Government Disburses Rs. 3,587 Crores in Viability Gap Funding to Bolster Regional Connectivity
The Indian government’s UDAN (Ude Desh ka Aam Nagrik) initiative has entered its latest phase, Round 5.3, reopening bids for routes previously discontinued before completing their three-year tenure. This move follows 12 successful bidding cycles under five rounds of UDAN, aimed at enhancing regional air connectivity by inviting airlines to bid on unserved and underserved airstrips and airports.
Under the UDAN scheme, which is driven by market demands, airlines assess route viability and submit proposals accordingly. When an airport included in the awarded routes requires upgrades or development, it is addressed under the ‘Revival of Unserved and Underserved Airports’ scheme. Once ready, Selected Airline Operators (SAOs) begin operations, connecting these airports to the broader aviation network. To bridge the gap between operational costs and expected revenues, SAOs receive financial support through Viability Gap Funding (VGF).
So far, Rs. 3,587 crores have been disbursed to SAOs under the VGF provisions of the UDAN scheme. Despite these efforts, delays in operationalizing airports occasionally occur due to various reasons, including land availability issues, technical and operational constraints, permit delays for new airlines, and challenges related to aircraft availability and maintenance.
To support SAOs, the government offers several concessions:
Airport Operators:
- No landing and parking charges on RCS flights.
- Waiver of Terminal Navigation Landing Charges (TNLC) on RCS flights by AAI.
- Route Navigation and Facilitation Charges (RNFC) levied at 42.50% of normal rates by AAI.
- SAOs allowed self-ground handling for operations at all airports.
Central Government:
- Excise duty on Aviation Turbine Fuel (ATF) set at 2% for purchases from RCS airports for an initial period of three years.
- Freedom for SAOs to enter code-sharing arrangements with both domestic and international airlines.
State Governments at RCS Airports:
- Reduction of VAT on ATF to 1% or less for ten years.
- Provision of minimum land, free of cost and free from encumbrances, for RCS airport development.
- Free security and fire services.
- Provision of electricity, water, and other utilities at concessional rates.
Minister of State for Civil Aviation, Murlidhar Mohol, provided these updates in a written response to a question in the Lok Sabha. The continued efforts under the UDAN scheme highlight the government’s commitment to making air travel accessible to the common man by improving regional connectivity and infrastructure.
