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Home / Politics / News /  The highs and lows of the Udan scheme

Earlier this year, the regional connectivity scheme (RCS) launched by the government called “Ude Desh ka Aam Nagrik" (Udan) completed five years. This marks the mid-point of this scheme that offers incentives—to consumers, airlines and airports—to boost air traffic on regional routes that had never been on the map or were less used. An assessment of the scheme against its stated objectives shows several advances and some retreats, though on an overall trajectory that should serve the aviation sector well in the long run.

The government, while inviting proposals for the scheme’s next phase last month, said the cumulative number of passengers under Udan had crossed 10 million. Other than the pandemic-induced drop in 2020-21, Udan numbers have been progressively increasing. The 2021-22 figure was 3.3 million passengers, which is about 2% of the total domestic passengers for the financial year. The importance of that small share lies in the network effects it can enable.

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However, there are challenges of continuity. Of the 423 routes approved, 164 routes (39%) registered zero passengers in June 2022, the latest month for which route-wise passenger data is available. The designated airline had stopped plying the route, either temporarily or permanently. Routes allotted under the scheme’s first two phases, many of which have crossed the three-year benefit period, show an operational rate of just below 50%. The third and fourth phases fare better, with an operational rate of 77% and 84%, respectively. Meanwhile, viability issues dog airlines, especially smaller ones, who were envisaged to be drivers of this scheme.

Different Flight Paths

Airlines that chose routes under Udan have traced different flight paths. At one level, they can be divided into large, national airlines and small, regional airlines. While the drop-off on Udan routes is across the board, large operators have held on better. Among them, though, SpiceJet, which is battling a financial crunch, has seen more route dropoffs than IndiGo and Alliance Air. Routes plied by IndiGo have the greatest continuity, with 71 of its designated 85 routes registering passenger movement in June.

In the way Udan was conceived, routes were pairings between two small airports in the same region (for example, Bikaner-Jaipur) or between a large airport and a small one (Bikaner-Delhi). Such a network pattern was seen enabling a business model for small, regional airlines. The jury is still out. Other than FlyBig and Star Air, some have shut down (Deccan Air) and some like Air Taxi and Pawan Hans show zero passengers for 2022.

Breakout Airports

For consumers, Udan offered connectivity to more regional destinations at reasonable fares. For airlines, it offered more routes and greater network possibilities. Airports are the third node. Udan aims to put more airports on the aviation map. It has added 68 airports, heliports and waterdromes, including 19 under-served ones (like Belgaum, Gwalior, Hubli, Kannur, Puducherry and Prayagraj) and the remaining being unserved ones. As part of a 4,500-crore plan to improve such airports, the government had spent 2,600 crore till June 2022.

Between April-June 2017 and April-June 2022, of the 68 airports, those registering passengers have increased from 24 to 53. And select airports have surged. For example, Prayagraj in Uttar Pradesh, which leads among these airports in passenger traffic, has seen a 13-fold increase in passengers during this period. But there are also some that have not grown, like Tezpur, Nanded and Bhatinda. In general, though, Udan airports are seeing greater footfalls.

Central Commitment

The next phase, for which proposals are open, revolves around “routes requested by" the tourism ministry. Under Udan, half the seats on a route have distance-based pricing caps for affordability. The operator has pricing flexibility on the remaining seats. The shortfall for airlines is made good through viability gap funding (VGF), with the Centre contributing 80% and states 20%. On each route, the price caps and VGF are for three years.

The Centre funds the scheme through a levy on major non-Udan routes. It also extends other benefits to airlines like lower excise on fuel. The Centre allocated increasing sums to Udan till 2021-22. In 2022-23, however, its spend is expected to drop from 994 crore to 601 crore—the lowest in three years. This is partly due to more routes completing three years and shifting into full-commercial mode. How they fare there will be their true test.

www.howindialives.com is a database and search engine for public data.

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