Strategy
If sources are to be believed, the Indian government is likely to introduce a new policy for short-distance flights. As per the reports, short-distance flights would be charged at a fixed price of Rs 2,500 per hour and while doing so, excise duty on jet fuel and service tax on tickets for the regional flights would be taken off of the fare. Another charge that may be waived off is the passenger services fee (PSF), which is Rs 149 per ticket, and is used to fund the cost of providing security at airports. Finance ministry has lend its support to the proposal and the policy would most likely be announced in the upcoming budget. The news has come from the mouth of a senior civil aviation ministry official, on the condition of anonymity.
"The finance ministry has given its consent for the waiver of central excise duty of about 8% on fuel and service tax of about 4.94% on flights under the regional connectivity plan," said the official.
To be eligible for the scheme, states will have to offer value added tax on jet fuel at 1%.
After PM Narendra Modi approved the idea, the ministry set up a committee, and the cabinet secretary was the head of the committe. The members of the said committee met twice and reached on a consensus to execute the plan.
However, not everything is as hunky-dory as it may sound. Take the example of a flight between Delhi and Mumbai. With the standard rate applied, the ticket would cost Rs 5000 flat, but at present, it can cost lesser, even with all the taxes and duties applied.
Nonetheless, experts from the industry say that there will be a strong demand for flights at this standard fare.
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