2% flight tax in India aims to make air travel more affordable to the masses

Currently around 70 million flight tickets are sold in India annually. However the country is struggling to make air travel affordable within the country to a wider proportion of the population. As a result a proposal has been put forward in the form of a draft government aviation policy where both current regional and national flights would have a 2% levy imposed on them. With the aim of raising US$230 million, the intention is to use the funds raised to improve infrastructure within the country for domestic flights and to enable prices for regional routes to be offered at a rate of 2,500 rupees (US$38.00) per flight hour.
The funds would also go towards opening up many old and disused airstrips and creating a series of ‘no frills’ airports. While India air travel is increasing at the rate of 20% per annum, this measure aims to see ticket sales reach 300 million by 2022. However this policy has been criticized for ignoring one of the major problems facing airlines in a battle to operate profitably, and that is the actual running costs which are exceptionally high in India. Budget airlines try to keep the cost of tickets at around $20.00 but this still takes them beyond the reach of the majority of Indians.
Ajay Singh, the chairman and managing director of low-cost carrier SpiceJet, said “Overall, this is a good first step,” continuing, “Most of the growth in India is happening in tier 2 and tier 3 towns.” He also indicated he wanted to see the government address taxes on aviation fuel and other operating costs which were not being addressed.
The government did indicate it wants to eliminate service taxes and reduce excise duties on certain aircraft maintenance and repair operations to allow more work to be performed in India. Over 80% of the USD$1 billion industry for repairing and maintaining Indian aircraft is performed overseas as it is appreciably cheaper. It is also considering the possibility of allowing overseas investors to acquire more than a 49% stake in Indian airlines, while India’s civil aviation secretary, R.N. Choubey, said it would be another two months before deciding whether to keep, revise or scrap a rule restricting newer airlines including Vistara and AirAsia India from flying overseas routes, which the airlines say unfairly discriminates against them.