About UDAN Scheme

Introduction

• UDAN is a regional connectivity scheme to promote the aviation sector 
• Tag line of the scheme is “Ude Desh Ka Aam Naagrik” 
• Launched by PM Mr. Modi 

UDAN Coverage

• UDAN applicable on all flights covering a distance between 200 KM and 800 KM 
• UDAN seats are available at subsidized rates 
• Minimum seats per carrier is 9 and maximum is 40 per carrier 
• There is no lower limit set for remote, hilly, security and island regions 
• UDAN caps the fare for short distance flights 
• Geographical means of coverage viz. North East, North, South, West and East 
• Airports selection under UDAN operations would be done with the consultation of the state government 
• Accordingly concessions would be made available under UDAN 
• Most of the un served and under served airports would be covered under UDAN 
• Tenure of UDAN scheme is fixed at ten years 

Funding

• Viability Gap Funding (VGF) provided to airlines to kick off operations under UDAN keeping passenger fares affordable 
• Market based model will be followed for VGF 
• First, operators submit their proposals to implementing agencies 
• Operators selected through competitive bidding process 
• Reverse bidding adopted to select the lowest VGF quote 
• Regional connectivity fund (RCF) created to meet VGF under UDAN 
• RCF levy for domestic flights from the states is fixed at 20% 
• Financial stimulus in the way of Central and State government concessions, tax concessions 
• Exemptions given on landing and parking charges for airlines under UDAN 
• Funding support given for first three years of operation only 

Limitations

• Airlines is a luxury product and often seen as alienated from common man 
• UDAN tries to break this idea but the subsidies given under UDAN will be a burden to Government 
• No mechanism to monitor the beneficiaries of UDAN 
• Regional connectivity would increase but already the existing airlines are operating flights with more passengers and exceeding their quota of regional connectivity 
• UDAN finances and supports airlines only for three years under the perception that within three years the routes will become sustainable 
• It does not consider the hike in fuel cost within these three years 
• Airlines high levy of ATF tax is an area of concern 
• Increase in air traffic due to UDAN may cause environmental hazards in the form of air pollution 

Way Forward

• UDAN would help in reviving existing airports and air strips 
• Employment would be generated 
• Indian Economy would see a boost 
• The scheme ensures growth, affordability, development and connectivity 
• Business would enhance with quick movement of goods and export products 
• Remote areas would get developed 
• Commerce, tourism and trade would enhance 
• New form of air transport in the form of small aircrafts and helicopters would increase connectivity 
• Start up airlines will increase with new opportunities in aviation sector 
• Incumbent airlines will get more passengers and new routes 
• Overall, common man will get to enjoy the luxury of air transport at affordable rates under UDAN scheme