The Centre on Friday decided to impose a new distance-based levy on domestic flights. While trips up to a 1,000-km distance will attract a tax of Rs 7,500 (per flight), those between 1,000 km and 1,500 km will be taxed Rs 8,000, and those that cover more than 1,500 km will face a levy of Rs 8,500. The new tax will be imposed per flight and not per ticket. Air travellers will face a fare hike depending on the passenger capacity of the airplane.
The Ministry of Civil Aviation’s proposal is an attempt to raise Rs 400 crore that can be used to fund subsidised flights between smaller towns and cities. Shares of airlines, including InterGlobe Aviation, Jet Airways and SpiceJet, fell as reports about the move began to surface on Friday.
In October, the Centre had announced its new Ude Desh Ka Aam Naagrik, or UDAN, scheme, which limits fares for half the seats on one-hour flights to Rs 2,500. The prices of the remaining seats will be market-based, which means they will be determined by demand and supply.
The scheme also seeks to provide air services between unserved and under-served areas and has invited proposals from operators to start flying to such airports. The government expects the first flight under this scheme to take off in January 2017.