Govt. Schemes – UDAN

UPSC Current Affairs 2017: Govt. Schemes – UDAN

UDAN scheme is a component of the National Civil Aviation Policy (NCAP) for regional connectivity. A “first of its kind” in the world, UDAN scheme proposes to empower commoners with low-cost travel options considered a luxury until now. Under this scheme, 50 per cent of the seats on one-hour flights operating within 1000 km will be available for a maximum Rs 2,500. No other charges will apply on tickets booked under this scheme. The remaining seats, however, will be sold at market rates.  

Ministry of Civil Aviation will target an indicative airfare of Rs2500 per passenger approximately, indexed to inflation. The government received bids from 11 air transport operators for its scheme to start subsidized fights to remote and unconnected airports and 5 were awarded the initial routes. The eligible airlines for the UDAN scheme were chosen through a process of reverse bidding.

This scheme will be implemented by way of:

  1. Revival of un-served or under-served airports/ routes
  2. Viability Gap Funding (VGF) for operators under RCS
  3. Concessions by different stakeholders

Revival of airports/ routes: Nearly 43 airports, which do not receive flights, could get them under the new scheme over time, taking the number of operational airports from the current 75 to 118. These include 21 airports in north India, 16 in the south, 32 in the west, 12 in the east and 11 in the north-east. A dozen airports where limited but irregular flights operate will be connected. As many as 31 destinations that are not operational despite the existence of airports will become active. Revival of the remaining air strips and airports will be “demand driven”, depending on firm demand from airline operators, as No-Frills Airports will be done at an indicative cost of Rs 50 crore to Rs 100 crore, without insisting on its financial viability.

Viability Gap Funding is a grant one-time or deferred provided to support infrastructure projects that are economically justified but fall short of financial viability. The lack of financial viability usually arises due to long gestation periods and the inability to increase user charges to commercial levels.VGF will be shared between Ministry of Civil Aviation and the State Government in the ratio of 80:20. For the North Eastern States, the ratio will be 90:10. Ministry of Civil Aviation’s share of VGF will be provided through the RCF. The VGF will be used to bridge the gap between the cost of airline operations and expected revenue. Airline operators would be extended VGF estimated to be around Rs 205 crore per annum for the operators chosen in the first round of bidding.

Regional Connectivity Fund (RCF) will be funded by a levy from a date to be notified by the Government under the Aircraft Act 1934.The premium realized, if any, from the allotment of additional capacity entitlements on international routes will also go to RCF. The RCF will be collected and operated by AAI or any other entity identified by Ministry of Civil Aviation.

Role of State Government: RCS will be made operational only in those States which reduce VAT on Aviation Turbine Fuel (ATF) at these airports to 1% or less for a period of 10 years. State Government will provide land free of cost and free from all encumbrances and also provide multi-modal hinterland connectivity (road, rail, metro, waterways, etc) as required. State government will provide police and fire services free of cost.  Power, water and other utilities at concessional rates.