Air travel to cost more as govt moots 2% levy on tickets

Air travel is set to become a little more expensive with the government proposing 2 per cent levy on all domestic and international tickets to raise funds for boosting regional air connectivity.
The proposal, part of the elaborate and revised National Civil Aviation Policy, is to be implemented from January 2016.
Even as there are concerns that additional levy will push airfares higher, leading carriers IndiGo and SpiceJet said the move will help develop infrastructure for regional air connectivity which, in turn, will bring down the costs.
Coming out with the much-awaited draft policy, the Civil Aviation Ministry today proposed a raft of measures to bolster regional air connectivity, including by way of levying additional cess and providing viability gap funding.

For Regional Connectivity Scheme (RCS), the government plans to impose a 2 per cent levy on all tickets.
"RCF (Regional Connectivity Fund) will be funded by a levy of 2 per cent on all domestic and international tickets from January 1, 2016 onwards under...The Aircraft Act 1934. The RCF levy will be applied on all routes other than Cat IIA routes and RCS routes," as per the draft policy.

"The government expects about Rs 1,500 crore annually from charging 2 per cent levy " Civil Aviation Secretary R N Choubey said.
SpiceJet CMD Ajay Singh told PTI that imposition of cess would not be making a "big difference" in airfares and the two per cent levy would help in improving regional connectivity.

The proposal for RCF with money coming from a levy is a good idea, he noted.
IndiGo President Aditya Ghosh said that if the proposal to charge two per cent levy on air tickets is seen in isolation, then air fares would rise.
"At the same time, if the money collected from cess is invested back in the airport infrastructure like air traffic management and ground handling, then we will definitely see fares coming down," he noted.
Interestingly, the levy proposal comes against the backdrop of concerns expressed in various quarters about steep movement in airfares and there have been discussions to explore the possibility of capping air ticket prices.