About the scheme
- UDAN is a flagship scheme of the Union Government to enable air operations on unserved routes, connecting regional areas, to promote balanced regional growth and to make flying affordable for masses.
- The UDAN Scheme is a key component of the National Civil Aviation Policy (NCAP) which was launched in June 2016.
Market based model
- UDAN has a unique market-based model to develop regional connectivity. Interested airline and helicopter operators can start operations on hitherto un-connected routes by submitting proposals to the Implementing Agency, AAI(The Airports Authority of India)
- The operators could seek Viability Gap Funding (VGF) apart from getting various concessions.
- All such route proposals would then be offered for competitive bidding through a reverse bidding mechanism and the route would be awarded to the participant quoting the lowest VGF per Seat.
- The operator submitting the original proposal would have the Right of First Refusal on matching the lowest bid in case his original bid is within 10% of the lowest bid.
- The successful bidder would then have exclusive rights to operate the route for a period of three years. Such support would be withdrawn after a three year period, as by that time, the route is expected to become self-sustainable.
Capping of fare
- The fare for a one hour journey of appx. 500 km on a fixed wing aircraft or for a 30 minute journey on a helicopter would now be capped at Rs. 2,500, with proportionate pricing for routes of different stage lengths / flight duration.
- This would be achieved through
- a financial stimulus in the form of concessions from Central and State governments and airport operators and
- Viability Gap Funding to the interested airlines to kick-off operations from such airports so that the passenger fares are kept affordable.
- A Regional Connectivity Fund would be created to meet the viability gap funding requirements under the scheme. The RCF levy per departure will be applied to certain domestic flights.
- Under this phase, 5 airlines companies were awarded 128 flight routes to 70 airports (including 36 newly made operational airports)
- In 2018, the Ministry of Civil Aviation announced 73 underserved and unserved airports.
- For the first time, helipads were also connected under phase 2 of the UDAN scheme.
Key Features of UDAN 3 included:
- Inclusion of Tourism Routes under UDAN 3 in coordination with the Ministry of Tourism.
- Inclusion of Seaplanes for connecting Water Aerodromes.
- Bringing in a number of routes in the North-East Region under the ambit of UDAN.
- Focus of this round would be the priority areas like NER, Hilly States, J&K, Ladakh and Islands.
Some of the key features of the Scheme are:
- Revision of (Viability Gap Funding) VGF cap –
- The provision of VGF for Category 2 / 3 aircraft (more than 20 seater) has been enhanced for operation of RCS flights in Priority Area(s) (Union Territories [UT] of Ladakh and Jammu & Kashmir; the States of Himachal Pradesh, Uttrakhand, North Eastern State; UT of Lakshadweep and Andaman & Nicobar).
- The VGF cap applicable for various stage lengths for operation through category 1 / 1 A aircraft (below 20 seater) has also been revised to further incentivize the operation of small aircraft under the Scheme.
- Promoting short-haul routes – The provision of VGF would be restricted for routes with stage length up to 600 kms, for operation of Category 2 / 3 aircraft, beyond which no monetary support would be provided. The table for provision of VGF for various stage lengths would be available for stage length up to 500 kms.
- Well defined Prioritization framework – Airports that has already been developed by AAI would be given higher priority for award of VGF under the Scheme, followed by airports not part of the above list but located Priority Area(s) would be given a priority, followed by airports located in areas other than Priority Area(s).
- Flexibility to change the frequency of flight operation - The Selected Airline Operator (SAO) would be allowed to change the frequency of flight operation, during the tenure of flight operation of the given route, provided that the total scheduled flight operation submitted as part of the Technical Proposal, is conformed and adhered to within a period of one year.
- Inclusion of helicopter and seaplane operation under NSOP license – The operation of helicopter and sea plane would be allowed under this round.