Aviation Ministry presents Draft Regional Connectivity Scheme; all you need to know about it

To make flying affordable and promote balanced regional growth, the Civil Aviation Ministry on Friday presented the Draft Regional Air Connectivity Scheme (RCS) in the presence of Minister of Civil Aviation, Ashok Gajapathi Raju and Minister of State Mahesh Sharma.

The Aviation Ministry in a release said that the RCS will be placed in public domain for three weeks for stakeholders to share their suggestions. After this, the details of the scheme will be finalised.

Terms under Draft Regional Air Connectivity Scheme:

--Assessing the demand: Under the Scheme, aircrafts and helicopter operators will be required to assess the demand on various routes and submit the proposal for providing connectivity on high-demand 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 aircrafts and helicopters depending upon the distance", said the report.

-- Agency for the Scheme: Airport Authority of India (AAI) will be implementing agency for the scheme. According to the release, RCS are required to include un-served airports i.e airports where there is no scheduled commercial flights and under-served airports i.e. airports which have seven or less scheduled commercial flights per week. 

The RCS route will cover distance between 200km to 800km. But the criteria will not apply to hilly areas,  islands, North-east region and for helicopter operations.

--Selection of Airline Operators: The procedure for selection of airline operators will be based on reverse bidding mechanism. Once the airlines selected, it will be able to enjoy a period of exclusivity on the awarded routes. This period will be decided by the stakeholders.

"Two half-yearly cycles would be the basis for inviting and evaluating the proposal.  Depending upon suggestions given by Stakeholders the para-meters for financial proposal could be (1) VGF (viability gap funding) per RCS seat (2) Total VGF per week (3) combination of  (1) and (2)", said the Ministry.

The airline operators will exempt the RCS flights from landing charges, parking charges, and terminal navigation  landing charges.

-- Excise duty: To support the RCS scheme, the central government will levy an excise duty of only 2% on Aviation Turbine Fuel (ATF) purchased at RCS airports for 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 operating Airline will be free to enter into code sharing arrangement with domestic and international  airlines".

Further, the State Government will charge VAT of 1% or less than 1% on ATF at RCS airports for 10 years. Along with this, the government will provide security and fire services free of cost, besides providing electricity, water and other utility services at concessional rates.

--Airfare cap and frequency: "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". 

The selected airlines will be required to maintain a frequency of minimum three flights and maximum seven flights per week.

-- Fund: Under the scheme, a Regional Connectivity Fund will be created for the operations of the RCS

-- Viability Gap Fund: The calculation of VGF will be 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 from the scheme: The mechanism to exit from the scheme will be made easy after a one year.