Centre launches UDAN
With the aim of taking flying to the masses, the Centre on 21 October 2016 unveiled the final regional connectivity
scheme known as UDAN. Airfares will be capped at Rs 2,500 for an hour’s journey on a flight operating to and from a regional airport, under the scheme. The government will provide subsidies to regional airlines to offer half the seats on a discounted rate.
- However, the subsidies will mainly be provided by taxing the air passengers on other domestic routes in the form of a “small” levy. The Union civil aviation ministry hasn’t yet disclosed the levy it will charge per departure to big airlines flying on all domestic routes, except remote and north-eastern States.
- Leading domestic airlines have termed “illegal” the government’s move to charge a levy on them to fund the regional connectivity scheme.
- Regional airlines can avail subsidies for flying a distance of at least 150 km. In a bid to woo the regional carriers, the subsidy amount has been increased from the draft scheme released earlier this year. Airlines will now get subsidy in the range of Rs 2,350-Rs 5,100 per seat for three years.
- The subsidy to airlines will be provided through a reverse bidding process, which means if there is a demand from multiple airlines to fly on regional routes the ones asking for the least financial support will get the subsidy. On routes where a proposal comes from only one airline, the government will give the subsidy based on normative pricing, meaning it will calculate the subsidy amount based on various parameters.
- Although the window for submission of initial proposal by airlines has been opened up, the reverse bidding process will start in November this year and will take place twice a year.