ALL YOU NEED TO KNOW ABOUT UDAN SCHEME (UDE DESH KA AAM NAGRRIK) WITH PRACTICE QUESTIONS

Regional Connectivity Scheme UDAN
Jan 27, 2018

The Ministry of Civil Aviation took a major step towards making flying a reality for the small town common man. The Civil Aviation Ministry launched Regional Connectivity Scheme UDAN (Ude Desh ka Aam Nagrik). UDAN is an innovative scheme to develop the regional aviation market. It is a market-based mechanism in which airlines bid for seat subsidies. This first-of-its-kind scheme globally will create affordable yet economically viable and profitable flights on regional routes so that flying becomes affordable to the common man even in small towns.

Key Features

The scheme UDAN envisages providing connectivity to un-served and under-served airports of the country through revival of existing air-strips and airports. The scheme would be in operation for a period of 10 years.
UDAN has a unique market-based model to develop regional connectivity. Interested airline and helicopter operators can start operations on hitherto un-connected routes by submitting proposals to the Implementing Agency.
The operators could seek a Viability Gap Funding (VGF) apart from getting various concessions.
All such route proposals would then be offered for competitive bidding through a reverse bidding mechanism and the route would be awarded to the participant quoting the lowest VGF per seat.
The operator submitting the original proposal would have the Right of First Refusal on matching the lowest bid in case his original bid is within 10% of the lowest bid.
The successful bidder would then have exclusive rights to operate the route for a period of three years.
Such support would be withdrawn after a three year period, as by that time, the route is expected to become self-sustainable.
The selected airline operator would have to provide a minimum of 9 and a maximum of 40 UDAN Seats (subsidized rates) on the UDAN Flights for operations through fixed wing aircraft and a minimum of 5 and a maximum of 13 Seats on the Flights for operations through helicopters.
On each such route, the minimum frequency would be three and maximum of seven departures per week.
Route networks would also be encouraged under the scheme to achieve economies of scale and optimal usage of aircraft.
The fare for a one hour journey of appx. 500 km on a fixed wing aircraft or for a 30 minute journey on a helicopter would now be capped at Rs. 2,500, with proportionate pricing for routes of different stage lengths/flight duration.
This would be achieved through 1. a financial stimulus in the form of concessions from Central and State governments and airport operators and 2. a Viability Gap Funding to the interested airlines to kick-off operations from such airports so that the passenger fares are kept affordable.
Central Government would provide concessions in the form of reduced excise duty, service tax, permission to trade ASKMs for Non-RCS (UDAN) Seats and flexibility of code sharing at the RCS (UDAN) airports.
State governments will have to lower the VAT on ATF to 1% or less, besides providing security and fire services free of cost and electricity, water and other utilities at substantially concessional rates.
Airport operators shall not impose Landing and Parking charge and Terminal Navigation Landing Charges in addition to discounts on Route Navigation Facility Charges.
A Regional Connectivity Fund would be created to meet the viability gap funding requirements under the scheme. The RCF levy per departure will be applied to certain domestic flights.
The partner State Governments (other than North Eastern States and Union Territories where contribution will be 10 %) would contribute a 20% share to this fund. For balanced regional growth, the allocations under the scheme would be equitably spread across the five geographical regions of the country viz. North, West, South, East and North-east.

The States have a key role under the scheme. The selection of airports where UDAN operations would start would be done in consultation with State Government and after confirmation of their concessions. It may be recalled that revival of dysfunctional airports and starting operations on un-served airports has been a long standing demand of most States and this will be addressed through UDAN to a large extent.

The UDAN is likely to a give a major fillip to tourism and employment generation in the hinterland. Through introduction of helicopters and small aircraft, it is also likely to significantly reduce travel timings in remote and hilly regions, as well as islands and other areas of the country.

Practice Questions

Q. With reference to ‘Ude Desh ka Aam Nagrik’, consider the following statements:

1. Under this scheme, flights between major airports are priced at Rs. 2500 for one hour of flying time.

2. To fund the scheme, a cess will be charged on airlines flying on metro or trunk routes for each departure. Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

Answer:

Q. Consider the following statements about the Regional Connectivity Scheme-UDAN:

It is a market-based mechanism to develop the regional aviation market
The scheme envisages providing connectivity to un-served and under-served airports of the country through revival of existing air-strips and airports

Which of the above statements is/are correct?

[A] 1 Only
[B] 2 Only
[C] Both 1 & 2
[D] Neither 1 nor 2

Answer: [C] Both 1 & 2

Both are correct statements

The UDAN scheme seeks to provide connectivity to un-served and under-served airports of the country through revival of existing air-strips and airports
This first-of-its-kind scheme will ensure affordability, connectivity, growth and development
It aims to increase ticketing volume from 80 million to 300 million by 2022 Under it regional connectivity will be developed on market-based mechanism under which Airlines will bid for seat subsidies
Airline operators will bid for up to 40 subsidised seats and minimum seats will be 9. There will be 50% seats on market based pricing
It will create affordable yet economically viable and profitable flights on regional routes so that flying becomes affordable to the common man even in small towns
Under it, airlines will have complete freedom to enter into code sharing with larger airlines for connectivity and they will be exempted from various airport charges
Airlines will have exclusive rights for three years to fly on a particular regional route. On these routes for regional flights Airfares will be capped at 2500 rupees for an hour’s flight

Q.Which of the following statements are is/are true regarding the UDAN?
i) UDAN is the Regional Connectivity scheme of the Government
of India, with the objective of "Let the common citizen of the
country fly"
ii) The first UDAN flight is from Shimla to Delhi.
Options:
a) i only
b) ii only
c) both I and ii
d) none
Ans:c

Q.1- UDAN scheme is related to which of the following?

A. Girl education
B. Tribal upliftment
C. Aviation sector
D. None

Answer: (c)

Q.Consider the following statements about the UDAN Scheme:

It aims to bring the TIER-2 and TIER-3 airports into the country’s aviation network
The scheme is based on market-based mechanism in which airlines bid for seat subsidies

Which of the above statements is/are correct?

[A] 1 Only
[B] 2 Only
[C] Both 1 & 2
[D] Neither 1 nor 2

Answer: [C] Both 1 & 2

Both are correct statements
The Union Civil Aviation Ministry has announced regional aviation routes and airlines after the first round of bidding under UDAN (Ude Desh ka Aam Naagrik) Scheme. It is an innovative scheme to develop the regional aviation market. It is a market-based mechanism in which airlines bid for seat subsidies. Under this scheme, half of the seats on the plane will be capped at Rs. 2,500 per hour’s flight. Government will subsidise the losses incurred by airlines flying to dormant airports by charging Rs. 2,500 per hour’s flight.