Thursday, Oct 06, 2022

Government Removes Caps On Air Fares From August 31

On May 25, 2020, the government introduced the upper and lower limits on the fares of airlines in order to protect weaker airlines and passengers from being charged exorbitantly

Aviation Sector In India.

The limits imposed on the fares of the domestic airlines will be removed from August 31, the Ministry of Civil Aviation notified on Wednesday. Notably, after the initial two months of Covid-19 lockdown on May 25, 2020 the government introduced the upper and lower limits on the fares of airlines in order to protect weaker airlines and passengers from being charged exorbitantly. 

Jyotiraditya Scindia, Civil Aviation Minister in a tweet said, “The decision to remove air fare caps has been taken after careful analysis of daily demand and prices of air turbine fuel. Stabilization has set in and we are certain that the sector is poised for growth in domestic traffic in the near future.”

Notably, the decision comes after several domestic carriers urged the government to remove limits on air fares, thus allowing the airlines to decide regarding airfares owing to high Aviation Turbine Fuel (ATF) prices and the depreciating Rupee, due to the ongoing Russia-Ukraine war. 

Ajay Singh, Chairman and Managing Director, SpiceJet earlier said in June, “ATF prices have increased by more than 120 per cent since June 2021. This massive increase is not sustainable and governments, central and state, need to take urgent action to reduce taxes on ATF that are amongst the highest in the world,”

“SpiceJet has in the last few months tried to absorb as much burden of this fuel price rise, which constitutes more than 50 per cent of our operational cost, as we could,” he added.

High jet fuel prices along with soaring inflation and depreciation have caused a double whammy for both passengers and domestic airlines. 

Notably, earlier this month, ATF prices were reduced by 12 per cent as international crude oil prices amidst fears of recession. This is the second time this year that the government has reduced ATF prices after reducing the prices by 2.25 per cent in July this year. 

Moreover, in a bid to control rising inflation, the government last week halved the windfall tax on diesel export as well as scrapped the levy on ATF shipments. Notably, in July this year, the government introduced a windfall tax of Rs 6 per litre ($12 per barrel) for petrol and ATF exports, whereas a windfall tax of Rs 13 per litre on the export of diesel. 

“After review of the current status of Scheduled Domestic Operations viz-1-viz passenger demand for air travel, it has been decided to remove the fare bands notified from time to time regarding the airfares with effect from 31.08.2022,” the Ministry of Civil Aviation said in a statement. 

“The airlines/airport operators shall, however, ensure that the guidelines to contain the spread of Covid are strictly adhered to and COVID appropriate behaviour is strictly enforced by them during travel,” it added.