Price Hike in Airfare owing to security cost to impact Aviation sector in India

Price Hike in Airfare owing to security cost to impact Aviation sector in India

Passengers may have to face an early increase in airfare. The government is expected to increase Passenger Service Fees (PSF) at least 38% to cover the security budget at Indian airports. The government had previously decided not to increase the PSF and its plan was to put the cost on the forefront of the Consolidated Fund of India (CFI), but the Finance Ministry rejected to fund the shortage.

Price Hike in Airfare owing to security cost to impact Aviation sector in India

A senior official of the aviation ministry said, “The finance ministry had decided to transfer the cost to the CFI, but had asked to do so when it was revenue neutral. This will lead us to boost the PSF. Our valuation is that the increase can be in the range of Rs 50 per ticket. This will not only benefit in eliminating the Annual Fund Gap but also benefit in recovering shortage for the last several years.

The amount collected from this levy is used in the cost of security at the airports. It is mainly used to pay salaries to CISF people that are on security duty at airports.

The Aviation Ministry believed that the increase in the rates would burden the passenger. The ministry wanted to transfer security costs to CFIs on airports. After a cost head is inserted in a consolidated fund, the government directly finances the shortfall. However, the finance ministry has refused to fund any shortfall.

The official said, “Now whether we decide to continue the existing system or transfer the cost to CFI, there will be an increase in the PSF.”
Officials say that the cost of safety at airports across the country is more than Rs 1300 Crore, while the amount raised through PSF falls to about Rs 500 Crore.

In this shortage, public sector’s Airports Authority of India (AAI) has a deficit of Rs 100 Crore annually and says that it is compensating the amount. Private airports, however, do not recompense their corpus.

The issue of increasing the deficit was also raised by DGO Singh of the Central Industrial Security Force and he had sought the intervention of the government for the outstanding clearance of CISF.

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