UDAN Scheme 2.0: Regional Air Connectivity, Benefits & Challenges Explained

Prelims :  (Governance + CA) Mains : (GS 3 – Infrastructure, Aviation, Inclusive Growth; GS 2 – Governance)

India’s aviation sector has witnessed rapid growth, yet a significant gap persists in connectivity between metropolitan cities and smaller towns.

Large parts of the country, especially :

• Tier-2 and Tier-3 cities
• North-East region
• Hilly and island areas

remain underserved due to :

• Low commercial viability
• Infrastructure constraints
• Limited airline penetration

To address these disparities, the Government launched the UDAN (Ude Desh ka Aam Nagrik) Scheme in 2017 under the Regional Connectivity Scheme (RCS), aiming to democratise air travel.

About UDAN Scheme

• Launched in: 2017
• Nodal Ministry: Ministry of Civil Aviation
• Objective: Affordable and accessible air travel

Objectives of the Scheme

• Enhance regional connectivity across underserved regions
• Make air travel affordable for common citizens
• Promote balanced regional development
• Utilise underused and unserved airports

Key Features

• Competitive Bidding: Airlines selected through transparent bidding
• Viability Gap Funding (VGF): Financial support for low-demand routes
• Fare Cap: Around ₹2,500 per hour of flight for 50% seats
• Regional Focus: Connectivity to remote, hilly, and island regions

Funding Mechanism

• Funded through a Regional Connectivity Levy (RCL) on major routes
• Cross-subsidisation ensures viability of regional routes

Phase-wise Evolution of UDAN Scheme

UDAN 1.0 (2017) :

• Initial focus on connecting unserved airports
• Basic route allocation and fare structure

UDAN 2.0 :

• Expanded coverage including helipads and water aerodromes
• Greater focus on North-East and remote regions

UDAN 3.0 :

• Inclusion of tourism routes
• Focus on seaplanes and strategic connectivity

UDAN 4.0 & Beyond :

• Emphasis on sustainability of routes
• Improved infrastructure and airline participation

UDAN 2.0 Revamp (Current) :

• Higher funding support
• Extended subsidy duration
• Focus on long-term viability

Governance & Regulatory Framework

• Implemented by the Ministry of Civil Aviation
• Managed through Airports Authority of India (AAI) as implementing agency
• Coordination with :
  • State Governments
  • Airlines
  • Airport operators

Regulatory Support :

• Concessions on :
  • Airport charges
  • Taxes on Aviation Turbine Fuel (ATF)
    • Simplified procedures for route approvals
    •  Policy support for infrastructure development

How Will UDAN 2.0 Benefit Consumers ?

• Affordable Air Travel : Continued fare caps make flying accessible to middle and lower-income groups
• Improved Accessibility : Direct flights from smaller cities reduce travel time significantly
• Better Connectivity : Integration of remote regions into national transport network
• Convenience : Reduced dependence on rail/road for long-distance travel

Socio-Economic Multiplier Effects (Tourism & Jobs)

1. Boost to Tourism

• Enhanced access to tourist destinations
• Promotion of eco-tourism and regional tourism circuits

2. Employment Generation

• Direct jobs in aviation sector
• Indirect jobs in :
  • Hospitality
  • Transport
  • Local businesses

3. Regional Economic Development

• Improved connectivity attracts investment
• Facilitates trade and business expansion

4. Social Integration

• Connects remote populations with mainstream economy
• Improves access to healthcare and education

Achievements of the Scheme

• Over 600 routes operationalised
• More than 90 airports revived
• Enhanced connectivity in North-East and remote regions
• Strengthened last-mile connectivity

Significance of the Revamp

1. Strengthening Regional Connectivity

Bridges the urban-rural connectivity gap in aviation.

2. Inclusive Growth

Ensures equitable development across regions.

3. Infrastructure Utilisation

Revives unused airports and enhances efficiency.

4. Strategic Connectivity

Improves access to border and remote areas.

5. Economic Multiplier Effect

Boosts tourism, trade, and employment.

Challenges

1. Financial Sustainability of Routes

Many UDAN routes struggle to remain operational after the withdrawal of Viability Gap Funding (VGF), as passenger demand in several regions remains insufficient to sustain commercial airline operations.

2. Low Passenger Demand in Remote Areas

Despite improved connectivity, air travel demand in Tier-2 and Tier-3 cities is often limited due to lower income levels, lack of awareness, and preference for cheaper transport modes such as railways.

3. Infrastructure Gaps at Regional Airports

Several revived airports lack adequate infrastructure such as night landing facilities, navigation systems, and terminal capacity, which restricts operational efficiency and flight frequency.

4. High Operational Costs for Airlines

Airlines face high costs related to Aviation Turbine Fuel (ATF), maintenance, and logistics, making regional routes less attractive despite government support.

5. Route Discontinuation and Airline Exit

A significant number of routes have been discontinued due to operational losses, indicating challenges in maintaining long-term airline participation.

6. Coordination Challenges Among Stakeholders

Effective implementation requires coordination between central government, state governments, airport operators, and airlines, which often leads to delays and inefficiencies.

7. Regulatory and Procedural Bottlenecks

Delays in approvals, land acquisition, and clearances can slow down airport development and route operationalisation.

8. Limited Private Sector Participation

Private airlines may hesitate to enter regional markets due to uncertain returns and operational risks.

Way Forward

1. Introduce Dynamic Subsidy Models

The government should design flexible VGF mechanisms based on route performance and demand patterns to ensure gradual transition towards self-sustainability.

2. Strengthen Airport Infrastructure

Investments should be increased to upgrade regional airports with modern navigation systems, better terminals, and all-weather operational capabilities.

3. Promote Demand Generation

Awareness campaigns, tourism promotion, and integration with local economic activities can help increase passenger traffic on regional routes.

4. Rationalise Aviation Fuel Taxes

Reducing state-level taxes on ATF can significantly lower operational costs and improve airline viability.

5. Encourage Regional Airline Ecosystem

Special incentives should be provided to small and regional carriers to enhance competition and service delivery in underserved areas.

6. Improve Multi-Modal Connectivity

Seamless integration of air transport with rail and road networks can enhance last-mile connectivity and increase passenger convenience.

7. Enhance Policy Stability and Ease of Doing Business

Simplifying regulatory procedures and ensuring policy continuity will attract greater private investment in regional aviation.

8. Leverage Technology and Data Analytics

Use of AI-driven demand forecasting and route optimisation can help airlines and policymakers make informed decisions.

9. Focus on Long-Term Sustainability

Shift focus from short-term connectivity to building economically viable and self-sustaining aviation ecosystems.

10. Strengthen Centre-State Coordination

Improved collaboration between central and state governments is essential for faster project execution and operational efficiency.