Govt goes all out to see UDAN take off
Govt hopes to boost air travel among smaller cities by capping fares to regional airports
NEWDELHI: From convincing companies to lease smaller jets in India to reducing airport charges at key metro airports for regional flights, the government is going all out to make the regional connectivity scheme called UDAN a success.
Launched last week, UDAN, which stands for Ude Desh Ka Aam Naagrik (may the common man fly), hopes to boost air travel between smaller cities by capping fares to regional airports at ₹2,500 for a one-hour flight. Government is hoping that the first flight under the scheme takes off by January 2017.
“The government has put in a lot of effort to ensure that the scheme is successful. The selected airline operators will be granted exclusivity of operations for three years as against one year that was proposed in the draft. During these three years, no other airline would be allowed to operate flights on that route,” said an official.
The aviation ministry is also talking to private airport operators to reduce the charges for regional flights. Foreign registered planes have been allowed to fly in India. This move will help leasing companies take back their planes in case of a default. At present, all civilian aircraft flying in the country is registered with the Directorate General of Civil Aviation. “A delay in deregistering planes, as witnessed recently in the Air Pegasus case and during the Kingfisher crisis has made international aircraft firms wary of leasing planes in India. This also caused a hike in lease rentals,” said an official.
The government has also held talks with aircraft leasing firms to ensure that small jets are available to operators in India.
“UDAN will result in air traffic doubling in the coming years,” said aviation expert Rajji Rai.
Government has said it will provide a viability gap funding (VGF) or financial support of up to ₹5,610 per seat to airlines to ensure that the operational cost is met. To fund the scheme, a regional connectivity fund would be created by imposing a levy per departure on domestic flights on key routes. The levy would help raise ₹500 crore annually.
Government will conduct a reverse bidding whereby the operator seeking the lowest VGF would be granted the right to operate services on a route.
Centre and state government would offer support by reducing excise duty, lower the VAT to 1% on ATF, provide land, security and fire services free of cost. The government hopes the incentives will help airline earn a return of 16%.