Government rules out capping of airline fares

Capping of airfares in the backdrop of passenger complaints of arbitrary tariff hikes was today ruled out by the government which said that competition among the airlines will take care of the problem. Civil Aviation Minister Ashok Gajapathi Raju said restricting the airfares will not make good business sense as it could also jeopardise the government’s regional connectivity plan as such a move may discourage airlines to fly on non-profitable routes.

He, however, said a slew of passenger-centric measures including “time-bound” grievance redressal mechanism would be unveiled very soon, emphasising that India’s civil aviation market was the fastest growing in domestic passenger travel demand.

It is expected that the government was going to announce steps to rationalise the ticket cancellation charges and they are likely to be capped around the base fare, as against current exorbitant fees, as part of passenger-friendly initiatives. The Minister said at least 32 airports built by Airport Authority of India at a cost of at least Rs 3,000 crore over the years were lying “unconnected” and putting any restriction on market-driven fares may jeopardize government’s plan to start flight services to those airports.

Holding that putting a cap on airfares may have an adverse impact on growth of aviation sector, Raju said his Ministry keeps a “continuous tab” on price movements to ensure that the rates are under check. His comments come at a time when the government is discussing ways to address issues related to steep fluctuations in airfares, especially during peak seasons and natural calamities. Minister of State for Civil Aviation Mahesh Sharma last month had announced that capping of fares will be announced soon. “These (capping airfares) are complicated problems. They don’t have simplistic solutions.... Competition has by and large taken care of the (ticket) rates,” Raju said in an interview.

“Floors and caps go together. If you just say I will only cap (air ticket prices) then you won’t have any airline. Anyone doing business doesn’t want to make loss,” he said. India’s domestic aviation market has clocked a growth rate of 22 per cent in the last one year, the highest for any country. Raju said his Ministry has taken up the issue of high tax levied on jet fuel by most of the state governments with the chief ministers concerned.

“Prices of ATF is higher than in most countries due to high tax,” he said making a case that lower levy on ATF can help in harnessing the passenger growth potential.

“We need to bring down taxation. It is no longer a sector that is serving the rich. There was a psychology that it is for rich and so it should be taxed high. From that psychology activities have moved. Now you are in line with the world and would like to serve the common man,” he said.

The Minister said one of the suggestions made by airlines is the possibility of increasing capacity when the demands go up.