India Proposes Changes To Country's Commercial Aviation Sector, Seeks To Make Flying Affordable

The Indian government released its civil aviation policy draft Friday that proposes tax incentives for airlines and bids to make flying more affordable to a larger section of the country's population.

The government has proposed a 2 percent levy on long-haul flight tickets that will reportedly go toward funding a plan to connect smaller cities around the country and encourage flying in these regions by capping airfares at 2,500 rupees ($38) for domestic flights under one hour.

The draft policy suggested increasing Foreign Direct Investment (FDI) to over 50 percent in domestic carriers in case the open skies policy was implemented. Under open skies policy, international airlines can operate unlimited number of flights into and out of India.

The draft also proposed the 5/20 rule to be substituted with a domestic flying credits method; however, it also said the existing rule may continue or be completely scrapped. The 5/20 rule requires a domestic airline to have a 20-aircraft fleet and operational experience of five years to start international operations.

"The basic behind of National Civil Aviation Policy is to take flying to the masses," Civil Aviation Secretary Rajiv Nayan Choubey said, according to the Press Trust of India (PTI) news agency. He also added that airline operators will get certain benefits to fly to smaller towns with incentives associated to fuel prices and inflation.

"We currently have some 430 airstrips and airports. But only around 90 in operation -- nearly 300-odd are not being used. This is a huge unused asset. These airports will form the basis for enhancing our regional connectivity," Choubey said, according to PTI. Choubey also said that the airstrips and airports will get a boost into a no-frills airport at the cost of $76.4 million each.

Aditya Ghosh, president of domestic airlines IndiGo, told the Hindu Business Line newspaper, that it was difficult to say by how much its fares were expected to go up if the 2 percent levy was imposed. Ghosh noted that it would be interesting to see how the policy impacts the airline sector. He also said that airfares could drop if some other proposals are implemented.