UDAN SCHEME: FEATURES, SIGNIFICANCE, CHALLENGES, WAY FORWARD

Why In News?

The Cabinet approved a revamped Regional Connectivity Scheme (UDAN) with a ₹28,840 crore outlay, extending subsidy periods to 5 years.

What is UDAN?

UDAN (Ude Desh ka Aam Nagrik) is a component of the National Civil Aviation Policy (NCAP) 2016, designed to make air travel affordable for the common citizen and connect unserved and underserved airports in Tier-2 and Tier-3 cities. 

The Core Objective

The scheme aims to democratize the skies by bridging the gap between metropolitan hubs and smaller regional towns. 

• Vision: "Let the common citizen of the country fly." 
• Operational Model: It is a market-driven scheme where airlines bid for specific routes. The airline asking for the lowest subsidy (Viability Gap Funding) wins the route. 

Evolution of the Scheme

• UDAN 1.0 & 2.0: Focused on reviving unserved airstrips.
• UDAN 3.0: Included Tourism Routes and Seaplanes. 
• UDAN 4.0: Shifted focus to Priority Areas like North-East India, Hilly States, and Islands.
• UDAN 5.0: Improving connectivity to remote areas, specifically targeting Category-2 (20-80 seats) and Category-3 (>80 seats) aircraft.
• UDAN 5.1: Specifically designed for Helicopter routes to ensure last-mile connectivity in rugged terrain. 

How It Works (The Mechanism)

To ensure flights are affordable yet profitable for airlines, the scheme uses a two approach:

• Fare Cap: Airfares are capped for 50% of the seats on a flight (approx. ₹2,500 for a 1-hour journey of 500 km). 
• Viability Gap Funding (VGF): Since capped fares may not cover operating costs, the government provides VGF to the airline to bridge the financial gap.
• Funding Source Update (2026): Previously funded by a levy on trunk routes, the new Modified UDAN shifts entirely to Budgetary Support from the government to ensure stability. 

The Latest Update: Modified UDAN (2026–2036) 

In March 2026, the Union Cabinet approved the "Modified UDAN" to address the issue of routes shutting down after the initial subsidy period ended. 

• Total Outlay: ₹28,840 Crore for a period of 10 years (FY 2026-27 to FY 2035-36).  
• Key Structural Changes:
1. Extended Subsidy: VGF support for airlines is increased from 3 years to 5 years to help routes mature.
2. New Infrastructure: Development of 100 new airports and 200 helipads (specifically for remote/hilly regions).
3. Operational Support: For the first time, the government will pay for Operation & Maintenance (O&M) costs (up to ₹3.06 crore/year per airport) for 3 years to keep small airports functional.  

Current Status & Impact

• Operational Stats: As of February 2026, 663 routes have been operationalized connecting 95 airports, heliports, and water aerodromes. (Source: PIB)
• Passenger Traffic: Over 1.62 crore passengers have flown under the scheme since its inception. (Source: PIB)

Related Sub-Schemes  

• Krishi UDAN: Focuses on transporting perishable agricultural products from hilly and tribal areas. 
• International UDAN: To connect select Indian cities with international destinations in the neighborhood (e.g., Guwahati to Bangkok).  

Significance of the UDAN Scheme 

Boost to GDP: Every ₹100 spent on air transport contributes ₹325 to the wider economy, and every 100 jobs in air transport support 610 other jobs in the economy. (Source: International Civil Aviation Organization)

Tier-2 & Tier-3 Growth: By connecting smaller cities like Jharsuguda, Darbhanga, and Hubli, the scheme decentralizes industrial growth from metros to regional hubs. 

Tourism Development: Direct connectivity to heritage and religious sites (e.g., Kushinagar, Hampi) reduces travel time, significantly increasing foreign and domestic tourist footfall. 

Medical Emergencies: Regional connectivity and the new push for 200 helipads provide a lifeline for "Air Ambulances" in hilly terrains like Uttarakhand and Arunachal Pradesh. 

North-East Connectivity: Acts as a strategic tool for the "Act East Policy," integrating remote border states with the mainland and providing faster troop and resource movement if required.

What are the challenges faced by the UDAAN scheme? 

High Route Mortality Rate: Sustainability of routes once the subsidy ends.

• The Issue: Ministry of Civil Aviation reveals that 327 of the 663 routes operationalised under the UDAN scheme since 2017 have been shut down due to factors like aircraft shortages, supply chain issues, and low passenger demand.
•  A report by the Comptroller and Auditor General (CAG) noted that only 7% to 10% of awarded routes remained viable once government subsidies were withdrawn.

Infrastructure & Technical Constraints: Building an airport is only half the battle; maintaining high-tech operations is the other.

• Lack of Night Landing: Many regional airports lack Instrument Landing Systems (ILS), meaning flights can only operate during daylight. This limits the number of daily sorties. 
• Shortage of Small Aircraft: Indian airlines primarily fly large jets (Boeing/Airbus). There is a shortage of 19–70 seater aircraft (like ATRs or Dorniers) suited for short regional strips. (Source: Ministry of Civil Aviation)

Financial Health of Regional Carriers: Several small airlines that won UDAN bids (e.g., Air Odisha, Air Deccan, TruJet) struggled with high operating costs and thin margins, eventually shutting down. (Source: DGCA)

 "Ghost" Airports & Underutilization: Out of the 100+ airports revived, several see fewer than two flights a week, leading to high Operation & Maintenance (O&M) costs with zero revenue. (Source: Airports Authority of India)

Land Acquisition: While the Centre provides funds, the State Governments often struggle with land acquisition and environmental clearances, leading to project delays. (Source: NITI Aayog)

Competition from Railways: Rapid expansion of Vande Bharat Express trains offers a cheaper, "center-of-city to center-of-city" alternative for 400–500 km distances, directly competing with UDAN's target 1-hour flights. 

Way Forward

Enhancing Infrastructure Stability

Night Landing Facilities: Prioritizing the installation of Instrument Landing Systems (ILS) at all regional airports to allow 24/7 operations, increasing the daily "utilization rate" of aircraft. 

Greenfield Synergy: Ensuring that the 100 new airports planned under the 2026 expansion are integrated with PM Gati Shakti for seamless multi-modal connectivity (Road/Rail to Airport). 

Financial & Operational Sustainability

Rationalizing ATF Taxes: Encouraging all states to cap Value Added Tax (VAT) on Aviation Turbine Fuel (ATF) at 1-4% for regional flights to lower operating costs for airlines. 

Direct Budgetary Support: Ensuring the timely release of the ₹28,840 crore outlay to prevent the cash-flow crises that previously led to the bankruptcy of small carriers.  

Niche Fleet Development

Leasing Incentives: Providing tax breaks or easier norms for leasing small aircraft (19-70 seats) and helicopters through GIFT City, Gujarat, to reduce the shortage of regional-friendly planes. 

Domestic Manufacturing: Leveraging the Modified UDAN funds to procure indigenous HAL Dornier and HAL Dhruv units, creating a self-reliant regional aviation ecosystem.  

"Hub and Spoke" Integration

Network Planning: Instead of isolated routes, the Ministry should promote a "Hub and Spoke" model where regional flights are timed to feed into international/trunk flights at major hubs like Delhi, Mumbai, and Jewar. 

Focus on Last-Mile  

Sagarmala Linkage: Accelerating the development of Water Aerodromes to connect island territories and coastal tourist spots, making aviation a true alternative to slow sea transport.  

Conclusion

UDAN is a classic example of Cooperative Federalism, where the Centre (VGF/Policy) and States (Land/Tax concessions) work together. While it has successfully "put the common man in the air," its future success depends on the transition of these regional routes into self-sustaining commercial businesses.

Source: pib