UDAN (which stands for ‘Ude Desh Ka Aam Nagrik’) is a Regional Connectivity

Scheme launched by the government that aims to make unserved/underserved

airports in small cities operational with regular flights, and offer subsidized airfares
to encourage more people to fly. to allow common citizens easier access to
aviation services. he UDAN Scheme is a key component of the Prime Narendra
Modi's National Civil Aviation Policy (NCAP) which was released by the Ministry
of Civil Aviation (India) on 15 June 2016.[17] The scheme will be jointly funded by
the central government and state governments, several states have come on board
by signing the "Memorandum of Understanding" with the union government for
this scheme.Under the regional connectivity UDAN scheme, the Civil Aviation
Ministry has set a target of operationalizing as many as 100 unserved and
underserved airports and starting at least 1,000 air routes. 56 airports have been
upgraded already and over 700 air routes awarded, of which air-service has
commenced on as many as 311 air routes under the UDAN scheme since it was
launched in the year 2017 with a budget of Rs 4,500 crore

Under this scheme:

 
1) Over 45 unserved and under-served airports would be connected to make air
travel more affordable
2) 50 per cent of the seats under UDAN scheme would be cappped at Rs 2,500.
3) 70 routes is proposed to be connected in this year

UDAN Scheme Latest Updates-

 The Civil Aviation Ministry has set a target of operationalizing as many as

100 unserved and underserved airports and starting at least 1,000 air routes.
  The Ministry of Civil Aviation has celebrated the UDAN day on the 4th
anniversary of the UDAN (Ude Desh Ka Aam Naagrik) Scheme. The GoI
has acknowledged the contribution of the scheme and has
identified 21st October as UDAN Day, the day on which the scheme
document was first released.
 The Civil Aviation Ministry has approved 78 new routes under the 4th round
of Regional Connectivity Scheme UDAN. So far, 766 routes have been
sanctioned under the UDAN scheme.

Objectives of the Regional Connectivity Scheme

 Operationalization and development of 425 underserved or unserved airports

in the country
 Boost inclusive economic development by providing faster connectivity
 Development of air transport infrastructure in remote areas aiding job
growth

UDAN Scheme

This scheme is a part of the National Civil Aviation Policy (NCAP) and is funded

jointly by the GoI and the state governments. The following are its salient features:

 The scheme duration is for 10 years

 Airlines participating in UDAN are selected through a competitive bidding
process
 The Central government will provide the following:

 Subsidy to cover Value Gap funding (VGF) for participating airlines

  Concessional GST on tickets booked using the scheme
 Codesharing for flights under the policy
State Governments will extend the following measures:
 GST reduction to 1% for 10 years
 Coordination with oil companies to facilitate refuelling facilities
 Provide land for airport and ancillary development
 Trained security personnel
 Utilities at subsidised rates
 20% of VGF
Airport operators such as AAI will provide the following concessions:
 No parking, landing and storage charges at participating airports
 Nil TNLC (Terminal Navigation Landing Charges)
 Allow ground handling by the airline selected through the bidding
process
 RNCF (Route Navigation and Facilitation Charges) will be discounted
to 42.4% of normal rates by the Airports Authority of India
Value Gap Funding is not provided to cargo airlines. All other terms and
conditions remain the same as passenger airlines. The fares are graded based on
distance and flight hours for both fixed-wing and rotary-wing services. The RCS
subsidy is funded by a levy of Rs 5000 per flight on major routes. Flights regulated
under this policy framework can be booked from the UDAN website and major
travel portals by passengers.

VGF
 the government has designed Viability Gap Funding (VGF). Viability Gap
Finance means a grant to support projects that are economically justified
but not financially viable. Such a grant under VGF is provided as a capital
subsidy to attract the private sector players to participate in PPP projects
that are otherwise financially unviable. Projects may not be commercially
viable because of long gestation period and small revenue flows in future.
VGF grants will be available only for infrastructure projects where private
sector sponsors are selected through a process of competitive bidding. The
VGF grant will be disbursed at the construction stage itself but only after
the private sector developer makes the equity contribution required for the
project.

Benefits

1. The citizens would get the benefit of affordability, connectivity and more
jobs.
2. The Centre would be able to expand the regional air connectivity and
market.
3. The state governments would reap the benefit of development of remote
areas; enhance trade and commerce and more tourism expansion.
4. For incumbent airlines there was the promise of new routes and more
passengers while for start-up airlines there is the opportunity of new,
scalable business.
5. Airport operators will also see their business expanding as would original
equipment manufacturers.

 
This is a perfect example of cooperative federation as selection of airports would
be done in consultation with State government. In fact starting dysfunctional
airports is the demand of many states that will be fulfilled by the scheme. The
scheme is rightfully needed to give much needed push to the tourism and
employment generation in the un-served region. It is also likely to significantly
reduce travel timings in remote and hilly regions, as well as islands and other areas
of the country.

 the challenges faced in the implementation of the UDAN scheme.

 Some states are reluctant on giving up the Tax Concessions on Air Turbine
Fuel (ATF) and other financial incentives that might attract different airlines
to operate in those regions of the state that are underdeveloped.
 Since airports occupy vast areas, acquiring land is not easy. Land scarcity
followed by huge capital are some issues that are faced.
 Policy reluctance due to financial non-viability of the models to connect
remote areas.
 The airline industry is known for its cut-throat competitiveness and capital
intensive nature. This discourages them to start operations in areas where the
passenger traffic is low due to low profitability.
 Another major challenge us gathering funds for Viability Gap Funding
(VGF)

A close examination of the distribution of successful UDAN routes by

operator, shows most of the successful routes have come from large
operators like SpiceJet and IndiGo. Both these airlines have chosen to not
take the Viability Gap Funding subsidy, but are instead leveraging the
scheme strategically towards gaining additional slots for themselves at
congested Tier-1 airports and gaining monopoly status on routes

the success of the scheme would depend on the participation established

airlines, since in its current form, UDAN does not make a business case for
small and independent operators who cannot benefit from the economies of
scale.U DAN cannot run without small aircraft operators as only small
aircraft can land and take off from the majority of the 400 airports that the
scheme intends to bring online.another issues in Scheme execution such as
AAI's selection of airports that lack supporting economic activity. Leisure
and native traffic alone will not stimulate demand at small airports. Demand
for air travel is created and sustained by the presence of industries and the
services sector