UDAN(Ude Desh ka Aam nagrik)

•  To boost air travel between smaller cities, fares for one-hour flights will be capped at Rs. 2,500 in the new UDAN scheme.
• The UDAN scheme (an acronym for Ude Desh Ka Aam Naagrik or "helping the average Indian fly") has been devised to increase connectivity.

Key features of the scheme:

• The UDAN scheme will be applicable on flights which cover between 200 km and 800 km with no lower limit set for hilly, remote, islands and regions which are security sensitive.
• Under the UDAN scheme, the flights are bound to connect at least one RCS airport (underserved and unserved airports).
• The RCS caps fares and also offers a ceiling for the VGF(Viability Gap Funding) available for each route. Which means the airlines cannot charge beyond the caps specified from passengers.
• For the shortest route under the scheme fare has been capped at Rs 1,420. For longest route, fare has been capped ar Rs 3,500.
• The Centre has also decided to provide concessions such as 2% excise on Value Added Tax (VAT) and service tax at 1/10th.
• State government are bound to provide free security and fire service, utilities at concessional rates and reduce VAT on ATF to 1%.
• There will be no landing charges, parking charges and Terminal Navigation Landing Charges will be imposed for RCS flights.
• A Regional Connectivity Fund (RCF) will be created to fund the scheme via a levy on certain flights. States are expected to contribute 20 per cent to the fund.

Analysis:

• Existing airlines are opposing the move to introduce one more levy on flyers in the form of RCS fee and they feel the government should have found some other way of funding this scheme instead of taxing passengers more.
• In order to address this issue, there are three crucial steps taken by government to strike a balance between affordability for the common man and profitability for regional operators. Firstly, successful bidders will now have exclusive rights to operate on a regional route for three years, up from the previous plan of one year. Secondly, a UDAN flight operating from a small city to a metro like Delhi or Kolkata will have to pay no airport charges at the bigger airport. And finally, government have made it possible for entrepreneurs to lease planes in small numbers also to become regional operators. Earlier it was not possible to do so.
• The scheme will offer incentives for anywhere between nine to 40 seats on an aircraft flying on designated regional routes, connecting unserved or underserved airports. Since the number of RCS seats cannot be more than 50 percent of the aircraft's capacity, this means such routes would require aircraft of about 80 seats at the most. Most airlines right now do not have these small aircraft - except Air India, Jet Airways and SpiceJet. And those already having smaller aircraft seem reluctant to operate flights under the present subsidy offer, saying smaller aircraft are more expensive to operate and would need higher support from the Central as well as state governments.
• Private airlines have said that despite the subsidy element being clearly defined in the scheme, the flights may still not be viable. They are unhappy with the quantum of subsidy being offered and by the process of bidding which will ultimately determine what the subsidy amount for a route will be.
• Business aircraft owners are unhappy because the scheme is meant as of now for only scheduled operators, thus barring them from participation.
• The environment for airlines to operate is already highly taxed (taxes on aviation turbine fuel among the highest in the world). So another levy to fund the regional connectivity scheme is obviously annoying airlines further.

By: Vishal