Prima facie, the budget 2016-17 of the NDA government presents a mixed picture when it comes to the aviation sector. While on one hand, the budget has made the provision of developing 160 air strips in the country for their commercial utilization with a proposed investment of Rs 50-100 crore in each of them, the proposal to increase the ATF excise tax from 8-14 percent on metro routes is likely to pinch majority of the airline travelers in the country. Going by an anlaysis, metro routes currently contribute about 70 percent of domestic passengers volume.
However, the hike in excise duty will not be applicable to the proposed Scheduled Commuter Airlines (SCAs) under the regional connectivity scheme which will be initiated after the new civil aviation policy comes into the effect. Promoting regional connectivity is the major highlight of the soon to be unveiled aviation policy which has proposed Rs 2500 fare for less than an hour journey on regional routes and advocated viability gap funding support to the scheduled commuter airlines (with the support of the state governments) operating on the regional route. The draft civil aviation policy had also asked for imposing a 2 percent cess on air tickets for long haul domestic and international flights to cobble up a coffer to promote regional connectivity.
Finance Minister’s proposal to keep regional routes exempted from the excise duty hike on ATF, therefore, seems to be part of the larger design which is much aligned to the civil aviation ministry’s plan to give big-ticket push to the regional connectivity segment.