The draft civil aviation policy is focused on promoting regional connectivity. Since private airliners have been reluctant to serve Tier II cities and remote areas on the ground of profitability, the policy seeks to charge a two per cent cess on metro and international flights and use the collected amount of about Rs 1,500 crore to cross-subsidize, or viability gap funding (VGF) of, flight operations connecting small towns and cities and backward regions.
The policy will be implemented from April 1, 2016 after going through revision on the basis of comments from various stakeholders. The policy is already placed in the public domain for three weeks.
Among other things, the policy calls for the VGF to be shared between the centre and the states in the 80:20 ratio and caps the fare at Rs 2,500 for flights of about an hour in remote areas.
After unveiling the policy, the Civil Aviation Secretary R N Chaubey said the central government will now work on persuading the state governments to cut the VAT on aviation turbine fuel to less than one per cent and provide water, electricity and security at concessional rates to promote regional connectivity within their own states and the regions around them.