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Govt to revive plans for low-cost airports

Sources said the govt might do away with the requirement of maintaining a minimum rate of return for developing regional airports

Somesh Jha  |  New Delhi 

Govt to revive plans for low-cost airports

The Union civil aviation ministry is set to revive plans to develop low-cost airports in non-metro cities. Sources said the government might do away with the requirement of maintaining a minimum rate of return for developing regional airports. This will be part of a draft civil aviation policy being formulated by the aviation ministry, to be released for public comment soon.

Currently, the finance ministry’s public investment board appraises projects with an internal rate of return of at least 12 per cent. Earlier this year, the Union government had scrapped a proposal to build 50 low-cost airports, as most were found unviable. The plan was originally mooted by the United Progress Alliance government.

It is planned these no-frills airports will have basic infrastructure and minimum manpower, to help reduce costs and, consequently, airfares. No-frills airports will also help enhance connectivity in regional and remote areas, primarily Tier-II and -III cities. Currently, the Airports Authority of India (AAI) manages 125 airports across the country. Of these, 95 are operational. Airport charges account for about 10 per cent of airfares.

The aviation ministry will set new criterion to help states identify such airports. Also, state governments will be incentivised to come on board, on such projects.

The Centre will set a threshold for developing no-frills airports, based on the number of flights or the seats flown from the airport in a month.

“We will make provisions for no-frills airports in our policy…If we want flying to get into the hinterland, we shouldn’t make it an expensive proposition. Airports should be no-frills; security should be aircraft-centric rather than airport-centric,” said a senior government official.

To reduce the cost of security, such airports would be sanitised only before an aircraft’s arrival or departure, the official added. These proposals might be taken up by the Bureau of Civil Aviation Security, which will approve the guidelines for setting up such airports, and the Directorate General of Civil Aviation, which will notify these.

Such airports will also have less manpower, usage of close-circuit cameras and motion detectors, and do away with metal detectors, X-ray machines, aerobridges and buses for passengers, without compromising on safety and security standards.

The Union government will formulate a regional connectivity scheme to incentivise states to identify potential regional airports. According to the scheme, a regional connectivity fund will be formed by charging two per cent cess on air tickets. The state government concerned, will then propose such airports, for which a host of charges such as value-added tax on aviation fuel, landing charges and parking charges would be considerably reduced.

The Centre will provide viability gap funding on air tickets from 80 per cent of the regional connectivity fund; 20 per cent will come from the state government. “This will avoid frivolous requests from state governments on development of regional airports. So, states will also come up with genuine proposals and viable projects,” said a source. Analysts say the AAI could play a key role in the revival of regional no-frills airports.

“For no-frills airports that are strategically important but do not attract any interest under the PPP model, the AAI may be requested to step in. Once traffic builds up, AAI might consider handling over day-to-day operations to the private sector and the funds received thereof could be invested in developing more such regional airports,” said Amber Dubey, partner and India head of aerospace and defence, KPMG.

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First Published: Wed, September 23 2015. 00:13 IST