The Centre unveiled a regional connectivity scheme, known as UDAN (Ude Desh ka Aam Nagrik), with flights priced at Rs.2,500 for one hour of flying time to and from regional airports, but raised the subsidy amount to be paid to regional airlines from the level proposed in a draft scheme.
Even as the government said the first flight from smaller cities under the scheme should take off by January, it remained tight-lipped on the amount of levy to be imposed on flyers on regular routes to fund the subsidy. The government will provide subsidies to regional airlines to offer half the seats on a discounted rate.
Airports ready
“Hawai chappal wale ko bhi hawai jahaz mein hume bithana hai (We want to ensure that even those who wear slippers get to travel by air). We want the regional aviation market to flourish in the country,” Minister of State Civil Aviation Jayant Sinha said, adding that 16 airports are ready to fly under the regional connectivity scheme from January.
On the day of its launch, airlines expressed concerns on the modalities of the Centre’s regional connectivity scheme, with SpiceJet chief Ajay Singh pointing out that concessions need to be extended to large airports to which flights will be connected from regional airports.
“It is unclear if the concessions will be provided at both small and large airports. A clarification on whether concessions on small airports will be given on the larger airports is required as it will impact the economic viability of the entire project,” Mr. Singh said, who was also present at the launch event. He also said slot availability at large airports will be another issue and opposed the three years of exclusive flying rights offered to operators in the scheme.
Slew of sops
Under the scheme, airlines will be offered a slew of sops at smaller airports such as waiver of landing and parking charges. “Extending the airports benefits for flights operating from small to major airports under the scheme is under active consideration of the government. We are inclined to do that but it has to undergo a legal process,” Civil Aviation Secretary R. N. Choubey said. He said the government will notify the levy amount to be charged to finance the regional connectivity fund by October 31.
Most domestic airlines have threatened to move court opposing the levy. Mr. Singh opined that government needs to fund such schemes from its own budget instead of “imposing more tax on consumers.” “For example when you build a railway station, you don’t start penalising the passengers for that,” he said.
“Unfortunately, we are unable to agree with airlines on this. The levy will be taken from one set of passengers and will be passed on to another set of passengers. So, the money remains in the civil aviation sector,” he said.
In a bid to woo the regional carriers, the subsidy amount has been increased from the draft scheme released earlier this year. Airlines will now get subsidy in the range of Rs.2,350-Rs.5,100 per seat for three years.
Bidding mechanism
Regional airlines can ask for subsidies for flying a distance of at least 150 km by submitting a proposal to operate on a particular route to the government. After scrutiny of the initial proposal, government will invite counter proposals within a window of two weeks.
Airlines quoting the lowest viability gap funding amount will win the bid, through a reverse bidding mechanism. The successful bidder would then have exclusive rights to operate the route for a period of three years. The airline will have to provide a minimum of nine and maximum of 40 seats at the fare of Rs.2,500 for an hour’s flight.
The bidding process will begin in January following which routes will be awarded immediately, Mr. Choubey said. The bidding process will take place twice in a year, he said.
