Civil Aviation Minister Ashok Gajapathi Raju said the policy will help India become the world's third-largest civil aviation market by 2022, behind the U.S. and China. Raju tweeted after the Cabinet's approval that it would be "a game-changer for the (aviation) sector."
The aviation policy caps airfares at rupees 2,500 ($37) for a one-hour flight between small towns and cities, and offers incentives to airlines to fly those routes. The government would refund 80 percent of the losses incurred by airlines due to the fare caps.
The objective of the new policy was to "make flying affordable, safe and convenient and to promote balanced regional growth, tourism, infrastructure and ease of doing business," Raju told reporters later Wednesday.
Domestic airlines also would not government approval before entering international code share agreements with other airlines.
The government also threw out an old rule that required airlines to have operated for five years and have at least 20 planes before being able to fly international routes.
India's booming economy and growing middle class have helped to make it the world's fastest-growing air travel market. The number of passengers grew 20 percent last year, and airlines are announcing flights to new destinations in the country almost every week. Domestic air passengers are expected to jump from the current 70 million to 300 million by 2022, and to 500 million by 2027.
(AP)