UDAN – Regional Connectivity Scheme.

REGIONAL CONNECTIVITY SCHEME

Ministry ResponsibleThe Ministry of Civil Aviation (MoCA), Government of India.
Implementing agency ·         Airport Authority of India (AAI)
Objectives

·         To facilitate / stimulate regional air connectivity by making it affordable for end user.

·         Supporting airline operators through

1.    Concessions by Central Government, State Governments and airport operators to reduce the cost of airline operations on regional routes.

2.    Financial (viability gap funding or VGF) support to the air line operators to meet their expenses to provide air connectivity in small towns.

Note : Under this Scheme, VGF support shall not be provided for cargo operations. However other subsidies will be provided like lower taxes.

Targets·         Domestic ticketing of 30 crores by 2022 & 50 crores by 2027.
Background.

·         In metros, due to higher population density, the cost of labour and other inputs of production have become costlier (due to higher cost of living).

·         The Hinter land of India provides lower cost alternatives for economic activities. If that is tapped, India can achieve a higher GDP growth at a sustainable rate.

·         But the issue is of connectivity. The far flunked areas of India, if connected well with rest of the part of India, can become next business hubs of India.

·         Even if the air connectivity is there, the cost is too high to afford it on regular basis.

Competitive ecosystem in Civil Aviation.

·         In India currently regional connectivity is majorly dependent on Road and Railways.

·         Aviation sector is still reluctant to provide connectivity in smaller towns.

·         The major reason is high cost to earnings ratio. Due to less traffic, it is not viable to employ big passenger planes like Boeing 747 to provide connectivity in these regions.

·         Another issue is unavailability of proper airports and human resource in smaller towns.

·         Thus Private sector has not been very motivated to participate in providing air services in smaller towns of India.

·         Thus Government has decided to provide the initial thrust to the area, by providing fiscal assistance for airline operators to provide regional connectivity.

·         Once a momentum is created in the area the government will withdraw its financial involvement in the area. Then the market forces will take over.

·         Government will try to keep the sector positively regulated to motivate competitive operations of airline operators e.g. Indigo or Spicejet, providing connectivity to the small towns.

Role of State Governments

·         State government has to reduce the cost of operations for air transport operators to the extent possible through concessions from State Governments.

·         UDAN scheme will be made operational only in those States, which will support air transport operations, by providing concessions to the air line operators (Indigo, Spicejet or likewise.)

Time line

·         The Scheme will be applicable, subject to periodic review, for a period of 10 years from the date of its notification by the MoCA.

·         The scheme was launched on 27/April/2017.

Airports as well as Helipads.

·         Under the schemes new airports as well as Helipad will be developed.

·         The list of RCS Airports / RCS Helipads as finalized in consultation with the State Governments, will be published for information of stakeholders from time to time.

Regional Connectivity Fund(RCF).

·         Under the Scheme, a RCF will be created to provide VGF to the selected airline operators, for their operations on Regional connectivity Routes.

·         Every interested State has to contribute 20% share of total reimbursement to the Airline. For North eastern states the share to be contributed is 10% in RCF.

Additional Subsidies- provided by Central Government to Airlines.·         Airlines operating under the scheme will pay only a 2% of Excise on Air Turbine Fuel, for a total period of 3 years starting from the launch date of the scheme.
Additional Subsidies- provided by State Governments.

·         States will levy only 1% as VAT on Air turbine fuel to the Airlines operating under the scheme for a maximum period of 10Years starting from the launch date of the Scheme.

·         Free of cost land for developing Airports and Helipads.

·         To arrange Multi modal Connectivity to the airports through rail or waterways etc.

·         Free service of fire and security on the airport.

·         Arrangement of other utilities like electricity, water and toilets.

Subsidies to be provided by the airport operators (AAI, State government, Ministry of Defense or Private operator)·         No Landing charges or Parking Charges will be levied on the Airlines operating under the Scheme.

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