, the Centre plans a levy on airlines in the trunk routes, pushing up air fares in those.

“The Aayog was not in favour of such a model,” said an official in the know. Such cross-subsidy, it reportedly felt, was unnecessary and costly, tampering with the way the market worked. Another source said after the Aayog’s objections, Aviation Secretary Rajiv Nayan Choubey gave multiple presentations to the PMO and “this intervention helped to resolve matters swiftly but after certain changes to the scheme”.

For instance, the ministry wanted the VGF tenure to be 10 years “as that would have helped airlines to put their aircraft leasing plans in place”.

It had to bring this down to three years in the draft announcement. The final draft also included conditions under which subsidy could be discontinued, based on passenger load factor.