Govt not to regulate airfares; caps only in exceptional cases

The Centre may impose caps on unjustified airfares on individual routes in exceptional circumstances under the new airfare rules, sources told businessline.

However, airlines will be mandated to provide information on airfares, along with a break-up of operating costs and taxes, to the regulator DGCA.

These disclosures would help assess whether high ticket prices are justified and could provide a basis for intervention where necessary in public interest.

The framework does not envisage a general airfare cap.

Domestic routes

These rules come in the midst of festive-season airfares hikes on several domestic routes. The steep increases in fares have been witnessed across key domestic routes during the Durga Puja, Chhath Puja and year-end holiday periods.

However, airlines would retain the freedom to determine ticket prices without seeking prior government approval.

The rules seek to formalise the basis for airfare assessment while preserving the deregulated character of the industry.

The operating-cost information submitted by carriers would provide a clearer basis for examining fares on individual routes and considering intervention in exceptional circumstances.

Furnishing fare and cost information would not amount to seeking government clearance for pricing decisions.

Any intervention to impose an airfare cap would be exceptional and undertaken where deemed necessary in public interest.

Such instances would be rare, sources said, adding that individual airlines will continue to exercise pricing autonomy in the normal course of business.

Price pressure

Special care has been taken while framing the rules to account for the financial pressures faced by the industry.

Additional pressure on pricing could weaken the commercial rationale for continuing in the airline business, given the financial constraints under which carriers operate.

The framework seeks to provide a basis for assessing whether fares are justified while retaining airlines’ commercial freedom.

Several aspects of the existing system have so far involved ad hoc measures and differing interpretations regarding airfare intervention.

The new rules would formalise these arrangements and provide greater clarity on the information carriers must furnish, as well as the basis for assessment and exceptional intervention.

Last week, the Centre informed the Supreme Court that the rules had been finalised, received administrative approval and would be published within two weeks.

The court directed the government to place the published rules before it by November 16, when the matter will be taken up next.