UDAN

The Civil Aviation Ministry recently launched its Regional Connectivity Scheme called UDAN (Ude Desh ka Aam Naagrik).

Aim Of The Scheme

It is aimed to connect a large number of unconnected places and people through the network of airways.

Features of UDAN

  • Fares capped at Rs 2,500 for one-hour flight for 50% of the seats and the remaining on market based pricing.
  • ‘Viability Gap Funding’ and other benefits such as lower taxes and airport charges to promote regional connectivity. A ‘Regional Air Connectivity Fund’ will also be set up for viability gap funding to aircraft operators to serve tier 2 and tier 3 cities. Union Government’s share will be 80% of the cost and the States will share the remaining 20% for the ‘Regional Air Connectivity Fund’.
  • Centre is encouraging States to provide incentives to airlines on regional routes specifically in unserved and underserved airports.
  • Government also plans to upgrade 50 unserved and underserved airports in the country.

Challenges to UDAN

  • Missing technical infrastructure (lack of airports, equipment, manpower) is forcing day operation in airports only without night training facility.
  • Low cost operations might not ensure much profit for big airlines.
  • Primary basic traffic flow in such unserved areas has to be developed for the commuters yet.
  • ‘Ghost airports’ are technically operational but do not handle any scheduled flights.
  • Non-scheduled operators like chartered planes and others might enter into this scheme but regulatory framework has to be synchronized according to their needs.
  • Government’s move to impose a levy on every departure on major routes to fund the scheme might push the costs of the airlines and subsequently the consumer’s pocket would feel the pinch.
  • On monopoly routes where single airline operates, application of subsidy for the consumers might help because of high air fare.

UDAN is a well-intentioned policy for regional connectivity. In the past such policies have failed, but robbing the rich ‘Peter’ (big national airlines) to fund the poor ‘Jack’ (small regional airlines) might have repercussions on the airlines industry. It is interesting to see how the policy will unfold in the future given that the industry is not too enthusiastic about it.

By | 2016-11-15T12:55:06+00:00 November 15th, 2016|Categories: Director's Desk, Governance, GS Paper 2|Tags: |0 Comments

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