Bhubaneswar, May 31: The state government today decided to terminate its agreement with Air Odisha Aviation Private Limited with effect from June 26 following differences over key issues, including pricing of tickets.

The intra-state airline operated operated a nine-seater aircraft between Bhubaneswar and the three major commercial centres of Sambalpur, Jharsuguda and Rourkela.

To ensure commercial viability of the operator, the state government had, as a special incentive, made arrangements to compensate it against vacancy of seats. However, problems cropped up when the operator allegedly started hiding information about the number of seats sold on its flights from the government.

"In the agreement it had been made clear to the operator that tickets would be sold online to ensure transparency. But it did not adhere to the terms of the agreement," said a senior government official.

The company also violated the terms of the agreement by not keeping the government posted about the changes in the price of tickets.

"We received repeated complaints that it was charging exorbitant prices from passengers," the government official said.

The company, according to the agreement, was also supposed to keep the government informed about its schedules, but it had also failed on this count. The company was charging between Rs 2,500 and Rs 4,000 for a ticket depending on the availability.

"Without addressing these issues, they started demanding subsidy from the government and then threatened to stop the services. Hence, we have decided to end the contract," the official said.

The company was issued a show cause notice on May 26. Since the reply of the operator was not satisfactory, the government today decided to end the agreement.

However, chairman-cum managing director of the airlines, Santosh Pani, described the allegations as an attempt to defame the company.

"A conspiracy has been hatched to defame us. We will bring it to the notice of the chief minister. If we fail to get due support from the government, we will move court," he said.

The company had courted controversy when Mitesh Khimji, director of Khimji Jewellers, one of the shareholders of the airlines had on May 2 lodged a complaint with the Khandagiri police accusing Air Odisha of having cheated him of Rs 1.5 crore.

Another shareholder, Sandeep Ray, son of BJP MLA and hotelier Dilip Ray, had filed a similar complaint with Khandagiri police accusing the company of cheating him of Rs 40 lakh.