Representational file image
| Photo Credit: B. Velankanni Raj
The government has cleared an expanded version of its flagship aviation connectivity programme, the UDAN scheme, with a total outlay of ₹28,840 crore, marking a nearly six-fold increase over the earlier allocation. The revamped scheme goes beyond airport redevelopment to include sustained support for operations and maintenance.
In a significant policy shift, the Union government has extended the subsidy period for airlines on select Tier-2 and Tier-3 routes under the UDAN scheme from three to five years, after a large share of those routes fell into disuse. The subsidy will also shift from a levy embedded in airfares to direct funding from the exchequer.
On Wednesday (March 25, 2026), the Union Cabinet approved the modified UDAN scheme with a total outlay of ₹28,840 crore, of which ₹10,043 crore is set aside for a subsidy to support airlines flying on regional routes over the next 10 years. A government official explained that airlines would receive subsidy support for specific routes for five years at a stretch.
Under the earlier scheme design, these subsidies were not funded by the exchequer but through a Regional Connectivity Scheme (RCS) levy built into airfares on non-UDAN routes.
Viability concerns
Subsidies were also capped at three years to push airlines towards self-sustaining routes. However, a Comptroller and Auditor General (CAG) report found that only 7% to 10% of these routes had remained viable beyond the subsidy period. As of February 2026, of the 663 routes launched under the UDAN scheme since 2017, 327 routes had been discontinued, according to data recently presented in Parliament by Minister of State for Civil Aviation Muralidhar Mohol. The data showed that 15 of the 95 airports revived under the scheme have also fallen into disuse.
At its core, the scheme relies on a bidding mechanism under which airlines compete for routes connecting smaller cities, with viability gap funding or subsidy awarded to winning airlines from the RCS levy, equivalent to 50% of the seating capacity on their aircraft. In return, airlines sell 50% of their seats on the awarded routes at a flat rate of ₹2,500 per hour of flight, in order to make air travel on these routes affordable.
Six-fold hike in funding
The ₹28,840 crore outlay marks a nearly six-fold jump in funding for UDAN. At its launch in 2017, the government had earmarked ₹4,500 crore over 10 years, primarily to revive unused airports.
Under the modified UDAN announced on Wednesday, 100 airports will be redeveloped from unused airstrips, with an outlay of ₹12,159 crore over eight years, aimed at expanding the regional aviation network.
The revised scheme, however, goes beyond infrastructure development to also support airport operations and maintenance at low traffic airports, capped at ₹3.06 crore per airport and ₹90 lakh per heliport or water aerodrome, with a total estimated cost of ₹2,577 crore covering around 441 aerodromes.
In a push to improve last-mile connectivity, particularly in remote and difficult terrains, the scheme also proposes to develop 200 helipads, each costing ₹15 crore, translating into a total investment of ₹3,661 crore.
To support aircraft purchases, the scheme also proposes to procure two HAL Dhruv helicopters for Pawan Hans and two HAL Dornier aircraft for Alliance Air.
Published – March 25, 2026 05:00 pm IST
