India's regional air connectivity scheme, UDAN (Ude Desh Ka Aam Nagrik) , faced a significant budget cut in the fiscal year 2024-25, impacting key initiatives for airport revival and the development process. The interim budget, by Union Finance Minister Nirmala Sitharaman on February 1, 2024, announced a substantial reduction in the funding of UDAN.
UDAN Budget slashed by 60 per cent
The budget for the UDAN scheme saw a significant 60 per cent reduction, the recent interim budget presented in the parliament. The allocated budget for the UDAN scheme in the upcoming fiscal year is Rs 502 crore, marking a steep decrease from the previous fiscal year's revised estimate of Rs 850 crore and the initial estimate of Rs 1,244 crore.
The Civil Aviation Ministry's total allocation saw a 26 per cent decrease, amounting to Rs 2,300 crore for the upcoming fiscal year. This reduction contrasts with the revised estimate of Rs 2,922.12 crore for the previous year and the initial estimate of Rs 3,113.36 crore.
What is UDAN scheme?
The Ministry of Civil Aviation launched the flagship Regional Connectivity Scheme UDAN (Ude Desh Ka Aam Nagarik) on October 21, 2016, with a 10-year vision. The initiative aimed to improve air connectivity to airports in smaller towns, ensuring that flight services were easily accessible to the general public.
Jointly funded by the Government of India (GoI) and state governments, UDAN was a key component of the National Civil Aviation Policy (NCAP). Under the scheme, state governments provided free security fire service and utilities at concessional rates, along with a reduced VAT on ATF to 1 per cent. The Centre also offers concessions, including a 2 per cent excise on Value Added Tax (VAT) and discounted service tax. UDAN is applicable to flights that covered distances ranging from 200 km to 800 km, with no minimum limit specified for hilly, remote, islands, and security-sensitive regions. The scheme ensures accessibility and connectivity for regions with geographical challenges. Under the scheme, flights are required to connect with at least one RCS airport, specifically targeting underserved and unserved airports.
Where will the allocated funds be used?
The allocated funds will be used to revive 22 airports, start 124 air routes, and support the financial needs for improving connectivity in the north-eastern region in the future.
Air India asset holding Ltd and other allocations
The budget allocated Rs 1,158.79 crore for Air India Asset Holding Ltd (AIAHL), intended for servicing loans transferred during Air India's financial restructuring. This marked a decrease from the initial allocation of Rs 1,144.49 crore in FY24. Additionally, Rs 85 crore has been announced for the medical benefits of retired Air India employees.
In FY24, AIAHL's initial allocation was of Rs 1,144.49 crore which was revised down to Rs 713.92 crore.
UDAN: FY24 targets
In FY24, the budget aimed to improve regional connectivity by reviving 50 additional airports, heliports, water aerodromes, and landing grounds under the UDAN scheme.
In July 2023, Rs 410 crore was sanctioned for 15 aerodromes, and ongoing/future bids will identify additional heliports and water aerodromes under UDAN.
In January 2024, the Finance Minister announced Rs 1,000 crore for the three-year period from April 2023 to March 2026 to revive and develop various air facilities. By then, 33 airports had been tentatively identified for development in the third phase of UDAN.
