Progress of UDAN Scheme

The UDAN scheme launched in June 2016 has been hailed by the Government as a game-changer. The intent of the scheme is to connect un-served and under-served airports across the country in an affordable manner consequently boosting connectivity. This is delivered via routes that are bid-for and awarded to airlines by the government including subsidies on seats, discounted input costs and monopoly status on routes. The scheme has its successes and failures and to the credit of policymakers, they have taken inputs from the industry and tweaked the scheme with each successive bidding. One would expect several new or existing pure regional airlines rushing for these rounds, but a closer examination shows much of the success has come from SpiceJet and IndiGo.

Ironically, both these airlines have not taken the Viability Gap Funding subsidy, instead have leveraged the scheme strategically towards gaining additional slots at congested Tier-1 airports, monopoly status on routes and lower operational costs. Air India is also flying some UDAN routes via its subsidiary Alliance Air. However, Air India’s decision making is historically driven by government prerogative rather than commercial logic, making it difficult to ascertain if UDAN has had any impact on their route decisions. If the intent of the scheme was to make for viable and sustainable regional operations, as of now it has not fructified.