The Indian government recently announced its decision to cap regional airfares at Rs. 2,500, and this is likely to eat away the passenger traffic of the Indian railways. Once the new rule comes into force, there would be very little price difference between premium rail fares and the fares that airlines charge for the same distance.
This could result in more number of passengers opting to fly instead of rail travel thereby saving time, the Financial Express reported. The central government is yet to announce a detailed regional connectivity scheme and the names of the airports, which would fall under the scheme.
The broad outline of the policy suggests that state government's, which are ready to give less than one percent VAT on Aviation Turbine Fuel (ATF) prices and airport charges, would be able to get airlines to begin operations in their cities.
For example: If the Jaisalmer airport in Rajasthan gets connected to Jaipur, then, a passenger who travels on a 12-hour AC first class journey between the two cities pays Rs. 2,300. With the option of regional connectivity, the passenger would only have to shell out an additional Rs. 200 to for a 75-minute flight instead.
For the last few moths, the railways has seen a decline in the number of passenger bookings.
Passenger bookings declined by four percent between April-August 2015 from the previous fiscal. During the April-August 2015 period, about 3,427.84 million passengers travelled by trains when compared to 3,575.30 million in the previous year, Press Trust of India reported.
The Indian government is reportedly planning to revive about 160 airports and runways and the cost of revival for each would be approximately between Rs. 50-100 crore.
More and more people prefer the option of flying in India as seen from double-digit growth of passenger traffic for the month of May alone. Indian air carriers flew 86.69 lakh passengers during the month of May, 21.63 percent more than 71.29 lakh passengers last May, according to government (DGCA) data.
[1 lakh = 100,000 | 1 crore = 10 million | 100 crore = 1 billion]