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Government proposes to cap fare at Rs. 2,500; seeks to make air travel affordable

Unveiling the much-awaited draft civil aviation policy, the government on Friday proposed tax incentives for airlines, maintenance and repair works of aircrafts besides mooting 2 per cent levy on all air tickets to fund regional connectivity scheme.

In a significant move, the Civil Aviation Ministry has pitched for over 50 per cent Foreign Direct Investment (FDI) in domestic carriers in case the open skies policy is implemented.

Under open skies policy, overseas airlines can operate unlimited number of flights into and out of India.

At present FDI limit is 49 per cent.

Presenting the revised draft national aviation policy here, Civil Aviation Secretary R N Choubey said the ministry has proposed 2 per cent levy on all domestic and international tickets for regional connectivity scheme.

“The government expects about Rs. 1,500 crore annually from charging 2 percent levy” Choubey added.

The policy has mooted various measures to boost regional connectivity including setting up of no-frills airports and providing viability gap funding for airlines.

Another proposal is to cap fare at Rs. 2,500 for one-hour flight under regional connectivity scheme.

To make MRO (Maintenance Repair, Overhaul) cheaper, the government has proposed to exempt such activities from service tax net and not levy any VAT.

However, the government has decided to seek more comments from stakeholders before taking a final call on 5/20 norms — whereby local airlines can fly overseas only when they have five years operational experience and at least a fleet of 20 aircraft.

The policy has now mooted three options — abolish the norm completely, continue with it or link overseas flying rights with domestic flying credits.

The draft policy would be put up for comments from stakeholders for three weeks.

To ensure increased regional connectivity, the policy has also proposed various concessions such as state governments providing free land and lowering the Valued Added Tax (VAT) on ATF to 1 per cent or less.

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