The Government of India is the driving force behind UDAN, a regional connectivity initiative (GoI). UDAN’s full name is ‘Ude Desh ka Aam Nagarik,’ and it intends to construct smaller regional airports to provide regular residents with easier access to aviation services.
From the standpoint of the IAS Exam, the scheme is an important government scheme. It is one of the new policies that have been put in place since June 2016. The scheme is included in both the Geography syllabus and the Economy syllabus of the UPSC Syllabus under infrastructural and economic geography.
- RCS’s principal goal is to facilitate/stimulate regional air connectivity by making it cheaper.
- The RCS envisions promoting regional air connectivity affordability by supporting airline operators through
(i) concessions by the Central Government, State Governments (reference deemed to include Union Territories as well, unless explicitly specified otherwise), and airport operators to reduce the cost of airline operations on regional routes / other support measures, and
(ii) financial (viability gap funding or VGF) support to meet the gap, if any, between the cost of airline operations and expected revenues on such routes.
- The project will last for ten years.
- Airlines that take part in UDAN are chosen through a competitive bidding process.
- The following services will be provided by the central government:
(i) Subsidy for participating airlines to pay Value Gap Funding (VGF).
(ii) Concessional GST on tickets purchased through the plan
(iii) Codesharing is permitted for flights under the policy.
- The following measures will be extended by state governments:
(i) For ten years, the GST rate will be reduced to 1%.
(ii) Coordination with oil firms to make refuelling facilities available.
(iii) Make available land for airport and associated development.
(iv) Security guards have been trained.
(v) Utilities at reduced rates
(vi) VGF accounts for about 20%
- Concessions will be provided by airport operators such as AAI:
(i) There are no parking, landing, or storage fees at participating airports.
(ii) TNLC does not exist (Terminal Navigation Landing Charges)
(iii) Allow the airline chosen during the bidding procedure to handle ground transportation.
(iv) The Airports Authority of India would reduce RNCF (Route Navigation and Facilitation Charges) to 42.4 percent of regular rates.
Challenges faced by Regional Connectivity Scheme RCS – UDAN (CS)
- Some states are hesitant to give up Tax Concessions on Air Turbine Fuel (ATF) and other financial incentives that could entice other airlines to operate in underdeveloped areas of the state.
- Because airports take up large regions, purchasing land is difficult. Some of the challenges are scarcity of land, followed by a large amount of capital.
- Policy hesitation stems from the financial inadequacy of remote-area connectivity models.
- The airline sector is recognised for its fierce competition and high capital requirements. This inhibits them from establishing operations in locations with minimal passenger flow due to low profitability.
- Another significant challenge is raising cash for Viability Gap Funding (VGF)