Modified UDAN Scheme: Boosting Regional Aviation

Outlay: Rs 28,840 crore for FY 2026‑2036.
Subsidy period: Extended from 3 to 5 years under Viability Gap Funding (VGF).
Funding source: Directly from the government exchequer (no passenger levy).
Infrastructure targets: 100 new airports (from unserved airstrips) and 200 modern helipads for hilly/island regions.
Indigenous aircraft: Procurement of HAL Dhruv helicopters and HAL Dornier planes.
Original UDAN performance (2016‑2026):
663 routes launched, carrying 162.47 lakh passengers.
327 routes became non‑viable by Feb 2026.
15 of 95 revived airports ceased operations.
Only 7‑10% of routes remained financially viable after the initial subsidy period (CAG report).

UDAN (Ude Desh ka Aam Nagrik) launched under the National Civil Aviation Policy (NCAP) 2016 to democratise air travel and connect Tier‑2/3 cities.
Implemented by the Ministry of Civil Aviation with the Airports Authority of India (AAI) as nodal agency.
Core mechanisms: airfare cap (Rs 2,500 per hour for half the seats), VGF, waiver of landing charges, and state‑level reduction of VAT on Aviation Turbine Fuel (ATF) to ≤1%.
The scheme evolved through UDAN 1.0 to 5.0, adding helipads, tourism routes, hilly/North‑East focus, and seaplane operations.

Economic: Enhances connectivity to remote regions, spurring tourism, trade, and investment; reduces logistics cost for agriculture (Krishi UDAN).
Social: Improves accessibility for citizens in Tier‑2/3 cities, aligning with Atmanirbhar Bharat and inclusive growth.
Strategic: Strengthens infrastructure in border and island areas, contributing to national security and disaster response.
Fiscal: Direct funding reduces burden on airline passengers and improves transparency of subsidy utilisation.
Industrial: Promotes indigenous aerospace manufacturing, supporting the Make in India agenda.

Article 246 – Union’s competence over civil aviation.
Civil Aviation Requirements (CAR) 2020 – regulatory framework for VGF and route licensing.
National Civil Aviation Policy, 2016 – provides the policy basis for UDAN.
Public Procurement Policy (2022) – facilitates procurement of indigenous aircraft.

Extended VGF gives airlines a longer runway to achieve breakeven, addressing the high discontinuation rates observed earlier.
O&M subsidies for low‑traffic aerodromes prevent premature airport closures.
PPP model encouraged for airport construction and helipad development, leveraging private sector expertise.
Krishi UDAN integrates agricultural logistics, enhancing farmer incomes in remote regions.

Ensuring efficient utilisation of the increased subsidy.
Maintaining operational viability post‑subsidy period.
Coordinating state‑level incentives (VAT, land acquisition) with central funding.
Managing environmental clearances for new airports/helipads in ecologically sensitive zones.

UPSC‑relevant angles:

Fiscal implications of direct exchequer funding vs. passenger levy.
Role of VGF in market creation and its impact on airline business models.
Comparative analysis of original vs. modified scheme (policy evolution).
Integration of aviation with agriculture (Krishi UDAN) – a multi‑sectoral governance case.
Legal framework governing civil aviation and PPPs.