Parliamentary panel asks MoCA to define ‘reasonable profit’ for airlines
Despite ‘reasonable profit’ is among the factors considered by airlines while fixing tariffs, it has no set definition, a parliamentary panel has pointed out. It has recommended that the Ministry of Civil Aviation (MoCA) define it and devise a mechanism to calculate it. The report ‘Issue of Fixing of Airfares’ by the Parliamentary Committee on Transport, Tourism and Culture comes in the backdrop of concerns over soaring airfares and calls for introducing fare caps on airline tickets.
In the report, which was tabled in Parliament Thursday, the panel noted that the government is not in favour of regulating airfares due to apprehensions that it would impact the sector’s growth — especially since most Indian carriers have registered an operating loss in the past three years. The panel, however, asked the government to review its policy so that passengers also receive a fair deal at all time, reports Yuktika Bhargave for The Print.
“The Ministry, in consultation with the airlines, should devise a mechanism or a formula, so that the concept of ‘reasonable profit’ as provided explicitly in Rule 135(1) of the Aircraft Rules, 1937, is adhered to,” the committee headed by Rajya Sabha MP Vijayasai Reddy V. said in its report.
Rule 135 of the Aircraft Rules, 1937, forms the basis of the legislation for airfare regulations. According to these rules, airlines decide tariffs after considering factors such as reasonable profit, the cost of operation, characteristics of service and the generally prevailing tariff.
The lack of a clear definition makes such expressions “liable to be misunderstood, besides encouraging arbitrary actions”, the committee report said.
“…‘reasonable profit’ is embedded under the provision of Sub-Rule (1) of Rule 135 of the Aircraft Rules, 1937, under the ‘Tariff’. There is no separate rule or any other guideline ‘reasonable profit’ and ‘generally prevailing tariff’. These words are understood as per the common understanding,” the panel said.