India presents draft Regional Air Connectivity Scheme

India's Ministry of Civil Aviation presented (01-Jul-2016) its draft Regional Air Connectivity Scheme (RCS), the objective of which is to "make flying affordable for the masses, to promote tourism, increase employment and promote balanced regional growth". It also intends to put life into unserved and under-served airports. Details include:

• Demand assessment: To operationalise the scheme, operators would be required to assess the demand on various routes and submit proposal for providing connectivity on such routes. They would be required to earmark certain number of seats on every flight for the RCS. The fare for such seats would be capped based on flight distance and time. An index has also been prepared for airfare caps for the RCS seats for fixed wing aircraft and helicopters depending upon the distance;
• Implementing agency: Airport Authority of India will be the implementing agency. The RCS route would have to include unserved airports, i.e. airports where there is no scheduled commercial service or under-served airports ie airports which have seven or less scheduled commercial flights per week. The RCS routes would cover a length between 200km to 800km. This criteria would not apply to hilly areas, islands, North-east region and for helicopter operations;
• Bidding mechanism: The procedure for selecting operators would be based on reverse bidding mechanism. Two half-yearly cycles would be the basis for inviting and evaluating the proposal. Depending upon suggestions given by stakeholders the parameters for financial proposal could be (1) Viability Gap Fund (VGF) per RCS seat (2) Total VGF per week (3) combination of both. Selected airlines will enjoy a period of exclusivity on the awarded routes. The exact period would be fixed on the basis of suggestions by stakeholders;
• Aviation Turbine Fuel (ATF): The Central Government will support the RCS Scheme by levying an excise duty of only 2% on Aviation ATF purchased at RCS airports for a period of three years. The service tax will be levied at only 10% of the taxable value of tickets for RCS seats for a period of one year. The airline will be free to enter into codeshare arrangement with domestic and international airlines;
• State Government contribution: State Governments will charge VAT of 1% or less on ATF at RCS Airports for a period of 10 years. It will also provide security and fire services free of cost, besides providing electricity, water and other utility services at concessional rates. Operators will exempt RCS flights from landing charges, parking charges, and terminal navigation landing charges;
• Seat commitment: The selected airlines on their part would be expected to commit 50% of the seats on RCS flights to be sold at the specified airfare cap. They would also be required to maintain a frequency of minimum, three flights per week and maximum seven flights per week;
• Fund: A Regional Connectivity Fund would be created to subsidise the operation of the RCS;
• VGF calculations: VGF would be calculated on normative basis. The VGF support for respective routes would be indexed to inflation and ATF prices which would be reviewed periodically. The VGF support would also be linked to the passenger load factor;
• Exit Mechanism: The Exit Mechanism for selected airlines would be made easy after a period of one year;
• Stakeholder input: The Draft Regional Air Connectivity Scheme will be placed in public domain for three weeks to enable Stakeholders to give their suggestions. After this the details of the scheme would be finalised. [more - original PR] [more - original PR - II] [more - original PR - Draft Policy]