The Parliamentary Standing Committee on Transport, Tourism, and Culture, led by YSR Congress MP V. Vijaysai Reddy, has suggested that the Indian aviation regulator the Directorate General of Civil Aviation be empowered to regulate tariffs on domestic flights.
The committee as part of its report tabled in the parliament has said that it has found multiple instances where domestic airlines have increased airfares around festivals and holidays.
“The Committee opines that a case of violation by airlines can only be detected if the records are inspected by DGCA. The Committee has come across various instances where there has been an abnormal increase in airfares, especially during festivals or holidays, and is of the opinion that self-regulation by airlines has not been effective," the committee said in its report.
The report also asked for the DGCA to monitor airfares to ensure that airlines don't increase prices unfairly.
"The Committee, therefore, again recommends that a mechanism may be evolved whereby DGCA is empowered to regulate air tariffs. The committee urges the Ministry to explore the feasibility of establishing a separate entity with quasi-judicial powers to exercise control over airfares being charged by the airlines,” the report said.
The Parliamentary panel also proposed route-specific capping of airfares and setting up of a separate entity to exercise control over air ticket prices, amid concerns in various quarters about surging fares.
''It also recommends that in order to protect the commercial interests of the airlines, the feasibility of modifying the ceiling during the peak/festival season, with prior intimation, may be examined,'' the report added.
As per the Ministry of Civil Aviation, DGCA has a Tariff Monitoring Unit that monitors airfares on certain routes every month to ensure that the airlines do not charge airfares outside a range declared by them.
DGCA monitors airfares on certain routes every month to ensure reasonable airfares.
The ministry also said that the DGCA does not have any power to regulate tariffs based on the data generated by the Tariff Monitoring Unit, as the process of airfare regulation has been dispensed with.
However, according to the report by the parliamentary committee, DGCA has not inspected the records of airlines over the last 10 years, and without any inspection, it has stated that airlines have complied with the rules.
The committee said that self-regulation of ticket prices by airlines has not been effective.
MoCA in its response to the committee report said airlines set airfares as per their respective distribution systems, which is in line with global practice.
According to the parliamentary report, the ministry in its reply has said that if very few seats are available on a flight, the fares may be higher.
Therefore, it is possible at times that the flight of a low-cost carrier (LCC) is in higher demand than a full-service carrier (FSC) and hence may see a higher fare being offered at a particular booking period.
The panel report contested the government's response saying that justification by MoCA was not satisfied, regarding higher fares being charged by Low-Cost Carriers (LCCs) vis-à-vis Full-Service Carriers (FSCs).
"It is aware that there have been instances where the LCCs have charged higher fares as compared to their Full-Service counterparts for flights on the same route and similar timings. The Committee reiterates its recommendation and urges the Ministry to monitor such instances and take corrective actions if necessary. The Committee, therefore, calls for more transparency and details on the monitoring process,” the report said.
According to the committee, revenue management and commercial interests such as maximising shareholders' value determines the fixing of airfares, and passenger interests do not play a role in airfares fixation.
''Hence, it strongly recommends that Ministry may formulate a mechanism to ensure the compliance of Rule 13(1) of the Aircraft Rules, 1937 and thereby ensuring a control on surge in airfares.
''Again the term 'reasonable profit' is used without a clear definition or specific criteria, making it a subjective measure,'' it noted.
The panel also said it is still of the opinion that the policy on variation in prices of seats for the same flight needs a relook as it is against the principle of equity.
The claim that unbundling reduces the cost of air travel for consumers who desire only the basic product needs to be scrutinised, the committee said, adding that while the practice may reduce costs for some passengers, the same may also lead to increased costs for others who end up paying for various add-ons.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
