Thursday, May 06, 2021

How Modi Govt’s Policy Change Made Air Travel Expensive in India

In the year 2017, the Government of India changed the way airport tariffs are calculated in India. Airport tariffs are fees that passengers and airlines pay the airport for using its services, which include user development fees (that are a part of air tickets) and aircraft landing charges.

Under the prevailing government policy which was issued in 2011, the government had allowed these tariffs to be fully subsidised by non-aeronautical revenues that an airport earns – car parking fees, rental from duty free shops and restaurants, etc.

But in 2017 the government said that only 30% of such revenues would now cross-subsidise the tariffs. While the 2011 decision was taken to keep air travel affordable, the 2017 decision was based on the need to attract private sector investment into building airport infrastructure. Indeed, in the years since the government has begun handing over public airports to private companies to operate.

How did the 2017 decision affect airport tariffs? And to what extent? This author conducted an analysis of tariff orders issued by the government’s Airports Economic Regulatory Authority of India (AERA). As airports are monopolies, the government retains the power to set tariffs even for airports run by the government’s Airport Authority of India. Tariffs are set through a transparent consultation process and explained in detailed tariff orders than run into more than a hundred pages each.

An analysis of the orders showed that passengers and airlines are now paying a steep price due to the 2017 change. Charges have increased significantly – ranging from 20% at Tiruchirappalli Airport to 54% at the Swami Vivekananda Airport in Raipur, the orders available on the AERA website show. These higher charges are levied directly to passengers via their air tickets, and through charges levied on airlines and air cargo services, which indirectly pass them on to the people.

06/05/21 Nihar Gokhale/Leaflet

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