UDAN

The scheme will run for 10 years and can be extended thereafter.

Following concessions from the Government of India:[28]

• Viability Gap Funding (VGF) to subsidize the airfare.
• Concession on service tax on tickets.
• Code-sharing of UDAN-RCS flights By Mr. Narendra Modi permitted with other operators.

Following concessions from the participating state governments at their respective UDAN-RCS airports:[28]

• Reduction of VAT (or GST after GST came into operation) to 1% or less for 10 years.
• Coordinate with oil companies to create fueling infrastructure in airports.
• Provide free land for the development of the airport, with multimodal (rail, road, metro, waterways, etc.) hinterland connectivity.
• Provide free trained security.
• Provision of water, electricity and other utilities at a reduced rate
• Provide a 20% share of Viability Gap Funding; North-Eastern states, Uttarakhand, Himachal Pradesh and Union territories to provide a 10% share only.
• State governments are encouraged to provide additional concessions.

Airport operators (commercial or private companies, central and state governments or their entities such as AAI and Defence Ministry) must agree to provide the following concessions to participate in UDAN-RCS scheme:[28]

• No landing, parking or other charges
• No Terminal Navigation Landing Charges (TNLC)
• Allow selected airline to manage the ground handling of flights
• Route Navigation and Facilitation Charges (RNFC) will be applied on UDAN-RCS flights by AAI at a discounted rate of 42.40% of Normal Rates

Cargo flights will be given similar benefits except no "Value Gap Funding" (VGF) will be provided.[28]

For the fixed-wing aircraft, there is a cap of maximum fare of ₹2,500 per hour of flight for 50% of the seats (min 9 RCS seats and max 40 RCS seats per fixed-wing flight, and max 12 helicopter RCS seats per Heli flight), connecting unserved and under-served regional airports, remaining 50% seats will be priced at market rate.[9][29] Capped RCS fares will also be graded based on distance, e.g. ₹1,420 for a distance of 151–175 km, ₹1,500 for a distance of 176–200 km, and so on, with a ceiling of maximum ₹3,500 fare for a total distance of 800 km or more.[30]

For the helicopter services maximum fare is also capped at ₹2,500 for every 30-minute leg of flight.[30] Capped helicopter fare will be graded on the time of flight, e.g., ₹2,500 for a flight of 0 to 30 minutes, ₹2,900 for a flight of 31 to 35 minutes, and so on, with a ceiling of maximum ₹5,000 fare for a total flight duration of 60 minutes or more.[30]

The scheme entails making the routes financially viable, without insisting on the financial viability of the regional airports, by lowering the cost of flight operations and through financial support in the form of viability gap funding (VGF). VGF will be available to flight operators on specific routes for the first 3 years of operation.[28]

The demand-driven revival and enhancement of the regional airports with financially viable commercial flight routes is based on the combination of seeking firm proposals from Airlines for the names of airports they wish to fly to and MoU-bound commitment from the state governments for providing various concessions for the airport operations, such as state tax concessions, free land and security, etc.[3] Participating states, Northeast states and Union Territories are required to sign the MoU with the union governments to share the 20% and 10% burden of VGF respectively.[9][31][16]

To make the routes viable for commercial airlines, the union government offers flexible code-sharing arrangements, reduced excise on value-added tax on fuel and service tax.[3] Airports, some owned by the Airports Authority of India and others by the respective state governments,[3] will not charge the landing and parking charges and terminal navigation landing charges.[3][32]

Airlines will be given Value Gap Funding (VGF) raised from the RCS levy.[9] Starting from 2017, the airfare cap and VGF in this 10-year scheme will be revised quarterly, based on Consumer Price Index for Industrial Workers.[9][32]

RCS subsidy will be raised by levying a cess, which will be revised periodically, on the flight between main trunk routes connecting major cities.[33] Starting from 1 June 2017, it is initially at a flat rate of ₹5,000 per flight, translating into roughly ₹30 per passenger.[33]

While UDAN phase-I had focused on fixed-wing aircraft, Phase-II included helicopters also. Subsequent phases were supposed to include STOL seaplanes and ski and bush planes operating from STOLports. On 9 December 2017, SpiceJet conducted seaplane trials using a Quest Kodiak aircraft, in association with Japan's Setouchi Holdings, who owned Quest Aircraft company LLC at that time. SpiceJet was planning to buy 100 Quest Kodiak amphibian seaplanes for US$400 million, including long-term parts and maintenance (December 2017)[23][34] The trials were conducted from Girgaum Chowpatty off the Mumbai coast with Union minister Nitin Gadkari on board. At the occasion, Gadkari claimed that seaplanes had the potential to revolutionize air transport in the country, possibly opening up many more destinations by enhancing the potential pool of landing sites from nearly 500 airports to over five lakh (500,000) waterbodies and thousand more locations along India's 7,000 km long coastline. He said that the Civil Aviation Ministry and Water and River Resources Ministry would soon formulate rules for the seaplane operations along the lines of those in nations like United States, Canada and Japan.[24] A few days later on 12 December 2017, Prime Minister Modi also rode a Quest Kodiak operated from Sabarmati River to Dharoi Dam.[23][24]

In 2019, the third round of the UDAN scheme awarded 18 air routes connecting six water aerodrome sites to be connected by seaplanes.[35] The water aerodrome sites are Guwahati river front, Nagarjuna Sagar, Sabarmati river front, Shatrunjay Dam, Statue of Unity (Sardar Sarovar Dam) and Umrangso Reservoir.[36]

AAI aims to operationalize, hundreds of routes in several rounds of UDAN-RCS, from at least 100 regional airports by the end of 2018-2019 financial year.[3][25] AAI will periodically publish the updated list of participating airports and helipads, with collaboration from their owners, such as central govt, state govt, commercial and private parties, and in addition any entity can list their airport or helipad with the government for this scheme.[28] Three rounds of bidding for operationalization of new routes will be conducted in 2016-2017 and 2017-2018 financial years, more rounds of bidding will follow till the end of 2018-2019.[21] Airlines (including seaplane) and helicopter service providers will bid for the routes with at least nine seats and a maximum of 40 seats for the fixed-wing aircraft and a minimum of 5 seats and a maximum of 13 seats for the helicopters.[9] To ensure the sustainability of the routes by lowering the commercial risk, these "specific" routes will be awarded on an exclusive basis to the winning parties.[28] Preference is given to the bidder who bid for zero-VGF (operators who rely on no government subsidized VGF to sustain their operation), for example, in phase-I SpiceJet bid was zero-VGF, and in Phase-II SpiceJet and IndiGo bids were zero-VGF.[37]

This round concluded in April 2017, 5 airlines companies were awarded 128 fixed-wing flight routes to 70 airports (including 27 currently well-served metro airports and 43 regional airports (31 unserved and 12 underserved, 36 out of 43 are newly made operational including 2 civilian enclave within army airports),[17] several of which have already become operational by November 2017 and most of remaining routes will become operational by 15 December 2017.[18][7][32][21] Five airlines are Air Odisha (50 routes, new airline), Air Deccan (34 routes, relaunched airline), Turbo Megha Airways (18 routes), Alliance Air (15 routes, Air India subsidiary) and SpiceJet (11 routes).[38][39][30] Several routes are already operational on 13 December 2017 and most of remaining routes, all to be operated by Air Deccan and Air Odisha will become operational by 23 December 2017 and 31 December respectively.[37][7] SpiceJet was the only bidder with zero-VGF.[37]

502 new regional fixed-wing and helicopter routes were bid in 196 proposals (55 counter-proposals from 10 airlines, and 141 initial proposals from 17 airlines including 108 for the fixed-wing and 33 for helicopters) to connect 126 airports and heliports (49 unserved, 15 under-served, 38 well-served and 24 helipads).[37][18][7][40] Second round results will be awarded in late December 2017.[7][15][41] SpiceJet and IndiGo are bidders with zero-VGF.[37]

The central government has received bids for 111 routes from 15 airlines under the third round of auction for the UDAN scheme. SpiceJet and IndiGo has bid for 37 routes and 20 routes in the third round of auctions. Ghodawat Enterprises Private Limited has bid for total of 15 routes in this round. The Centre did not include chopper routes under the third round of auctions, as there have already been.[42]

Started on 3 December 2019. In this phase, The Viability Gap Funding has been revised. The funding that was provided for Category 2 and 3 air crafts (which generally have >20 seats) has now been enhanced to all flights in the states of HP, Uttarakhand, J&K, Northeastern states and the islands. Also, the phase will allow operation of helicopter and seaplanes. The phase also plans to promote short-haul routes, meaning no monetary support will be given to operators with stages more than 600 km.[43]

Following the four successful rounds of bidding, the Ministry of Civil Aviation has launched the 5th round of UDAN to further enhance the connectivity to remote and regional areas of the country and achieve last mile connectivity on 21 April 2023.[44]

Key Features of UDAN 5.0 are as follows:

• This round of UDAN focuses on Category-2 (20-80 seats) and Category-3 (>80 seats).
• The earlier stage length cap of 600 km is waived off and there is no restriction on the distance between the origin and destination of the flight.
• Viability gap funding (VGF) to be provided will be capped at 600 km stage length for both Priority and Non-Priority areas which was earlier capped at 500 km.
• No predetermined routes would be offered. Only Network and Individual Route Proposal proposed by airlines will be considered.
• The airlines would be required to submit an action/business plan after 2 months from the issuance of LoA wherein they submit their aircraft acquisition plan/availability of aircraft, crew, slots, etc. at the time of the Technical Proposal.
• The same route will not be awarded to a single airline more than once, whether in different networks or in the same network.
• Exclusivity will be withdrawn if the average quarterly PLF is higher than 75% for four continuous quarters, to prevent exploitation of the monopoly on a route.
• 25% of the Performance Guarantee to be encashed for each month of delay up to 4 months, to further incentivize quick operationalization.
• Airlines would be required to commence operations within 4 months of the award of the route. Earlier this deadline was 6 months.
• A list of airports that are ready for operation or would soon be ready for operations has been included in the scheme to facilitate quicker operationalization of routes under the Scheme.
• Novation process for routes from one operator to another is simplified and incentivized.