Launched in October 2016, the UDAN scheme (Ude Desh ka Aam Naagrik) aimed to enhance regional air connectivity in India by making air travel more affordable and accessible. The scheme was intended to connect underserved and unserved airports across the country, encouraging affordable air travel for the masses. However, according to ICRA, a leading credit rating and research agency, the scheme has not yet reached its full potential. In fact, the rise of alternative transport options like the Vande Bharat Express trains has posed significant competition to UDAN, especially on short-distance routes.
UDAN Scheme’s Goals and Structure
The UDAN scheme was designed to improve connectivity to remote parts of India by offering airlines subsidies for operating on routes connecting smaller, underserved airports. The government provides viability gap funding to support airlines operating on these routes, aiming to make air travel affordable for the average citizen. As part of this initiative, airfare for flights under 500 kilometers is capped at Rs. 2,500 for 50% of the seats on eligible routes. This affordability was expected to revolutionize regional travel in India, reducing congestion on major air routes and promoting economic development in smaller cities.
However, despite these ambitious goals, the scheme has faced several challenges that have hindered its widespread success.
The Impact of Vande Bharat Trains on UDAN
One of the key issues identified by ICRA is the growing competition from Vande Bharat Express trains, which offer semi-high-speed services on some of the same routes targeted by the UDAN scheme. Kinjal Shah, Senior Vice President and Co-Group Head at ICRA, noted that these trains are often able to provide a more affordable and efficient alternative to air travel, especially on shorter routes. As a result, the Vande Bharat Express trains are emerging as strong competitors to regional air travel, particularly for routes under 500 kilometers.
ICRA’s analysis revealed that despite the ambitious goals of the UDAN scheme, its impact on overall air travel penetration remains limited, with regional routes accounting for only about 1-4% of total air travel. With cheaper fares on trains like Vande Bharat, many travelers prefer rail travel for shorter distances, especially when the journey time is comparable to that of air travel.
Challenges Limiting UDAN’s Growth
Several factors have prevented the UDAN scheme from reaching its full potential. These include:
1. Limited Viability Gap Funding
The viability gap funding offered under the UDAN scheme is limited to a three-year period. After this, airlines must continue operating without the financial support, which can lead to financial strain, especially if passenger traffic on these routes remains low. According to Shah, many airlines that initially won the UDAN route bids chose not to operate these routes due to the absence of long-term subsidies and the lack of sufficient passenger traffic.
2. Airfare Caps and Route Sustainability
While the scheme caps airfares at Rs. 2,500 for flights under 500 kilometers, the removal of these caps after three years can make these routes less financially viable for airlines. The reduction in passenger load factor (PLF)—the percentage of seats filled—further complicates profitability for airlines, making it harder to sustain these routes without ongoing support.
3. Lack of Route Additions
Another significant issue is the slow pace of new route additions to the UDAN scheme. The scheme’s expansion is critical to increasing passenger traffic and making regional air travel more attractive. However, without new routes being added each year, the existing routes are unlikely to see a significant increase in passenger numbers.
4. Awareness and Demand
Despite the affordability and benefits of the scheme, many people are still unaware of UDAN’s potential to improve their travel options. This lack of awareness has contributed to slower-than-expected uptake, particularly in rural or underserved regions where the scheme was supposed to have the most significant impact.
The Future of UDAN and Regional Connectivity
ICRA analysts emphasize that unless there is more consistent route expansion and better awareness efforts, the UDAN scheme will continue to face challenges in fulfilling its potential. Additionally, competition from affordable transport options like the Vande Bharat Express trains will continue to limit the scheme’s growth, especially in regions with well-connected rail infrastructure.
However, the government remains committed to regional air connectivity. It continues to offer support to airlines under the scheme, including tax concessions, reduced landing fees, and other incentives from the Airports Authority of India. These measures aim to make regional air travel more attractive, despite the growing competition from other modes of transport.
Conclusion
The UDAN scheme has made significant strides in promoting regional air connectivity in India, but it still faces considerable challenges in realizing its full potential. Competition from Vande Bharat Express trains, coupled with limitations on subsidies and route sustainability, has created obstacles for the scheme’s long-term success. Moving forward, addressing these challenges through expanded routes, better passenger awareness, and long-term support for airlines will be essential in ensuring that the UDAN scheme fulfills its promise of making air travel more accessible and affordable to all.
Refer:
Economic Times, Link to article
Also read : Bullet Train Breakthrough: Rail Minister Reviews Ahmedabad-Mumbai Corridor Track Slab Production