The Indian civil aviation industry has witnessed significant progress in recent years. Regional connectivity, in particular, has seen major advancements with the introduction of new routes and other initiatives backed by government support. At a recent industry conference, Kinjarapu Ram Mohan Naidu, Union Minister of Civil Aviation, shared his views on the improving state of regional connectivity in India, the role of sustainability and government initiatives in the sector. Edited excerpts…
The Government of India envisions improved regional connectivity, ease of doing business and harmony in the aviation sector to foster regional growth. The Ministry of Civil Aviation (MoCA) is working to ensure that every part of the country is well connected and accessible via aviation. The aim is to take off from the remotest corners of the nation and land in the most backward and underserved areas. By connecting such regions through enhanced air mobility, we are bridging geographical distances and unlocking avenues for economic growth and job creation in the country. In line with this, enhancing regional connectivity has been prioritised through initiatives such as the Regional Connectivity Scheme Ude Desh ka Aam Naagrik (RCS UDAN).
RCS UDAN
RCS UDAN has democratised air travel and opened new economic opportunities for Tier II and III cities of the country. Under the scheme, over 583 routes have been operationalised and 86 airports (including heliports and water aerodromes) have been developed, many of which were previously unserved or underserved. More than 14 million passengers have benefitted from UDAN flights and 0.28 million flights have operated under this scheme with a viability gap funding (VGF) support of over Rs 37 billion.
Over the past 10 years, the number of airports in the country has increased from 74 to 157, including heliports and water aerodromes. However, the challenge of connecting airports remains, as many may not be feasible or viable in the long run. In this regard, RCS UDAN and the VGF have played a significant role in transforming the civil aviation sector in the country.
As smaller airports are leveraged for enhancing connectivity, the demand for air travel in the country increases, bringing more players to the market. Several new airlines have emerged over the past few years including FlyBig, Star Air, IndiaOne Air and Fly91. The successful run of these players highlights the favourable environment provided by the government, which prioritises ease of doing business and ease of flying.
Regional connectivity is also being promoted through helicopter routes in areas with difficult terrain, such as the northern Himalayan regions where airport construction and aircraft landing are difficult. Under UDAN 5.1, helicopter services are being expanded to improve hospitality, tourism and local economic growth, with 60 helicopter routes operationalised under the scheme.
In August 2024, comprehensive guidelines for seaplane operations were launched under the UDAN scheme. These were reworked based on feedback from seaplane operators to facilitate greater activity in seaplane services. These guidelines aim to open up hard-to-reach locations like islands, riverine regions and areas with very limited airport infrastructure. Seaplanes present a significant opportunity to leverage India’s diverse water bodies and wide coastline.
With reduced operational costs, airlines benefit from concessions on airport charges, reduced VAT and excise duty on aviation turbine fuel (ATF), and financial support to bridge the gap between operational costs and expected revenue.
UDAN has been a landmark move by the government. It has progressed well in the past seven years since its launch. The government aims to increase the total number of airports to 350-400 in the next 20-25 years. Given the challenge of connecting these airports due to economic feasibility issues, RCS UDAN, which was earlier slated to end in 2027, is now likely to be extended for another 10 years. All feedback from the present RCS UDAN scheme is being incorporated, with a focus on ensuring affordability for the common man.
Improving the aviation environment
Aircraft leasing and financing
The government’s commitment to strengthening regional connectivity is further demonstrated by Indian operators placing orders for more than 1,200 aircraft. To provide a more cost-effective and flexible solution for airlines to expand and modernise their fleet, without the substantial financial burden of purchasing aircraft, the government has also announced initiatives for leasing through the International Financial Services Centre (IFSC) including a 100 per cent tax holiday for 10 years. The Directorate General of Civil Aviation (DGCA) has also amended the civil aviation requirements to streamline the in-country transfer and re-leasing of aircraft, including deregistration processes. The government is also trying to ease regulations to facilitate the introduction of new aircraft into the country’s fleet.
Several other initiatives have also been implemented. Thirty aircraft leasing entities have been registered at the Gujarat International Finance Tec-City IFSC for undertaking the aircraft leasing business. These entities have leased 140 aviation assets including 31 aircraft, 49 engines and 60 ground support equipment. Leasing provides airlines flexibility to expand their fleet without the large capital expenditure required for purchasing new aircraft. This is particularly beneficial for emerging airlines and regional carriers. The aircraft leasing and financing business is the most profitable segment in the aviation value chain, but it was entirely under foreign jurisdiction. Hence, there is a need to improve domestic aircraft leasing. This would also reduce the dependence on foreign lessors and retain more financial resources within the country. Additionally, establishing India as a hub for aircraft leasing would attract global investors, thereby boosting FDI.
eVTOL aircraft
Another form of regional connectivity set to emerge in the coming years is the electric vertical take-off and landing (eVTOL) aircraft. The circular for the development of vertiports, which are required for these eVTOL aircraft, has been released, with the DGCA at the forefront of this initiative. eVTOL aircraft would provide a strong aviation mobility network especially in metropolitan cities such as Delhi and Mumbai where road travel is often hindered by congestion, or time constraints.
In terms of regional air mobility, the government aims to promote regional aircraft and manufacture its own aircraft. The goal is to establish India’s presence in the regional aircraft market. This would bring in engineering, skills, knowledge and know-how into the entire industry. It is very important for a country like India to promote the development, design and manufacturing of aircraft.
Developing hubs
It is also essential to look beyond international models and prepare our own road map for greater connectivity between the Asia-Pacific countries. More airports in the region should be connected through the hub-and-spoke model, by establishing major airports as hubs and smaller regional airports as spokes. A seamless network that reduces travel time and optimises resources can also be created. The MoCA also aims to create global aviation hubs. Metropolitan cities like Delhi, Mumbai, Chennai, Hyderabad and Kolkata have the potential to become leading hubs in the Asia-Pacific region and across the world. India is strategically located and must utilise this potential.
Focus on sustainability
One key area for collaboration in the Indian civil aviation industry is sustainable aircraft. As global efforts to reduce carbon emissions intensify, it is crucial for the Indian aviation industry to embrace environment-friendly practices. Delhi’s Indira Gandhi International Airport and Mumbai’s Chhatrapati Shivaji Maharaj International Airport have already achieved carbon neutrality. Most airports, including those owned by the Airports Authority of India, are moving towards carbon neutrality. Many airports are also installing solar mega power plants within their premises. The government is promoting the adoption of sustainable aviation fuels (SAF), with plans to blend 1 per cent SAF with jet fuel by 2027, 2 per cent by 2028 and 5 per cent by 2030. Various collaborative efforts and discussions are under way with the Ministry of Petroleum and Natural Gas to ensure that the industry can contribute to achieving the target.
In sum
India has immense potential for air travel. Several government initiatives, particularly, RCS UDAN, have played a key role in enhancing regional connectivity over the years. Despite this growth, common challenges remain. These include market imbalances, infrastructure gaps and regulatory hurdles, which can be addressed through collaboration and partnerships. Looking ahead, there is a need to focus on skilling the workforce. Further, new targets and measures will shape the sector’s growth in the coming years.