Udan 5.0: Civil Aviation ministry releases bid document

The Ministry further said the Viability Gap Funding has been revised. Viability Gap Funding is increased to 600 km from 500 km earlier. (Representative Image)

The Union Government has begun the fifth phase of the Regional Connectivity Scheme (RCS)-UDAN (Ude Desh Ka Aam Nagrik) to improve connectivity to the country's regional territories. On April 21, the Ministry of Civil Aviation (MoCA) initiated the process of inviting bids from airlines for various routes under the fifth round of bidding for its regional connectivity scheme UDAN by releasing a bid document.

Funding has been made available for Category 2 and Category 3 aircrafts in the scheme's fifth phase, known as UDAN 5.0. According to a tweet from the Ministry of Civil Aviation, only aircraft operations of Category 2 (20–80 seats) and Category 3 (>80 seats) will fall in this round with no restriction on the distance between the origin and destination, with stage length cap of 600 km waived.

UDAN 5.0 is officially out with game changing features! Category 2 (20–80 seats) and category 3 (>80 seats) aircraft operations will fall under this version of the scheme. (1/3) pic.twitter.com/lzpLZzPb2d

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— MoCA_GoI (@MoCA_GoI) April 21, 2023

The Ministry further said the Viability Gap Funding has been revised. Viability Gap Funding is increased to 600 km from 500 km earlier.

The UDAN scheme is funded through a Rs 50 levy on flight tickets on major routes. The levy accounts for 80 percent of the viability gap funding provided to the airlines, with the remaining 20 per cent provided by State governments.

Under the scheme, airlines are offered viability gap funding for 50 per cent of the seats on a flight and fares for those seats are capped by the government.

Other key features of UDAN 5.0 are:

- No predetermined routes would be offered. Only Network and Individual Route Proposal proposed by airlines will be considered.

- The airlines would be required to submit an action/business plan after 2 months from the issuance of LoA wherein they submit their aircraft acquisition plan/availability of aircraft, crew, slots, etc. at the time of the Technical Proposal.

- The same route will not be awarded to a single airline more than once, whether in different networks or in the same network.

- Exclusivity will be withdrawn if the average quarterly PLF is higher than 75% for four continuous quarters, to prevent exploitation of the monopoly on a route.

- 25% of the Performance Guarantee to be encashed for each month of delay up to 4 months, to further incentivize quick operationalization.

- Airlines would be required to commence operations within 4 months of the award of the route. Earlier this deadline was 6 months.

- A list of airports that are ready for operation or would soon be ready for operations has been included in the scheme to facilitate quicker operationalization of routes under the Scheme.

- Novation process for routes from one operator to another is simplified and incentivized.

Commenting on the launch of UDAN 5.0, Civil Aviation minister Jyotiraditya Scinda said, “UDAN has proved to be a lifeblood of many regions which are now well connected with places across the country. This new & stronger version of the scheme will raise the momentum, connecting new routes, and bring us closer to the target of operationalizing 1000 routes & 50 additional airports, heliports, and water aerodromes in the near future."

What was Udan 4.0

The last round (Udan 4.0) of the Regional Connectivity Scheme was in August 2020 when 78 routes were awarded, about 40 from the northeast region. The Airports Authority of India (AAI) listed 50 airports (including heliports) and 268 routes under operation as part of the ambitious scheme.

After the launch of the fourth phase, 766 routes were sanctioned under the scheme. 29 served, 08 unserved (including 02 heliports and 01 water aerodrome), and 02 underserved airports were included in the list for approved routes.

What is UDAN scheme?

The goal of UDAN scheme is to connect small and medium-sized cities with major cities via air service. UDAN was aimed to meet the common citizen's desire of flying. Airlines compete for air routes and participate in bids. The contract is granted to an airline that bids for the lowest subsidy. The plan was to place small-town India on the map of aviation by encouraging airlines to fly on regional routes.

Compensation for business losses

The fundamental goal of RCS is to make regional air connections more economical. RCS is to promote the affordability of regional air connectivity by assisting airline carriers through concessions from the Central and State Governments. It also aims to minimise the cost of regional airline operations.

The government compensates airlines for losses caused by low fares through Viability Gap Funding (VGF). The airport fee has also been waived by the Airports Authority of India. At the same time, state governments provide free security, electricity, and firefighting services.

When did UDAAN begin?

The Union Government released the country's National Civil Aviation Policy for the first time in 2016, and the UDAN Scheme was the most essential component of this Policy. Prime Minister Narendra Modi launched the first aircraft from Shimla to Delhi under the UDAN scheme in April 2017.