The government is not planning to re-introduce price caps on airfares as it does not want to interfere with market dynamics, sources told CNBC-TV18. The government believes that the festive demand raising airfares will improve airlines' financial health.
The government removed the airfare caps on domestic flights on August 31. With this, airlines have the flexibility to regulate their fares for passengers.
"The decision to remove airfare caps has been taken after careful analysis of daily demand and prices of air turbine fuel. Stabilisation has set in and we are certain that the sector is poised for growth in domestic traffic in the near future," Civil Aviation Minister Jyotiraditya Scindia tweeted on August 10.
The government imposed lower and upper limits on the prices of domestic flight tickets in May 2020, after air travel resumed following the Covid-19-induced nationwide lockdown.
In May 2020, the government imposed lower and upper limits on domestic airfares, according to which airlines couldn’t charge a passenger less than Rs 2,900 (excluding GST) and more than Rs 8,800 for domestic flights with a total duration of 40 minutes or less.
The Cabinet note will be sent soon to approve privatisation of the next bundle of 11 airports, sources said.
The Aviation Ministry is also seeking the inclusion of aviation turbine fuel (ATF) in Goods and Service Tax. The decision rests with the Centre, the sources added.
ATF price is down since October 1 - three percent due to lower crude prices and another three percent due to negotiations. However, a six percent benefit in ATF prices is undone by 10 percent rupee devaluation.
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