The ministry has decided against regulating fares even as members of Parliament and a parliamentary panel urged it to put in place a mechanism. Its analysis since January-March 2014 on six key routes showed fares have lowered or marginally increased (see chart).
"We did a quarterly analysis of fares for some quarters and it shows that fares have not gone up to the extent costs for airlines have. As of now, we do not see any reasoning behind regulating fares. All airlines declare their minimum and maximum fares to the aviation regulator every month and that it is a transparent enough mechanism to check fares," civil aviation minister Ashok Gajapathi Raju told ET in an interview recently.
The ministry had in the past discussed ways to regulate fares. Methods discussed by the ministry included limiting the highest fare at Rs 20,000, fixing a lower and higher fare band and allowing airlines to go only 33% higher or lower from that fixed band.
None of the models was either finalised or implemented. The minister, however, feels that the concern of emergency travellers can be addressed by bringing in an emergency quota of seats.
Popular in Transportation
"We also realised that going into floors and caps, you will push up cost for some and pull down cost for others. Fares are not regulated anywhere in the world. The problem that we have is last-minute emergencies. Is it not possible to ask the airlines to reserve some seats for emergency travellers and release the seats last minute for people travelling due to an emergency?" he said.
Passengers, however, believe lower or higher fares may have come down but average fares have increased.
"The ministry or the Directorate General of Civil Aviation (DGCA) does not have the expertise to monitor the economics behind fares. Rather than collating data on low/high fares, they should have asked for average fares from the airline, as the airline operates on the basis of yield management," said D Sudhakara Reddy, president of Air Passengers Association of India.
Reddy further said airlines sell a large number of tickets last minute at higher prices and hence increase their yield.
"So, the fare range may not have increased but the number of tickets at higher prices has surely increased. On top of it, airlines are also increasing cancellation charges and introducing a charge for seats," he said.
Meanwhile, the Competition Commission of India (CCI), after complaints from members of Parliament and a parliamentary panel, has started an inquiry into alleged cartelisation of fares by airlines. In earlier inquiries, CCI did not find any irregularities in airfares.
