Centre imposes levy to fund regional connectivity scheme (UDAN)
The Centre will impose a levy of up to Rs. 8,500 on flights of domestic airlines from December 1 to fund its regional connectivity scheme, making fares costlier.
Imposition of Levy:
Rs. 7,500 for flights up to 1,000 km.
Rs. 8,000 for flights between 1,000 and 1,500 km.
Rs. 8,500 for flights beyond 1,500 km.
It will be applicable only on scheduled domestic flights operating on major routes and excludes regional flights. However, airlines are expected to pass on the hike to passenger.
Aim and objective of Govt.
Centre will be able to collect around Rs.400 crore from this levy every year which will be used to promote regional air connectivity.
Aim is to increase domestic ticketing four times by 2023 from eight crore at present.
Opposition from airlines
Leading domestic airlines have already opposed the move to impose a levy fund subsidies for regional flights and are likely to challenge it in the courts.
During the launch of the scheme, Spice Jet chief had opined that government needs to fund such schemes from its own budget “instead of imposing more tax on consumers.”
What is Regional Connectivity Scheme (UDAN)?
The governments UDAN (Ude Desh ka Aam Nagrik) is a regional connectivity scheme with rates capped at Rs.2500 for one hour of flying from regional airports. It will impose levies on flights on regular routes in order to give subsidy to regional airlines. Under this scheme, 50 airports are to be upgraded.
What are the objectives of this scheme?
1. INTEGRATION: Flourishing of regional aviation market and integrating them with the overall aviation network.
2. ACCESSIBILITY: As is apparent from the name, it aims at providing cheap fares so that even common masses can avail benefits of flights.
3. TOURISM: Aims at promoting tourism to areas hitherto less explored due to less connectivity.
What is the impact of this scheme?
1. Regional Carriers will get a boost and air traffic in regional airports will increase.
2. Regular Carriers are apprehensive of the levy on regular routes. Carrier owners say that it will lead to increase in prices for such routes which may impact their demand.
3. Passengers flying through regional routes will benefit from the decreased price, while those flying from regular routes will have to pay more.
4. Govt. may face opposition from carriers regarding the levy.
5. Expansion of business for Aircraft and Equipment Manufacturer.