UDAN scheme takes off; fares capped at Rs 2,500 for 1-hr flight

The cap on fares would be reviewed periodically based on Consumer Price Index for Industrial Workers and would also vary in tune with duration of a flight under the Regional Connectivity Scheme (RCS), which has been named 'UDAN'. 

A ‘first of its kind’ in the world, UDAN (Ude Desh Ka Aam Naagrik) will be based on market mechanism as well as bidding for a minimum of 50 per cent seats in the participating airline's flight and the rest would be market-based pricing. Under the scheme, mainly aimed at connecting unserved and under-served airports, airfares would be capped at Rs 2,500 for half of the seats in flights travelling 476 -500 kilometre. This translates to around a one-hour journey.

As per the government, a participating carrier – which would be extended Viability Gap Funding (VGF) - has to bid for at least 9 seats and a maximum of 40 seats. In the case of a helicopter, the operator has to bid for a minimum of 5 seats and a maximum of 13 seats. The limit of RCS airfare would vary from Rs 1,420 to Rs 3,500 for fixed-wing aircraft. For helicopters, half-an-hour ride under the scheme would cost Rs 2,500 and for over one- hour duration, the cap would be Rs 5,000.

However, the government's move to impose a ‘very small’ levy on every departure on major routes to fund the scheme seems to have not gone down well with many of the existing airlines as they feel that such a move could push the airfares higher and are of the view that there are other ways for funding the scheme. The exact quantum of levy to be imposed would be decided in the coming days. 

Helicopter services too can be part of the scheme. The government expects the first flight under this scheme to take off in January. Charging a levy on profitable routes is likely to push the airfare for fliers.