DGCA to get more powers to regulate air fares

14th Mar 2011

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Ministry of Civil Aviation will soon come out with a blueprint seeking to arm the Directorate General of Civil Aviation (DGCA) with powers to regulate air fares, which hit the roof during the last festival season. According to a report in The Economic Times, the blueprint, which will be ready in a month, mainly looks at transforming DGCA into a powerful regulatory body called Civil Aviation Authority (CAA).

“The blueprint for the CAA should be ready in a month's time and we are planning to include regulation of airfares in it. We also plan to have an environment regulation and one for passenger grievances, for which an ombudsman may be brought in," a senior official from the civil aviation ministry said.

"We can't disagree with the ministry on this as many countries have competition and anti-trust laws. Also, the market is often misused to raise or slash fares like what happened during Leh crisis and Mangalore crash. We need a referee,” said Sanat Kaul, Chairman, International Foundation for Aviation and Aerospace Development.

The India representative in the International Civil Aviation Organisation (ICAO) Arun Mishra thinks that the experience of last year when airlines increased fares abnormally on few routes and the DGCA had to intervene is enough case for such powers to be given to the new regulator.

"A soft-handed approach to fare regulation would be an effective way to deal with this issue. The Civil Aviation Authority should have inherent powers to intervene on fares in extraordinary situations and in normal times it should allow market forces to take care of the fares," Mishra, a former Joint Secretary at the ministry said. However, others think it is not a feasible idea for the Indian market.

“In a competitive market like India, there is no role for such powers as market forces are the best bet for regulation and consumers respond quickly to changes in pricing,” Kapil Kaul, CEO, global consultancy firm Centre for Asia Pacific Aviation (South Asia). The government's role should be to allow competition to thrive and ensure adequate capacity, he added.

After the ministry takes a view of the draft on Civil Aviation Authority, it will be put in the public domain for inviting views of stakeholders and the general public. After this stage, a Cabinet note will be prepared, post which the report will be circulated among different ministries for consultation.