Flying High

RCS-UDAN scheme making good progress in connecting the country

Over four years into its launch, the Re­gional Connectivity Scheme – Ude Desh Ka Aam Nagrik (RCS-UDAN) has been able to make air travel a more affordable and convenient mode of transportation for a wider network of regions across the country. As of August 2021, 780 valid awarded routes have been allotted to select airline operators, out of which 359 RCS routes connecting 59 unserved and underserved airports (including five heliports and two water aerodromes) have been operationalised. Regional airports can save a lot of funds by providing only those amenities that are needed for operations, and those that ensure safe operations. UDAN provides support to the selected airline operators in the form of viability gap funding (VGF). The respective state governments provide 20 per cent of the VGF for RCS flights pertaining to their sta­tes. However, the share of VGF for the north-eastern states and the union territories is 10 per cent. The airlines are required to commit arou­nd 50 per cent of the seats as RCS seats (up to 40 seats) on UDAN flights.

There is a significant demand currently for regional flight operators. With passenger de­ma­nd almost doubling every year at regional airports, as well as the overall increase in travel for regional cities, airports will play a crucial role in supporting this demand. It is important for low-cost operators to operate in these markets, as profit margins are very low and most consumers in these markets are extremely pri­ce-sensitive. A significant number of passengers who travel by rail might end up moving to air transport if they get a better travel schedule at similar cost. Many regional operations can also benefit civil enclaves – airports that support both commercial as well as military operations. Since these airports are primarily for military use, major operations such as airport maintenance and air traffic control are carried out by the military, making commercial operations more viable.

A preliminary estimate by the Airports Au­thority of India (AAI) and the Ministry of Civil Aviation (MoCA) has suggested that a budgetary allocation of Rs 25 billion will be needed under the RCS-UDAN scheme in 2022-23, as the government requires more funds to operate flights. In the budget for 2021-22, the government allocated Rs 6 billion for the UDAN scheme – 14.28 per cent lower than the mo­n­ey allocated in 2020-21.

In a recent development, MoCA virtually flagged off the first direct flight on the Shillong-Dibrugarh route under the RCS-UDAN scheme in October 2021. IndiGo was awarded this route under the fourth round of UDAN. The airline will deploy a 78-seater ATR 72 aircraft. The government has also inaugurated 22 new routes under the RCS, six of which have been operationalised in the Northeast. These are Shillong-Agartala, Shillong-Silchar, Dibru­ga­rh-Dimapur, Gorakhpur-Lucknow, Kur­no­ol-Bengaluru, Visa­k­ha­pat­nam-Chennai, Agra-Bengaluru-Bhopal, and Prayagraj-Bhubaneswar-Bhopal.

The Rajasthan government has signed a tripartite agreement with the Government of India and AAI, with the objective of facilitating implementation of UDAN in the state. Under UDAN, airports such as Bikaner, Kishangarh, Uterlai, Kota and Jaisalmer have been identified for development in Rajasthan. UDAN fligh­ts from Bikaner, Kishangarh and Jaisalmer have already commenced. UDAN is a demand-driven scheme, whereby airline operators ass­ess the feasibility of operations on a particular route and bid under the scheme occasionally. The routes connecting Lalgarh (Sri Ganga­na­gar), as proposed by the government of Raj­as­than, have been offered for bidding in a special round under UDAN 4.1.

What the future holds

Under the RCS-UDAN scheme, there has been a growing focus on providing air connectivity in Tier II and Tier III cities. AAI will focus on developing no-frills airports in the future, and routes connecting such airports will be prioritised for award of VGF. The market will be incentivised to develop short-haul routes only, providing connectivity to nearby airports.

Going forward, the potential of the scheme will lie in the transition from regional connectivity to remote connectivity. MoCA has set a target of operationalising as many as 100 unserved and underserved airports under the RCS and starting at least 1,000 air routes. This will be achieved by focusing on operationalising routes in priority areas as, till now, airlines have been inclined towards profitable routes only.

 

 

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