1. Draft Regional Connectivity Scheme (RCS)

2. Introduction

3. National Civil Aviation Policy 2016 - RCS
Vision / Objectives
To make flying affordable for the masses
To promote tourism, increase employment and encourage balanced regional growth

4. Regional Air Connectivity Scheme (RCS)
Guiding Principles
Reviving un-served / under-served airports / heliports or routes
Operators to assess demand on routes (both aircraft and heli)
Submit proposals for operating / providing connectivity on such routes
Earmarking a certain number of seats in each flight as RCS seats
Passenger fares on RCS seats to be capped based on flight distance / time
Operator to seek VGF in case there is gap in costs of operations and revenues
Market based discovery of lowest VGF sought on a route and allocation of a route to such operator on such lowest VGF payment

5. Key definitions
Implementing Agency –Designated entity responsible for implementation of the Scheme.
‘Unserved Airport’ - Any airport with no scheduled commercial flights during the last two (2) flight schedules
‘Underserved Airport’ - Any airport with no more than 7 scheduled commercial flights per week as per the latest schedule
RCS route – pair of origin / destination points (atleast one RCS airport or heliport / no scheduled flights for last 2 schedules (heli -1) / stage length between 200 to km except hilly / island /NE regions or for heli operations (60 min))
Regional Connectivity Fund - Fund/Corpus created through application of a levy on domestic flights ( other than CAT- II/ CAT IIA, RCS routes and small aircrafts below 80 seats)

6. Support from the Central Government
Excise 2% on Aviation Turbine Fuel (ATF) purchased at RCS Airports for an initial period of three (3) years from the date of notification of this Scheme.
Concession on Service Tax – To be levied on 10% of the taxable value (abatement of 90%) of tickets for passengers on an RCS Flight for a period of 1 year
Freedom to enter into code sharing arrangements with both domestic as well as international airlines.
Permission to set-off / trade ASKMs for non-RCS seats as per existing RDG guidelines

7. Support from the State Governments
VAT to 1% or less on ATF at RCS Airports located within the state for a period of 10 years;
Minimum land, if required, free of cost and free from all encumbrances for development of RCS Airports
Security and fire services free of cost at RCS Airports;
Electricity, water and other utility services at concessional rates at RCS Airports; and
Contribution (20% for States other than for North-Eastern States where the ratio will be 10%) to RCF

8. Support from the Airport Operators
Exemption to RCS Flights from Landing Charges and Parking Charges.
Exemption to RCS Flights from Terminal Navigation Landing Charges (TNLC)
Discounts to RCS Flights on levy of Route Navigation and Facilitation Charges (RNFC) 42.50% of Normal Rates)
No levies by the Airport Operators for PSF, DF and UDF.
Allowing selected airline operators to do self ground handling for operations under the scheme at all airports

9. Features of the Scheme

10. RCS Coverage & Applicability
Routes or a Network of Routes satisfying RCS requirements
RCS Operations through fixed-wing aircrafts.
RCS Operations through helicopters, permitted only for remote / specified areas

11. Regional Connectivity Fund (RCF) and its allocation
Inflows to RCF
Levy or fee per departure on domestic routes as provided under NCAP 2016
Premium realized, if any, from the allotment of additional capacity entitlements on international routes
Allocation of RCF
To Regions – Capped up to 25% of the estimated inflows in 1st year (5 regions)
To Underserved Airports – Capped up to 30% of the estimated inflows in 1st year
To Airline operators – 50% for a region and 25% of the total fund

12. Period of Support under the Scheme (RCS)
Tenure of the Scheme – 10 years
Tenure of VGF Support – 3 years
Proposals for provision of VGF under the Scheme will be considered until the end of 7th year from the date of notification of the Scheme

13. Minimum commitments from Selected Airlines
Fixed-wing aircraft: 50% of seats offered on an RCS Flight (subject to a minimum and maximum of 9 seats and 40 seats respectively) to be sold at or below specified Airfare Cap
Helicopters: 5 Seats to be sold at or below specified Airfare Cap
Frequency: Minimum 3 Flights per week and Maximum 7 Flights per week

14. Airfare Caps under the Scheme
All-inclusive airfare of ₹2,500 per RCS Seat will be applicable for:
RCS Flights operated by fixed wing aircraft for stage length of 500 km; and
RCS Flights operated by helicopters for flight duration up to 30 minutes
Airfare Caps will be indexed to inflation as per NCAP 2016 and will be revised quarterly.
3. Airfare Caps have been specified for various stage lengths

15. VGF to be capped VGF Caps calculated on normative basis
Caps with reference to a broad representative data set / potential cost and revenue for operations on a typical RCS Route for a particular stage length
VGF Caps to be specified upfront to ensure transparency under this Scheme
VGF Caps as well as VGF support for respective routes indexed to inflation & ATF prices; such indexation to be reviewed on a periodic basis

16. Airfare Caps – Fixed Wing Aircrafts (1/2)
Stage Length (in km)
RCS Airfare Cap (in ₹)
VGF Cap (in ₹)
201 – 225
1,770
1,810
226 – 250
1,830
2,190
251 – 275
1,890
2,560
276 – 300
1,950
2,940
301 – 325
2,010
3,090
… – … –
426 – 450
2,330
3,610
451 – 475
2,370
3,720
476 – 500
2,500
3,750
501 – 525
3,790
526 – 550
2,760
3,820
676 – 700
3,540
4,040
701 – 725
3,670
4,070
726 – 750
3,810
4,100
751 – 775
3,940
4,130
776 – 800
4,170

17. Flight Duration (in minutes)
Airfare Caps – Helicopters (2/2)
Flight Duration (in minutes)
RCS Airfare Cap (in ₹)
VGF Cap (in ₹)
00 – 10
2,500
11 – 15
1,200
16 – 20
2,400
21 – 25
3,600
4,800
31 – 35
2,900
5,600
36 – 40
3,350
6,400
41 – 45
3,750
7,200
46 – 50
4,150
7.200
51 – 55
4,600
56 – 60
5,000

18. PLF Based Tapering of VGF support
For annual average PLF exceeding 90%, VGF for the next year will be 50% of the applicable VGF for the next year.
If annual average PLF for the subsequent year of operations continues to exceed 90%, VGF for the third year will be 25% of the applicable VGF.
However, if it falls below 90%, VGF for the third year will be restored to 100% of the applicable VGF.
Such VGF tapering will not be applicable for Category 1 aircraft and helicopter operations under the Scheme

19. Exclusivity to Selected Airlines on awarded routes
During the exclusivity period, no other airline operators would be allowed to operate flights on the specific RCS Route
Suggestions to be invited from stakeholders on the length of Exclusivity Period
One Year (1 year);
Two Years (2 years);
Three Years (3 years)

20. Procedure for selecting an airline operator
Reverse bidding mechanism will be followed for the selection of airline operator
Two half-yearly cycles for inviting & evaluating proposals and identifying the Selected Airline
Submission of Initial Proposal(s)
Scrutiny of Initial Proposal(s)
Invitation of Counter Proposal(s)
Evaluation of Proposal(s) and Selection of Preferred Applicant

21. Evaluation of Financial Proposals
Suggestions to be invited from stakeholders on the following bidding parameters
VGF per RCS Seat
Total VGF per week
Combination of VGF per RCS Seat and Total VGF per week

22. Ease of Exit Mechanism for Selected Airline
If a Selected Airline Operator ceases RCS Flight operations
After completion of one year of operations: Performance Guarantee (PG) and Additional Performance Guarantee (APG) will be returned, provided there are no defaults by the Selected Airline Operator under the contract.
Before completion of first year of operations: Both PG and APG to be encashed and retained by the Implementing Agency.

23. Draft Scheme will be available on the website- http://civilaviation
Draft Scheme will be available on the website Thank you