After remaining unchanged for the last seven years, airfares in the domestic sector are in for a hike. The Ministry of Tourism is preparing a detailed route-sector fare revision proposal to be ready next week. The final decision will, however, depend on how the political leadership responds to the plan.

Aviation fuel prices have gone up several times, price of spares and customs duty has also increased, says Yagya Prasad Gautam, joint secretary at the Ministry.

These have made it necessary to change fares, he says. Talk about raising domestic airfares has been on since the recommendation made by the Civil Aviation Authority of Nepal (CAAN) last December. The CAAN proposal included a new mechanism for cross-subsidising flights to remote destinations.

According to the plan, airlines flying profitable routes-mountain flights and those charging \'tourist\' fares-were to contribute a portion of their earnings toward the creation of a special fund that was to be used to subsidise flights to remote areas. Airlines were to provide five dollars on each mountain flight ticket and two dollars on each tourist fare. The sum thus collected would pay the difference between a plane\'s operating cost and the ticket price.

But this plan felt apart after some private airlines-including those that do no fly to any remote destination-disagreed on the contribution plan.

A possible dry operating cost (DOC) for a Twin Otter, which provides the basis for ticket prices, is $ 860, including the cost for maintenance. (Without major maintenance, that would be $ 720.) By that reckoning each ticket on the hour-long flight from Nepalgunj to Simikot would have to be priced at around Rs 3,900. an amount far beyond the reach of locals. But even if the present fare were doubled to make it Rs 1200 no plane carrying 16 passengers would be able to do business. That\'s where the subsidy comes in.