CALCUTTA, November 22: The Union government has decided to auction air routes in the north-east to airlines that demand the least subsidy, civil aviation secretary MK Kaw said here today. Kaw was speaking at a national conference on air transport infrastructure organised by the Indian Chamber of Commerce and the British Coucil Division.

Kaw said that the subsidy will come from the national civil aviation development fund proposed to be set up under the new civil aviation policy, now awaiting approval by the Union Cabinet.

The secretary said that alternatively a cess could be levied on all airline operators. The collections will go to the civil aviation fund and form the subsidy component for the north-east sector.

The fund is managed by a committee of representatives from the civil aviation ministry and all-India financial institutions such as Industrial Credit & Investment Corp of India, Industrial Development Bank of India and Industrial Finance Corp of India.Kaw said that it has been proposed that at least half the revenue generated by the inland air travel tax (IATT) and the FTT (foreign travel tax) should go to the civil aviation and airports sectors via the development fund. However, the draft policy has recommended that 25 per cent of the revenue will go to the fund.

Kaw said that, at present, hardly 10 per cent of the FTT goes to the Airports Authority of India (AAI). He said that hardly 1.3 per cent of the total funds allocated to the aviation sector came from the government's budget. Most of the organisation and agencies of the civil aviation sector raised finances through their internal accruals. Kaw gave the example of other countries where the aviation sector is subsidised by their governments through loans and guarantees.

The pricing and taxation policy also has to change, said Kaw. For instance, in dollar terms, aviation turbine fuel is around two to three times higher in India compared with the global prices. Fuel accounts for around 30 to 35 per cent of an airline's operating cost.

Kaw announced the need for a level playing field between the national carrier and private airlines. "The ministry," he said, "cannot be seen as favouring the national carrier". Some of the private airlines, he said, such as Modiluft and East West were now trying to revive themselves "and the ministry is giving its full support to it," he said.

Kaw clarified that the airport at Calcutta will continue to be an international hub, its status at par with the the airports of other metropolitan cities. AP Singh, the joint secretary for civil aviation, said that the ministry has constituted a five-member committee headed by him to take decisions on aircraft inductions. He said that the problems with having too many flights in any route in the domestic sector was the load factor. If the load factor becomes as low as 50 per cent, it becomes unviable. Referring to the IATT, Singh said that this component should be allowed to be retained with the airlines.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.