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Business News/ Opinion / Views/  UDAN is slogan-worthy but in need of a rethink
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UDAN is slogan-worthy but in need of a rethink

India’s air map has hardly expanded, flying remains out of reach for most and this scheme has shown how tough it is to defy market forces. We must weigh its costs and benefits closely

With a long patch of weak competition in Indian skies expected to give way to an air-capacity boom as a new era of rivalry gets underway, a relaunch will have its advocates.Premium
With a long patch of weak competition in Indian skies expected to give way to an air-capacity boom as a new era of rivalry gets underway, a relaunch will have its advocates.

India’s Ude Deshka Aam Naagrik, a subsidy scheme launched in 2016, was cleverly named in Hindi to mean ‘the country’s common citizen shall fly’ and also yield the acronym UDAN (‘flight’). As it captures an aspiration, it isn’t a literal misnomer. Our vast majority still cannot afford air travel, but it could yet happen someday. The scheme’s aim was to pin many more airports on our map of air-links by offering airlines funds to plug viability gaps for a bunch of unserved—or under-plied—routes they were asked to bid for. A recent report by the Comptroller and Auditor General (CAG) says 2.5 million passengers took these UDAN routes in 2022-23. This is a sliver of our domestic air traffic, which, placed at 136 million fliers that year, shows a distinct big-city skew. Only 260 UDAN flights are in operation today, a fraction of those cleared for take-off, going by government data. The CAG audit offers a dismal picture of steep drops, as if this outreach project hit one air-pocket after another. Of the 774 routes awarded in its first three phases, more than half could not make a start; of those that did get off the ground, less than a third lasted all three years of the deal’s period; and of these, less than half kept going. Although covid dealt aviation a heavy blow, the later phases of UDAN are unlikely to have fared any better, a reason the ministry of civil aviation has initiated a relook at the package.

The fault, though, may not lie in UDAN’s nitty-gritty. Weak demand for flights to reach remote places with wobbly facilities for air services is seen as a key force that pushed carriers off profit paths. In response, the Centre could pull a big lever to angle the project up. It could double down on its thrust by raising payouts, easing the price caps that apply to half the seats, and investing more in airport back-up and helipad support. Indeed, it would not be a surprise if the Centre opts to sweeten the deal in an effort to attract more takers. With a long patch of weak competition in Indian skies expected to give way to an air-capacity boom as a new era of rivalry gets underway, a relaunch will have its advocates. What comes of it will remain a guess, though, as we don’t know what success might take.

This is a complex sector. As unsold seats go waste, it is a market of perishables, one marked by such supply rigidities that prices—which vary by demand—tend to be volatile. This effect is amplified on sparsely travelled routes, whose ticket sales swing too wildly for seats to be aptly committed. Under stiff pressure to contain costs and optimize operations, airlines would need an outsized lure to devote their precious resources to such services. At times of aircraft scarcity, that incentive would have to go even further up. Over time, it would also have to pay for the brand-image risk of service instability, which is a put-off for customers. All added up, achieving a map of air coverage idealized by the state could prove far more expensive than its benefits can justify. It will not be anytime soon that most Indians can afford air-fares anyway, even with out brisk economic emergence, and the sky may turn out to be the limit for what it costs to reshape a market that’s given to evolving its own way. Policy tools used as air traffic signals expose an old conceit of the command economy: that market forces can cheaply be swayed to serve a central agenda. As seen in the past, it’s a losing bet more often than policymakers like to admit. Interventions like UDAN should be subject to rigorous cost-benefit analysis.

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Published: 22 Aug 2023, 09:25 PM IST
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