Flying in India could cost as low as Rs2,500 an hour with the first services under the regional connectivity scheme that aims to boost air travel between smaller cities taking off in January.
The civil aviation ministry today said the first flights under the scheme to boost air travel between smaller cities should take off in January, after it finalised rules to make flying more affordable in the world's fastest-growing aviation market.
Under the "Regional Connectivity Scheme", air fares on routes between towns and cities currently poorly connected will be capped at Rs2,500 ($37.4) for every 500 km of travel – even as it reduced service and fuel taxes.
A "first of its kind" in the world, UDAN (Ude Desh Ka Aam Naagrik) will be based on market mechanism as well as bidding for a minimum of 9 seats and a maximum of 40 seats in a fixed wing aircraft.
For 50 per cent of the seats of flights under UDAN, the fare cap will be Rs2,500, and the rest will be market-based pricing.
The price cap will not apply to popular routes such as New Delhi- Mumbai or Mumbai-Kolkatta or Chennai-Kolkata.
"We are cautiously optimistic about it (UDAN)," Civil Aviation Minister Ashok Gajapathi Raju said Friday, adding that the first flight under the scheme is expected to take off in January 2017.
In order to finance the scheme, government will slap a small levy on existing routes, while the government will spend Rs4,000 crore ($598 million) to reopen 50 unused airports within the next four years.
Some industry executives have expressed reservations about the levy, but the ministry defended the scheme, saying it will boost the overall market.
"When we jump start the regional aviation market, the beneficiaries will be the airlines themselves. They will get a lot more traffic," Jayant Sinha, the junior civil aviation minister, told reporters.
Ait travel market in India has boomed with low fuel prices and a consequent fall in ticket prices, which in turn air travel affordable to many, although it is still off limits to the common man.
With ticket prices coming down the number of people using airlines for travel increased and domestic carriers, including IndiGo, SpiceJet, Jet Airways and state-owned Air India jumped 21 per cent in 2015 to more than 80 million. The government aims to increase that number to 300 million by 2022.
Still, India's annual trips per capita, at 0.04, compares with 0.3 in China, and flying remains unaffordable for the overwhelming majority.
Civil aviation secretary RN Choubey said airlines could now start bidding to run specific routes. Successful bidders will have exclusivity for the route for three years, after which government support would tail off as the market becomes sustainable on its own. The scheme will run for 10 years.
"We expect flights to commence in January," Choubey said.