April 4th, 2017
Last mile connectivity would soon be a reality. The government, under the Regional Connectivity Scheme (RCS) also called UDAN which is an acronym for “Ude Desh Ka Aam Nagrik”, gave the license to five airlines for connecting the unserved and the underserved airports. UDAN connects 45 airports over 70 new routes. Under this scheme, for the journey of an hour or those flight which would fly for a distance of 500Km or less, the cost of 50% of the seats in such flights will be capped at Rs 2,500.
What is UDAN scheme
Before knowing what this scheme is all about, it is important to know that there are atleast 400 or more ‘unserved’ airports in India. The unserved airports are the ones which have seen no flights in the last few air schedules. There are other types of airports, called the ‘under-served’ airports which have very few flights.
One of the principal objectives of the National Civil Aviation Policy 2016 (NCAP 2016) was to enhance regional connectivity and also to utilise the unserved and the underserved airports. This gave birth to the UDAN scheme.
The increasing per capita income has changed how Indians prefer to travel. It has led to about a 23% surge in the passengers travelling by air. The government also anticipates that with growing population in the metros, the same would also “spill over” to the other regions surrounding them.
Civil Aviation Minister A Gajapathi Raju had said that this scheme is in keeping with PM Narendra Modi’s vision of enabling “every hawai chappal wearing Indian to board a hawai jahaz (aeroplane)”.
This scheme was officially announced in October 2016. The scheme will run for ten years. The motivating factor behind launching this ambitious scheme were:
1. India become one of the countries with the highest growth in terms of number of passengers as of 2016.
2. The key objectives of NCAP through this scheme is to promote tourism, increase employment opportunity and maintain regional balance.
3. NCAP also aims at sustaining a competitive market environment in the civil aviation industry, outcome of which would be affordable and convenient air travel.
To achieve the target of making air travel affordable, this RCS is modelled around the Viability Gap Funding (VGF). VGF is a grant for supporting projects which are economically justified but not financially viable.
To make RCS a profitable deal for the Airlines as well, the Central Government and the State Government will be providing many concessions, like:
1. Excise duty of 2% will be levied Aviation Turbine Fuel (ATF) for RCS flights for a period of three years.
2. The Airline operators have the freedom to enter code sharing arrangements with domestic as well as international airlines.
3. The State Government will reduce VAT to 1% or less on ATF at the RCS airports for a period of ten years.
4. Provision of free fire and security services free of charge at the RCS airports.
5. Coordinating with the oil companies for provisioning of fuel infrastructure on best effort basis.
Right now, five airlines, have won the bid to connect the unserved airports in the country. Centre has allotted a budget of Rs 205 crore for the same. The first towns to be connected will be Bhatinda and Shimla by April, while other towns – from Kandla and Porbander to Salem, Bidar and Hosur – will be connected by September. Other places which will be connected under this scheme are Mysore-Chennai, Agra-Jaipur, Nanded-Mumbai etc.
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