New Delhi, Jun 15 (HT/PTI) : The Cabinet cleared a new civil aviation policy on Wednesday, opening doors to a number of passenger-friendly measures including capping of airfares at Rs 2,500 for hour-long flights.

The policy also eased a rule restricting when newer airlines can start flying overseas, civil aviation minister Ashok Gajapathi Raju said. He said on Twitter that airlines would no longer need to wait for the five years of operations earlier required before they can begin flying abroad, but must still have 20 jets in their fleet.

The policy lays focus on regional connectivity with an aim of providing affordable aviation services in Tier-II and Tier-III cities. It will introduce a slew of changes, including the auctioning of unilateral traffic rights, tax incentives for airlines, maintenance and repair works of aircraft besides mooting a 2% levy on all air tickets to fund regional connectivity scheme and providing viability gap funding for airlines to encourage operation on regional routes.

The civil aviation ministry had sent the policy for Cabinet’s approval on June 3.

The NDA Government had for the first time unveiled the policy draft in November 2014, subsequently replacing it with another in October 2015.

Easing the “5/20” rule on international flights would mark an important further step towards liberalising India’s aviation market, the world’s fastest growing.

The rule, unique to India, had sought to encourage the growth of the nascent domestic aviation industry, but many officials said it inhibited Indian carriers from growing their share of international travel.

Airlines were divided on the rule change with incumbents like Etihad-backed Jet Airways, InterGlobe Aviation’s Indigo Airlines and SpiceJet opposing it.

Tata Group’s two recent ventures - Vistara, in partnership with Singapore Airlines, and AirAsia India, a venture with Malaysia’s AirAsia Bhd - were in favour.

Shares in Jet Airways, InterGlobe and SpiceJet rose on news that the policy had been approved in a move that, analysts said, would boost the overall aviation market.

Civil Aviation Minister Ashok Gajapathi Raju said the policy is a "game changer" and that the country's aviation sector is poised to become the world's third largest by 2022.

The policy has been finalised after nearly eight months since the Ministry came out with the revised draft in October 2015 and follows many rounds of deliberations with stakeholders. 

Significantly, India's domestic air traffic market logged the fastest growth in the world for the 13th consecutive month in April. The market grew at nearly 22 per cent during the month.

"India's domestic traffic soared 21.8 per cent, marking the 20th month of double-digit traffic growth and the 13th consecutive month it has led the domestic markets," global airlines body, International Air Transport Association (IATA) had said last month.

Initially, the policy was expected to be finalised in the last financial year as certain proposals were to be in effect from April 1, 2016.

However, the government had been moving back and forth on the policy seeking to sort out the differences among stakeholders including on 5/20 norm.

In the run-up to the framing of policy, various provisions including the issue of international flying norm witnessed extensive debate, with legacy carriers opposing any changes to the rule, while start-up airlines frantically demanding its scrapping.

Significantly, AirAsia Berhad --a key stakeholder in AirAsia India had recently said that it was confident of the Government scrapping the norm.

"...the ruling (5/20 norm) is expected to be revoked along with a new National Civil Aviation Policy (NCAP) to be introduced in the near future, given massive lobbying against it," AirAsia Berhad said in its 2015 annual report released yesterday.

The Ministry had received more than 450 responses on the draft policy.

Raju said the objectives of the policy is to "make flying affordable, safe, convenient", promote balanced regional growth, tourism, infrastructure and help improve the ease of doing business.

Regional connectivity, cargo, MRO and skill development would be the focus areas, he said in a series of tweets.