UDAN That Didn’t Took-off

Roping in national air carriers and compromised runways are enough to kill the basic vision behind the idea of regional air connectivity scheme namely UDAN

By Asit Manohar

With an aim to provide air connectivity to the far flung and difficult terrain of India, the Ministry of Civil Aviation and Directorate General of Civil Aviation (DGCA), Government of India coined a regional air connectivity policy scheme (RCS) in 2007.  However, despite announcement of the policy, the idea remained a non-starter on account of various logistic, commercial and operational problems. When Narendra Modi led NDA government took the reins from the UPA government, they tweaked this regional air connectivity policy o 2007 to National Civil Aviation Policy (NCAP) in 2016. The NDA government introduced Viability Gap Funding (VGF) and the po9licy was renamed UDAN (Ude Desh Ka Aam Nagrik) and competitive e-bidding for allocation of VGF routes was sought. After, several postponements and delay, bidding for first phase of the RCS resulted in the award to five operators for 128 routes that could connect 22 airports. But, it is surprising to know that out of 128 routes, majority of the air routes were awarded to Air Odisha and Air Deccan, which have failed to take off operations.

Commenting upon the failure of first phase of UDAN, a major aviation player in India who was part of the bidding process in first phase of UDAN, said on condition of anonymity, “In the first round of UDAN, fares were capped at Rs 2,500 for an hour flight for specified number of RCS seats on each flight. Out of 128 routes awarded in this phase, only 40 percent of those have got operational till date as two air lines — Air Odisha and Air Deccan, which got 84 of these routes — are yet to start flying.” Big Boys SpiceJet and Alliance Air have started operations on the routes they were awarded. Since, the factual position would have sounded the death kneel to UDAN, national air carrier were roped in to participate in RCS that led to complete dilution of the basic policy of having smaller regional operators and subsidizing their operations.

In the second phase of bidding, 325 routes were awarded to 17 operators, namely SpiceJet (20), Indigo (20), Jet Airways (4), Pawan Hans etc. In fact, 70 percent (31 out of 56 cities) — will be served by helipads.

RN choubey, Civil Aviation Secretary has stated that to fund the scheme, the levy will not be increased, but funds will be diverted from the Airport Authority of India (AAI) dividend payable to the centre, to the regional connectivity fund. For 2017-18, AAI has contributed a sum of Rs 200 crore to the fund, and the civil aviation ministry expects to receive a sum of Rs 500 crore in the upcoming financial year, subject to approval from the finance ministry. The subsidy cost of the second phase of UDAN will be around Rs 620 crore, compared to first round that required Rs 213 crore. Now, it is ironic to see for 128 routes, the subsidy is Rs 213 crore while for 325 routes, it jumped to Rs 620 crores.

The Civil Aviation Ministry is promoting the ATR Turboprops resulting in indo-placing an order for 40 ATR 71 but unfortunately neither of these ATRs or the Q 400 Bombardiers owned by SpiceJet suitable for RCS as this scheme requires short take off short landing (STOL) 20 seater aircrafts.

Among major domestic carriers, IndiGo has bagged 20 proposals, SpiceJet got 17 while Jet Airways won 4 proposals. The second round of UDAN is expected to connect 43 airports and helipads in ‘priority sector’, which includes the north-east and hill states, the civil aviation ministry officials said. To achieve this goal, the government of India would spend Rs 620 crore in providing VGF as subsidy to airlines and helicopter operators for RCS flights.The government will have to foot and annual bill of Rs 6.6 crore just for the first sector under UDAN scheme on the Delhi-Shimla route. This is apart from the exemption rom airport charges, fuel and other taxes.

The expansion of the RCS as proposed in the union budget 2018, is unlikely to see a major shift of rail passengers to the aviation sector.

Pointing out that the seats subsidized by UDAN are just 40 per day, which will have negligible effect on other modes of transportation Amber Dubey, partner and India head of Aerospace and Defense, KPMG says, “What it will will do, however, is bringing an unconnected city on the national aviation grid. It will expand the market by bringing in tourists and businessmen who may not otherwise have travelled to the unconnected city.”

It is interesting to see that airports are far away from most cities and lack transit connectivity meaning passengers will be forced to pay for a taxi ride that could well be more than the air fair! For example, the Delhi-Shimla route, flagged by the Prime Minister Narendra Modi to launch the RCS, air fare is at Rs 2,037 while the passengers are paying around Rs 2000-2500 for cab service to reach city from the airport. It would be cheaper to take the train from Delhi, reaching Shimla directly at a fraction of the cost of the air and taxi travel combined. Apart from this, there is compromised runway length that can cause casualty to the air passengers flying to avail RCS. ATR the French aircraft manufacturer has addressed its concerns due to regulatory and safety restrictions of flying its aircrafts to airports which don’t have adequate runway length. Therefore, UDAN is an air connecting scheme which failed to take-off.