DGCA begins random checks on airfares, is regulation the next step?

New Delhi: Having done much back and forth over airfare regulation, this government has at least begun monitoring fares in earnest. Is full fledged regulation the next step? Aviation regulator DGCA has set up a Tariff Monitoring Unit to monitor airfares on certain routes selected on random basis, Minister of State Mahesh Sharma said in a written reply to the Rajya Sabha today.

The minister said this has been done to ensure the airlines do not charge airfares outside the range declared by them though an analysis has shown that the airfares remained well within the fare bucket uploaded by the airlines on their respective websites. As of now, all airlines are expected to price tickets on each sector within a prescribed price bucket - which mandates the lowest and highest fares.

But 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 breakeven cost of each airline and that the the AERA act may be amended to include airlines and therefore fare regulation by the ministry. As of now, only airport tariffs are regulated via AERA.

In today’s reply in the Upper House of Parliament, Raju’s deputy Sharma said airfares are not regulated by the government. Under the provision of Sub Rule (1) of Rule 135, Aircraft Rules 1937, airlines are free to fix reasonable tariff having regard to all relevant factors, including the cost of operation, characteristics of services, reasonable profit and the generally prevailing tariff.

He also said airfares fixed by airlines are published on their respective websites under the provision of of Sub Rule (2) of Rule 135, Aircraft Rules 1937. Airlines remain compliant to the regulatory provision of Rule -135 as long as the fare charged by them does not exceed the fare established and displayed on their website.