Mahesh Sharma to meet airlines soon before starting airfare regulation

India is moving ahead to put in place some sort of airfare regulation in place. Speaking to Firstpost, Minister of State for Civil Aviation Mahesh Sharma said he will call airline representatives for a meeting within the next two weeks to discuss a mechanism to regulate fares. His emphasis is especially on exorbitant last minute fares which have lead hundreds of Members of Parliament and the general public to protests.

Sindhu Bhattacharya June 01, 2015 11:27:44 IST
Mahesh Sharma to meet airlines soon before starting airfare regulation

New Delhi: India is moving ahead to put in place some sort of airfare regulation in place. Speaking to Firstpost, Minister of State for Civil Aviation Mahesh Sharma said he will call airline representatives for a meeting within the next two weeks to discuss a mechanism to regulate fares. His emphasis is especially on exorbitant last minute fares which have lead hundreds of Members of Parliament and the general public to protests.

"Airlines cannot be allowed to have predatory prices.....I know world over there is no regulation (on fares) but we have a social infrastructure......someone has a health crisis, someone is a student and needs to fly at short notice......I have called a meeting with all airlines in the next two weeks to discuss what can be done," Sharma said.

On being told that airlines are obviously upset at any attempts to regulate last-minute fares since operating costs in India are already sky high thanks to jet fuel taxation, the minister said "we will watch the airlines' interests as well".

Mahesh Sharma to meet airlines soon before starting airfare regulation

Reuters

Sharma' enthusiastic response to regulating fares is in stark contrast to his senior and Minister for Civil Aviation A Gajapathi Raju. Raju told the Economic Times last week no regulation would be done. The paper quoted him saying "We did a quarterly analysis of fares for some quarters and it shows that fares have not gone up to the extent costs for airlines have. As of now, we do not see any reasoning behind regulating fares. All airlines declare their minimum and maximum fares to the aviation regulator every month and that it is a transparent enough mechanism to check fares."

So will Sharma prevail or will Raju's reluctance to regulate air fares push this issue to the backburner?

A few months back, the DGCA began asking all domestic airlines to submit data on fares. Airlines are now asked about number of seats sold on highest and lowest fare buckets for each sector. There was always a requirement for airlines to reveal lowest and highest fares on each sector but not how many seats sold at each fare. The regulator has been monitoring this data for sometime before deciding to take any action. In fact, a Tariff Monitoring Unit has been set up within the DGCA for this purpose where it select airfares on certain routes on a random basis.

Since late last year, there have been contrary views within the Ministry of Civil Aviation over whether exorbitant fares call for some sort of regulation. One section within the ministry wants airfares capped - both the maximum and the minimum - for each sector, airline wise. Another section says this would not be in line with international norms since airfares are not regulated in most other countries but decided by market forces.

A senior ministry official had earlier indicated that despite opposition from within the ministry, this proposal has been forwarded to the Secretary and that he will be studying the matter. This official had also said that Minister A Gajapathi Raju has asked ministry officials to study how airfares are regulated, if at all, in other countries. Raju sought such an analysis after receiving complaints from more than 100 Members of Parliament (MPs) about exorbitant fares, specially for flights on the North Eastern Region.

In an earlier internal note circulated within the ministry, there was a proposal to cap maximum fare any airline can charge on any domestic route at Rs 20,000. This proposal had said that minimum fare will depend on break even cost of each airline and that the the AERA act may be amended to include airlines and there.

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