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DGCA removes fare caps on tickets of domestic flights from August 31

The government had in June started discussions with airlines about the removal of price bands for passenger fares.

August 10, 2022 / 06:35 PM IST

The Directorate General of Civil Aviation has decided to remove the ongoing fare caps on the tickets of domestic airlines from August 31.

"After review of the current status of Scheduled Domestic Operations viz-a-viz passenger demand for air travel in terms of the purpose specified in the initial Order No. 02/2020 dated 21.05.2020, it has been decided to remove the fare bands notified from time to time regarding airfares with effect from 31.08.2022," the DGCA said in a notification.

The government had June started discussions with airlines about the removal of price bands for passenger fares.

The talks started after some airlines renewed their demand to remove the pricing caps, claiming the regulation is a hurdle to the full-fledged recovery in domestic air traffic.

In May, aviation minister Jyotiraditya Scindia had said that fare capping was necessary to protect passengers from being charged exorbitant fares.
 "I have an environment where ATF prices are still very high, I want to protect the passengers and also the airlines... I have to ensure that the environment is stable and I need multiple airlines to proliferate in my country and then I need to create that arena where multiple airlines can operate,” Scindia had said.

Discussions on removing the price bands for domestic airfares have resurfaced after many airlines renewed their demand to remove the pricing caps, saying that over-regulation is a hurdle to the full-fledged recovery of domestic air traffic. Airlines in India are also hoping that ATF will be brought under the ambit of the goods and services tax regime, to lower their burden.

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Fare caps are currently applicable on a rolling basis for a 15-day cycle, which means airlines are free to set prices of tickets beyond a 15-day period from the date of booking.

Experts said it has become difficult for airlines to maintain operating efficiencies under the current fare caps, given that ATF accounts for 30-35 percent of operational costs.

The Aviation Ministry had imposed lower and upper limits on domestic airfares based on flight duration when services resumed on May 25, 2020, after a two-month lockdown due to the pandemic.

The lower end of the fare band was put in place to help airlines that had been struggling financially due to travel restrictions. The upper limit was imposed so that passengers are not charged huge amounts when the demand for seats is high.

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