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Lok Sabha TV- Public Forum: Flying High With ‘UDAN’

 

 


Lok Sabha TV- Public Forum: Flying High With ‘UDAN’


 

https://youtu.be/sNrCk_mUem8

 

The Civil Aviation Ministry recently launched its Regional Connectivity Scheme called UDAN (Ude Desh ka Aam Naagrik). It is termed as the first of its kind scheme in the world where a large number of unconnected places and people will become a part of the airways.

Features of UDAN:

  1. Under the scheme, the centre has proposed to cap fares at Rs. 2500 for one hour flight for 50% of the seats with the idea to make flying affordable for common man and the remaining on market based pricing.
  2. Airlines operating under this scheme will get Viability Gap Funding and other benefits such as lower taxes and airport charges to promote regional connectivity. A Regional Air Connectivity Fund will also be set up for providing viability gap funding to aircraft operators to serve tier 2 and tier 3 cities. The centre will share 80% of the cost of this viability gap funding while the states will share the remaining 20%. While this may prove to be an attractive scheme for consumers, there is also a lot for carriers, small and regional airlines and other players in the ecosystem.
  3. Centre has also suggested that states provide incentives to airlines to encourage them to fly on regional routes specifically in unserved and underserved airports. This is in sync with the Draft Regional Connectivity Scheme Rules which was released in July 2016.
  4. The government also plans to upgrade 50 unserved and underserved airports in the country which would further boost air connectivity pan India. For example: Recently, Spicejet connected Gorakhpur. Similar such small towns will be connected this way with short haul aircrafts.

Challenges:

  1. The biggest challenge in regional connectivity is technical infrastructure like the aircraft has to go to the interiors, lack of airports, lack of equipment, technical manpower etc. Mostly, these are day airports without night training facility. If this is included, the costs would be very high and runways have to be improved as well.
  2. Primary basic traffic flow in these areas has to be developed for the commuters. Mainstream airlines are already dealing with heavy traffic flow. It is unlikely that they would step forward in the regional sector.
  3. The overhead cost for a small aircraft is almost same as that of bigger aircrafts. Therefore, low cost operations might not ensure much profit for big airlines. Investments have to be attracted here from new and local investors.
  4. Ghost airports are technically operational but do not handle a single scheduled flight. These have to be connected with short haul aircrafts along with development of low cost airports with reasonable expenditure.
  5. The type of aircraft which will work well for regional connectivity has to be decided based on cost benefit analysis based on seating capacity i.e. Category 1 (less than 20), Category 2 (21-80) and Category 3 (more than 80). There are a lot of non-scheduled operators in India like chartered planes and others. These businesses might enter into this field. For the policy to succeed, the regulatory framework has to be analyzed and changed to be in sync with it.
  6. The government’s move to impose a levy on every departure on major routes to fund the scheme seems to have not gone down well with many of the existing airlines as they feel that such a move could push the airfares higher.
  7. There are some routes like Mumbai to Dharmshala which might cost Rs.8000 as these are monopoly routes while the cost for Delhi to Mumbai is around Rs.2100 because of more competition. In such cases, application of subsidy would help.

The Policy is very well intentioned which was being planned for last 1 year. For the first time, there is a policy dedicated to regional airlines. In the past, these policies have not worked. This time, the Ministry is taking a corpus from the national flights and is putting them into regional flights. Regional flights are difficult to run because these are expensive and have less traffic. So, these flights will be subsidized with these national flights. It is being hoped that this policy might act a baby step towards regional connectivity in next 1-2 years.