New Delhi: The Directorate General of Civil Aviation (DGCA) on Wednesday notified a new cess applicable on domestic flights in order to create a corpus for the regional connectivity scheme called Udan, a move airlines have challenged in court.
Airlines would have to pay Rs7,500 for every flight up to 1,000 km, Rs8,000 for those between 1,000 and 1,500 km and Rs8,500 above 1,500 km, DGCA director general B.S. Bhullar said in a 29 November notification marked to all airlines and posted on the aviation regulator’s website on Wednesday.
“The central government has decided to impose a levy on the following scheduled flights being operated within India at the rates indicated against them to fund regional air connectivity fund created under powers conferred under Rule 88-B of the Aircraft Rules 1937,” Bhullar said.
The current rules already mandate that airlines should mark a certain percentage of their total flights for underserved areas. Bhullar said those flights would be exempted from the new levy.
Operators of smaller planes such as ATRs, (operated by Air India and Jet Airways) and Bombardier Q400s (operated by SpiceJet) which are below the take-off mass of 40,000 kg, too need not pay this levy. These planes mostly fly short-haul routes.
Flights started by operators in future using funds from the Udan cess will also be exempted from these charges.
The Airports Authority of India has been designated as the nodal agency to monitor the collection of funds from airline operators.
The funds will also be open to audit by the Comptroller and Auditor General of India (CAG)
The ministry expects an estimated Rs400 crore to be collected annually as a result of this scheme. The fare for a one-hour journey of about 500km on a fixed-wing aircraft or a 30-minute journey on a helicopter has been capped at Rs2,500, with proportionate pricing for routes of different lengths and duration.
Airlines were expected to pass on the cost of the new Udan charge to passengers, but they are not sure they can do so under the law. If passed on, the cess would come to about Rs50 per passenger on a 180-seater Airbus A320 plane—flown by many budget airlines. The airlines planned to go to court despite knowing their plea may not be entertainted, Mint reported on 30th November, quoting airline executives.
Lobby group Federation of Indian Airlines (FIA) led by IndiGo, Jet Airways, SpiceJet and GoAir filed a petition challenging the cess in the Delhi high court on Wednesday.
The court, however, declined to stay the imposition of the levy.
FIA’s petition, a copy of which Mint has reviewed, contended that the ministry of civil aviation did not have the authority to introduce the levy in this manner. It said the levy made up for the government’s share of the Regional Connectivity Fund (RCF) towards the public purpose of enhancing regional connectivity.
FIA said the cess will be a huge burden on the financials of the airlines.
The next hearing is slated for 21 December.