The central government is set to take a major step towards making its ambitious regional air connectivity scheme, UDAN, more effective and sustainable in the long run. Experience over the past years has made it clear that the existing subsidy structure is not providing sufficient financial support to airlines operating on regional routes. Therefore, the government is now seriously considering a new funding mechanism, which has been developed after extensive discussions with several ministries.
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Awaiting Cabinet Approval
The draft of the new system has been prepared and is to be placed before the Union Cabinet for final approval. The government hopes that this change will lead to better utilization of airports in smaller cities and remote areas and make air travel truly accessible to ordinary citizens.
Objective and Investment in the UDAN Scheme
Launched in 2016, the UDAN scheme aimed to provide affordable air travel opportunities to the common man in the country. Under this scheme, the government has so far provided direct subsidies worth Rs 4,352 crore. In addition, more than Rs 4,638 crore has been spent on the development of airports and necessary infrastructure.
Why Ground Realities Became a Challenge
Despite such a large investment, the scheme has not operated as expected. According to official figures, only about 60 percent of the 649 routes sanctioned under the UDAN scheme are currently operational. Several airlines have discontinued their services from smaller cities due to high operating costs and low profitability.
Economic Challenges Faced by Airlines
The biggest problem in regional flights is the imbalance between costs and revenue. Fares on half of the seats on UDAN flights are capped, limiting the airlines’ earnings. Rising aviation fuel prices and the expensive operating costs of smaller aircraft further exacerbate the situation. Low passenger numbers on many routes also directly impact revenue.
Weaknesses of the Existing Subsidy Model
In the current system, approximately 80 percent of the subsidy for the UDAN scheme is raised through levies imposed on non-UDAN flights, while the remaining burden falls on airport operators. This structure has proven unsustainable in the long run, which is why the government is now preparing to make comprehensive changes.
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What Will Change with the New Funding System?
The proposed new funding system is expected to bring stability to regional flights. The government believes that this will reduce the financial burden on airlines, enable the resumption of flights on more routes, and make air travel more affordable and reliable for the general public.
