The Naresh Chandra committee, which is drafting the much-awaited civil aviation policy, has suggested setting up a National Civil Aviation Development Fund to promote infrastructure development in the sector as well as the creation of a Civil Aviation Economic Regulatory Authority.

Government sources said though the details had not been worked out yet, the fund could be financed by diverting the collections from the inland air travel tax and the foreign travel tax to the corpus. A cess could also be levied on the airlines operating in the country, sources added.

The proposed fund would be used for upgrading the existing airports or building new ones, starting airline services to remote areas and also providing revenue to any regulatory body to be created, the sources said.

The proposed Civil Aviation Economic Regulatory Authority could be mandated to oversee privatisation of airports and various other aspects of air navigation, the committee suggested.

The civil aviation ministry had earlier considered setting up an Airport Economic Regulatory Authority to control airport tariffs in view of privatisation of airports. This could now be subsumed under the CAERA, sources said.

The CAERA will primarily be entrusted with the task of preventing predatory practices and unfair tariff structures either by airlines and airport operators or by airport service providers.

The authority will also ensure quality and efficient services. To set up the regulatory body, the committee has suggested the existing Aircraft Act 1934 be replaced by a consolidated Indian Aviation Law.

The Naresh Chandra committee has been asked to submit its report to the civil aviation ministry by October. The ministry hopes to have a consolidated policy in place by December 2003.

The committee will also look into the issues of foreign direct investment and allowing foreign airlines to pick up a stake in domestic carriers.

The other issues before the committee will be allowing international flight operation rights to private domestic carriers, rationalisation of sales tax on aviation turbine fuel and regional connectivity.