When the government launched the UDAN scheme in 2016, it made a simple yet ambitious promise: to make air travel accessible even for someone wearing chappals. Nearly a decade later, this vision has transformed the map of Indian aviation.
Achievements of the first phase of UDAN
Small airports that had been dormant for a long time were restored. Cities that previously lacked regular commercial flights gained connectivity with larger population centers. Regional air transport moved beyond megacities and became part of a broader expansion of India's infrastructure.
Under UDAN, over 16.6 million passengers traveled on 669 operational routes connecting 95 airports, heliports, and water aerodromes. The scheme also helped expand access to remote, hilly, and underserved areas where commercial airlines previously faced difficulties operating.
Problems and audit of the scheme
However, this journey was not without difficulties. Despite launching hundreds of routes, many faced issues after the initial government support ended. Several small airlines either left the market or scaled back operations due to rising costs, limited passenger demand, and operational complexities. In some cases, airports were built, but flights could not sustain themselves, while in others, airlines received route approvals, but operations were delayed due to infrastructure limitations.
These problems were noted by the Comptroller and Auditor General (CAG) in its 2023 audit report on the first three phases of the scheme. The audit showed that while UDAN achieved regional connectivity expansion, long-term commercial sustainability remains a serious challenge. According to the report, out of 774 routes approved before UDAN-3, only 371 started operations. Furthermore, only 112 routes completed the full three-year concession period, and as of March 2023, only 54 routes continued operating after subsidies ended.
Modified UDAN 2.0 scheme
Recognizing these limitations, the Cabinet decided on the Modified UDAN scheme in March, allocating a total budget of ₹28,840 crore for the next ten years. Prime Minister Narendra Modi officially launched the next phase, named Viksit UDAN, on July 4 during the inauguration of a new terminal building at Jodhpur airport.
Unlike the previous version, the updated scheme is not limited to subsidizing airline tickets. Its goal is to create a complete ecosystem for regional aviation by developing airports, supporting their functioning, expanding connectivity through helicopters, increasing aid to airlines, and promoting the use of domestic aircraft. These changes aim to enhance the resilience of regional aviation and strengthen links between smaller towns and the national economy.
Essence and goals of UDAN
UDAN, or Ude Desh ka Aam Nagrik, is an Indian regional connectivity scheme designed to make air travel cheaper and improve connectivity between small towns and major urban centers. Before the launch, aviation in India was predominantly focused around megacities. While large airports expanded rapidly, many small towns had limited air connectivity or were outside the commercial aviation network altogether.
For airlines, serving these destinations was often financially challenging due to uncertain passenger flow, low aircraft load factors, and high operating costs. This created a vicious cycle: airlines avoided smaller routes due to limited demand, and passengers had fewer options due to the lack of flights. UDAN sought to break this cycle through government support.
The scheme introduced a comprehensive set of incentives. Airlines operating on regional routes received Viability Gap Funding (VGF) to compensate for losses and maintain affordable fares. Ticket prices on selected routes were capped to ensure affordability for passengers. Airport operators provided concessions, and state governments were encouraged to reduce aviation taxes and provide auxiliary services at lower rates. The goal was to reduce operating costs for airlines, maintain affordable fares for passengers, and gradually build sufficient demand for commercial viability of the routes.
Need for relaunching UDAN
The first phase demonstrated the demand for regional connectivity but also highlighted the difficulties in maintaining air services in small markets. Many routes that received government support struggled after the subsidy period ended. Regional airlines faced issues such as high fuel costs, limited aircraft availability, difficulties accessing major airports, and uncertain passenger volumes.
The CAG audit revealed several such implementation gaps. Beyond route sustainability, the auditor pointed to delays in airport development. He noted that despite infrastructure spending, operations could not commence or were discontinued in several places. According to the report, out of 116 airports, heliports, and water aerodromes that received funds during the audit period, operations started in only 71 locations. CAG also noted that operations could not start or were discontinued in 83 airports, heliports, and water aerodromes even after spending ₹1,089 crore. These findings reflected a broader problem: building infrastructure alone does not guarantee connectivity. Airports need airlines, passengers, and operational support to become sustainable.
Industry expert opinion
Aviation industry experts believe that the success of UDAN should now be measured not just by the number of routes launched or airports connected. They argue that the focus must shift to whether regional connectivity creates sustainable economic activity around these locations. Ashish Chhawchcharia, partner and aviation industry leader at Grant Thornton Bharat, told TOI that the discussion about UDAN must go beyond 'the number of open airports or launched routes' and focus on 'the quality and sustainability of the connectivity created.' He emphasized that regional aviation is not just a transport initiative but a tool for economic development, and it is important to observe whether these routes stimulate trade, tourism, investment, and mobility in a way that creates sustained demand.
In Chhawchcharia's view, regional connectivity is successful when aviation becomes part of a broader economic ecosystem, rather than functioning as an isolated transport service. Interested industry stakeholders similarly assert that regional aviation requires better coordination among airports, airlines, and government agencies. For smaller carriers, access to major airports remains a key challenge. Without connections to major hubs like Delhi or Mumbai, regional routes often cannot attract enough passengers. Another issue is the availability of suitable aircraft. Many small towns require smaller capacity aircraft that can operate efficiently on short routes. Limited availability and high leasing costs restricted the expansion of regional operators.
Changes in UDAN 2.0
The government believes that the Modified UDAN scheme addresses many of these weaknesses by shifting the focus from route subsidies to broader structural reforms. The most significant change in the updated scheme is the concentration on creating and modernizing airports. The government plans to develop 100 airports from existing unserved runways with an investment of ₹12,159 crore. Instead of building new airports everywhere, the approach focuses on upgrading existing airfields that have potential but lack passenger terminals, navigation systems, or operational infrastructure.
The scheme also provides special support for airport operation and maintenance. Regional airports often face difficulties in the initial years, as developing passenger traffic takes time. To address this, the government has allocated ₹2,577 crore to support the operation and maintenance of about 441 airfields. This support is intended to help airports remain functional until passenger traffic improves and revenues become more stable.
Expansion of helipads and support
The updated scheme is also aimed at improving connectivity in regions where traditional airports are difficult to develop. Under Modified UDAN, the government plans to construct 200 modern helipads with an investment of approximately ₹3,661 crore. These will be concentrated in mountainous regions, island territories, border areas, and high-potential areas where geography often hinders road and air connectivity. The government believes that these helipads can improve not only passenger movement but also emergency response, disaster management, and healthcare access. For remote areas, helicopters can provide faster connectivity during medical emergencies, natural disasters, and other situations where traditional transport infrastructure may be insufficient.
Another important change is the extension of financial support for airlines. The scheme has allocated ₹10,043 crore for Viability Gap Funding (VGF) over ten years to support the operations of regional airlines. This extended financial backing is intended to give airlines more time to build up passenger traffic before routes are expected to become self-sustaining. The government has also linked UDAN to its broader aspiration for aviation self-reliance. Under Modified UDAN, the government plans to support the adoption of domestic aircraft and helicopters, including HAL Dornier aircraft and HAL Dhruv helicopters, for operations in underserved regions. This step is expected to strengthen regional connectivity while supporting India's domestic aerospace manufacturing ecosystem.
Will UDAN 2.0 be more successful?
The success of the updated scheme will depend on more than just financial allocation. Experts warn that subsidies can help create a market but cannot replace it permanently. The long-term success of regional aviation will depend on whether the connectivity aligns with economic activity, tourism potential, industrial clusters, and emerging consumption centers. Chhawchcharia stated that the expanded government support under Modified UDAN reflects the strategic importance of regional connectivity, but financial aid alone cannot guarantee sustainability. He added that India needs a more holistic approach where infrastructure development, airline economics, fleet availability, maintenance capabilities, and local demand generation work together. Airports must be ready before airlines begin operations. Airlines need access to suitable aircraft. Small carriers require reasonable access to major aviation hubs. States must continue to provide tax incentives and operational support. The CAG audit identified similar implementation issues in the first phase, including delays in airport development, as well as gaps in monitoring and oversight mechanisms regarding the verification of airline claims and delays in the Regional Connectivity Fund processes.
