UDAN (Ude Desh ka Aam Nagrik) Scheme

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About UDAN Scheme:

It is a regional airport development and “Regional Connectivity Scheme” (RCS) of the Union Government of India.
It was initially launched on October 21, 2016, for a 10-year period.
The primary objective of the scheme is to provide affordable and efficient air travel options to residents of tier-2 and tier-3 cities, remote areas, and regions with limited or no air connectivity.
The scheme envisages providing connectivity to unserved and underserved airports of the country through the revival of existing airstrips and airports.
Nodal Ministry: Ministry of Civil Aviation
Under the UDAN Scheme, the government works in partnership with airlines to provide subsidies and incentives to operate flights on underserved and unserved routes.
The government provides financial support to airlines through a Viability Gap Funding (VGF) model, which covers the difference between the cost of operations and the expected revenue on the identified routes.
Aviation companies bid for air routes. The company that asks for the lowest subsidy is awarded the contract. Under this fare for each flight, the airline has to book half, or a minimum of 9, or a maximum of 40 seats.
Under the scheme, the airfare for a one-hour journey by a ‘fixed wing aircraft’ or half an hour’s journey by a helicopter for about 500 km has been fixed at Rs.2500/-.

Q1: What is Viability Gap Funding (VGF)?

VGF is a financial mechanism used by governments to support infrastructure projects that are economically essential but may not be financially viable for private investors due to high initial capital costs or long-term returns. The concept is designed to bridge the gap between the cost of such projects and their financial viability, making them more attractive for private sector participation.

News: India: Affordable flights for another decade, as Govt. extends UDAN scheme for 10 more years