All You Need to Know About New Regional Air Connectivity Scheme

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The Draft Regional Air Connectivity Scheme (RCS) was presented by the Ministry of Civil Aviation in the presence of the Minister for Civil Aviation, Ashok Gajapathi Raju and MOS Dr. Mahesh Sharma recently.

The objective of Regional Connectivity Scheme 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 un-served and under-served airports.

ashok gajapathi raju

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.

To operationalise the Scheme Aircrafts and helicopter operators would be required to assess the demand on various routes and submit their 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 aircrafts and helicopters depending upon the distance.

Conditions set:

Airport Authority of India will be the implementing Agency for the Scheme. The RCS route would have to include un-served airports i.e. airports where there is no scheduled commercial flight or under-served airports i.e. airports which have 7 or less scheduled commercial flights per week. The RCS routes would cover a length between 200 to 800 km. But these criteria would not apply to hilly areas, islands, North-east region and for helicopter operations.

The procedure for selecting Airline Operators would be based on reverse bidding mechanism. Two half-yearly cycles would be the basis for inviting and evaluating the proposal. The 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.

Benefits to airlines:

The Central Government will support the RCS Scheme by levying an excise duty of only 2% on Aviation Turbine Fuel (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 operating Airline will be free to enter into code sharing arrangement with domestic and international airlines.

The 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.

Airline Operators will exempt RCS flights from landing charges, parking charges, and terminal navigation landing charges.

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.

A Regional Connectivity Fund would be created to subsidise the operation of the RCS.

The Viability Gap Fund (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.

The Exit Mechanism for selected airlines would be made easy after a period of one year.

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