The government has no plans to regulate airline ticket prices under the new airfare rules being framed, although it may impose fare caps during extraordinary situations such as natural disasters or major disruptions, a senior government official told The Economic Times.
The development comes after the Centre informed the Supreme Court on Friday that the rules governing airfares under the Bharatiya Vayuyan Adhiniyam, 2024, had received administrative approval and would be published within two weeks. The announcement triggered speculation about government intervention in airline pricing and led to a sharp fall in airline stocks.
“There are no plans to interfere in the free market mechanism which fixes airfares based on demand and supply,” the official told ET. However, the government will be able to impose fare caps when exceptional circumstances threaten to cause hardship to passengers.
What do the new rules say?
The proposed rules will introduce greater oversight of airline pricing without bringing routine ticket fares under government control.
Airlines will have to submit their fare structures to the Directorate General of Civil Aviation (DGCA), India's aviation regulator, a month in advance and display them on their websites. The DGCA will monitor compliance to ensure carriers do not charge more than the highest fare category submitted to the regulator.
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The government may also impose fare caps during extraordinary situations, such as natural calamities or major disruptions, to prevent excessive prices from causing hardship to passengers. Past interventions have included temporary fare caps or other measures during the Covid-19 pandemic, the Maha Kumbh, and the Pahalgam incident.
Why are airfares rising in India?
India deregulated airfares in 1994, allowing airlines to determine ticket prices based on operating costs, the nature of their services and reasonable profit expectations.
However, fares have come under pressure amid rising aviation turbine fuel (ATF) costs and limited flight options, particularly during peak travel periods.
According to aviation analytics firm Official Airline Guide (OAG), average one-way airfares for travel between September 1 and November 10 rose by 68 per cent year-on-year on the Delhi–Hyderabad route, 51 per cent on Mumbai–Kolkata, 39 per cent on Delhi–Goa, and 37 per cent on Mumbai–Bengaluru.
Speaking to reporters last week, Union Civil Aviation Minister Ram Mohan Naidu said the ministry was keen to keep airfares reasonable, although volatile aviation turbine fuel (ATF) prices were making this challenging.
Naidu said the West Asia crisis was adding to the burden of ATF prices and that the ministry was discussing the issue with airlines and oil marketing companies.
Meanwhile, IndiGo, Air India, Air India Express and Akasa Air have raised or introduced fuel surcharges in response to rising aviation turbine fuel (ATF) prices, adding to the cost of air travel.