Budget 2023: Centre proposes to raise allocation for regional air connectivity

The Centre on February 1 proposed to increase the budgetary allocation for its regional air connectivity scheme in FY24.

In the budget for the next financial year, Finance Minister Nirmala Sitharaman earmarked Rs. 1,244.07 crore for the scheme, up from Rs 600.71 crore (BE FY23) and a revised estimate of Rs 1,078.81 crore.

UDAN, which is an acronym for the scheme called Ude Desh ka Aam Naagrik, is a regional airport development program under the Centre’s regional connectivity scheme, aimed at refurbishing under-served airports to make air travel affordable.

“The proposal is for revival of 22 airports and for commencement of 100 RCS (Regional Connectivity Scheme) routes…(and) Viability Gap Funding for North East Connectivity,” said the notes on demands for grants.

In recent years, the Centre has been improving regional air connectivity through UDAN, which focuses on linking Tier-2 and Tier-3 cities.

The scheme provides viability gap funding, a form of financial support, to airlines that have been selected via a bidding process to operate flights on under-served or unserved routes.

In her budget presentation to Parliament, Sitharaman said: “Fifty additional airports, heliports, water aerodromes and advance landing grounds will be revived for improving regional air connectivity.”

Track record

The scheme was launched in October 2016 as part of the National Civil Aviation Policy unveiled that year. The first UDAN flight took place in April 2017, connecting Delhi with Shimla.

Notably, the Centre has set a target to operationalise 1,000 UDAN routes during the currency of the scheme and to revive or develop 100 unserved and underserved airports or heliports or water aerodromes by 2024.

As of November 2022, flights on 453 routes had commenced under the scheme. This led to the operationalising of 70 airports including two water aerodromes and nine heliports.

More than 215,000 UDAN flights had operated and over 10 million passengers availed of the flights until November 2022.

The Economic Survey 2023, which was tabled in Parliament on January 31, said the UDAN scheme had considerably enhanced regional connectivity through the opening of airports in India’s hinterland.

Under this scheme, the government has approved a budget of Rs 4,500 crore for the revival of existing unserved or underserved airports or airstrips of state governments, the Airports Authority of India (AAI), public sector undertakings and civilian enclaves.

The government has also accorded ‘in-principle’ approval for the setting up of 21 greenfield airports across the country.

“More than one crore air passengers have availed themselves of the benefit of the UDAN scheme since its inception,” the survey said.

“The scheme focuses on the connectivity between the Tier-2 and 3 cities in the country and the number of beneficiaries will increase manifold as the connectivity improves between unserved and underserved airports.”

Civil aviation

On an overall basis, the Ministry of Civil Aviation has been allocated Rs 3,113.36 crore in FY24 against a budget estimate in FY23 of Rs 10,667 crore and revised estimate of Rs 9,363.70 crore.

According to the budget document, out of the total allocation, Rs 1,144.49 crore has been earmarked for AI Asset Holdings Ltd for servicing loans transferred to the special purpose vehicle (SPV) for the financial restructuring of Air India.

An amount of Rs 130 crore has also been set aside for the medical benefits of retired Air India employees.

In addition, under Internal and Extra Budgetary Resources (IEBR), the Centre has allowed the Airports Authority of India to raise Rs 3,448.21 crore.

IEBR includes resources raised by public sector units through profits, loans and equity.

The FY24 IEBR is lower than FY23 budget estimate of Rs 4,574 crore and revised estimate of Rs 4,191.63 crore.