Regional air connectivity UDAN sees lower allocation in Interim Budget 2024-25

Total proposed outlay to the Ministry of Civil Aviation

The interim budget has proposed to decrease the budgetary allocation for the government's regional air connectivity scheme in 2024-25.

Finance Minister Nirmala Sitharaman in her budget speech on February 1 did not mention the total outlay for the civil aviation ministry, but the capex allocation reflected in the budget documents that were released after her speech.

In the budget for the next financial year, the government has earmarked Rs 502 crore for the scheme, up from Rs 1,244.07 crore (BE FY24) and a revised estimate of Rs 850 crore.

UDAN, or the Ude Desh ka Aam Naagrik scheme, is a regional airport development programme under the Centre’s regional connectivity mission, is aimed at refurbishing under-served airports to make air travel affordable.

“The proposal is for revival of 22 airports and for commencement of 124 RCS (Regional Connectivity Scheme) routes…(and) Viability Gap Funding for North East connectivity,” she said.

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

Even though the budget speech itself didn’t mention a broad allocation towards the sector, the government earmarked Rs 11.1 lakh crore as capital expenditure for the next fiscal year.

This is a rise of 11.1 percent when compared to 2023-24 budget estimate of Rs 10 lakh crore.

The finance minister said that the Indian aviation sector has been galvanised in the last 10 years and the number of airports in the country has shot up to 149.

On an overall basis, the Ministry of Civil Aviation has been allocated Rs 2,300 crore in FY25 against a budget estimate in FY24 of Rs 3,113.36 crore and a revised estimate of Rs 2,922.12 crore.

According to the interim budget document, out of the total allocation, Rs 1,158.79 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  1,144.49 crore had been allocated for the same in 2023-24 and a revised allocation of Rs 713.92 crore.

A sum of Rs 85 crore has also been set aside for the medical benefits of retired Air India employees, falling from Rs 130 crore allocated in the budget last year, but higher than the revised estimate of Rs 51 crore.

In addition, under Internal and Extra Budgetary Resources (IEBR), the Centre has allowed the Airports Authority of India to raise Rs 3,448.14 crore, slightly lower than the Rs 3,448.21 crore allocated last year, but higher than the revised estimate of Rs 3,427.70 crore.

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

The FY25 IEBR is lower than the FY23 budget estimate of Rs 4,574 crore and actual spending of Rs 4,441.50 crore.