The Bharatiya Janata Party (BJP), which had promised in its election manifesto that it would work towards regional connectivity, has almost fulfilled that. The BJP-led National Democratic Alliance (NDA) government has taken a huge step in boosting regional connectivity through its Regional Connectivity Scheme (RCS) by awarding 128 regional routes to five airlines — Alliance Air, SpiceJet, Turbo Megha Airways (TruJet), Air Odisha and Air Deccan (Deccan Charters). Alliance Air is a subsidiary of state-owned Air India, and Ajay Singh-owned SpiceJet is a low-cost carrier; while TruJet is a regional airline and Air Odisha and Deccan Charters are charter operators.

The NDA government’s lofty initiative ‘Ude Desh ka Aam Naagrik’ (UDAN) has been rolled out. The government unveiled the list of successful bidders and routes under the UDAN scheme which will make flying accessible and affordable to the common man. Commenting on the first round of RCS, Civil Aviation Minister P. Ashok Gajapathi Raju said, “The geographical spread of the airports covered is interesting.”

1.3 Million Seats Created

“This is a unique scheme, which is completely market-driven,” Jayant Sinha, Minister of State for Civil Aviation, said. “Through a corpus of only Rs. 205 crore, we will create around 1.3 million seats, which will kick-start the underdeveloped regional aviation market.”

Jayant Sinha said that the decision to award routes to the airlines was taken only after they gave bank guarantees for the routes. In the first round of RCS, Alliance Air has got 15 routes, which will see it touch five unserved and two underserved airports. Air Deccan has been awarded 34 routes, 10 at unserved airports and five at underserved airports. Air Odisha has won 50 routes. As many as 70 airports, including 31 unserved and 12 underserved ones, would be connected with the UDAN flights. The carriers will operate 19- to 78-seater aircraft.

These flights would connect airports spread across over 20 states and union territories including Punjab, Uttar Pradesh, Madhya Pradesh, Maharashtra, Andhra Pradesh, Gujarat, Himachal Pradesh, Karnataka, Tamil Nadu, Telangana and Puducherry. The airports that would be connected under UDAN include Bhatinda, Shimla, Bilaspur, Neyveli, Cooch Behar, Nanded and Kadapa.

Civil Aviation Secretary Rajiv Nayan Choubey said that UDAN would leapfrog India’s aviation sector. “From a rate of one airport annually, we have leapfrogged to connecting 33 airports in a single year,” Choubey said, adding the routes have a uniform spread across the country.

The process saw intensive bidding for prime routes. For instance, SpiceJet outbid Alliance Air for the Delhi-Kanpur route, which Air India was operating till today. “It is a great day for Indian aviation,” said Amber Dubey, India head of aerospace & defence at global consultancy KPMG. “This will give a huge fillip to investments, tourism and job creation in the interiors of India. Good to see that the RCS routes are spread out across all corners of the country. Operators should try and synchronise their schedules and enter into code-share agreements with larger carriers.”

THE GOVERNMENT IS LOOKING TO CREATE AN RCF OF Rs. 500 CRORE FOR VIABILITY GAP FUNDING OF 12 MONTHS AND ANY SHORTFALL WOULD BE MET BY AAI, WHICH WOULD BE LATER RECOVERED THROUGH A LEVY

Flights under the RCS scheme could take off as early as April 2017 with both Alliance Air and Air Deccan indicating that they plan to launch services between Shimla and Delhi in April. Deccan Charters plans to operate Durgapur-Kolkata and Rourkela-Kolkata flights from July this year and launch flights linking Kullu to Delhi and Pantnagar to Dehradun in August. Air Odisha plans to link Bhavnagar to Ahmedabad and Diu to Ahmedabad in August, followed by flights between Kadapa and Bengaluru, Kadapa and Chennai, Rourkela and Bhubaneswar and Puducherry and Chennai among others. As a result, there will soon be Salem-Chennai, Kadapa-Chennai, Nanded-Hyderabad and Puducherry-Salem flights on which at least half the passengers will be able to fly at fares of under Rs. 2,500.

Ajay Singh, Chief Executive Officer of SpiceJet, said that the airline will induct three aircraft to participate in the RCS. SpiceJet’s plans include Puducherry-Hyderabad, Porbandar-Mumbai, Adampur-Delhi and Kandla-Mumbai services from August.

MoU with 16 State Governments

The Ministry of Civil Aviation (MoCA) had launched the RCS-UDAN on October 21, 2016, and had immediately commenced the e-bidding process to select airline operators for mounting RCS operations. The airfare cap under RCS-UDAN for fixedwing aircraft ranges from Rs. 1,420 for 151 kilometres to Rs. 3,500 for above 800 kilometres. The Ministry has signed a memorandum of understanding (MoU) on RCS-UDAN with 16 state governments/union territories to provide concessions as mentioned in the RCS.

The UDAN scheme offers 50 per cent subsidy to airlines on these routes, route monopoly for three years and a host of other concessions at landing airports. It expects the airlines to cap fares at Rs. 2,500 a seat an hour rate on regional flights.

The scheme that would be funded through the Regional Connectivity Fund (RCF) created from levy of Rs. 7,500 and Rs. 8,500 charged to the airlines on a per-flight basis, could see unserved airports like Jaisalmer, Bikaner, Jalgaon, Akola, Kunj Vihar and others being connected through scheduled flights. To make it commercially viable for airlines to operate flights to these airports at fares capped at Rs. 2,500 for onehour flight, the government has committed to cover any shortfall in operational cost through Viability Gap Funding (VGF) and has also offered a three-year exclusivity to airlines on the RCS routes. Besides these, it will also offer concessions on other services and tax relief on aviation turbine fuel (ATF) at underserved and unserved airports.

“As far as funding for UDAN is concerned, there are efficient ways of funding it. The proposal we have in front of levy to the airlines is the most efficient and least-cost way of funding, but if that poses challenges, then we have other mechanism too that we can use,” said the Minister. He said that his Ministry along with the Airports Authority of India (AAI) was behind UDAN and subsidies. “Those airlines that will be participating in UDAN can be sure that they will get the subsidies by way of VGF.” He said 15 states had already inked MoU with the Ministry for partnering in the RCS and another three will soon come on board.

The government is looking to create an RCF of Rs. 500 crore for VGF of 12 months and any shortfall would be met by AAI, which would be later recovered through a levy.

On the tussle with mainline carriers over levying regional connectivity charges, the Minister said: “We are very close to a solution over this matter. We had multiple rounds of discussions with the airlines and the issue will be resolved soon.” The Federation of Indian Airlines, which consists of IndiGo, SpiceJet, Jet Airways and GoAir, and has around 80 per cent market share, had moved the court contesting that the government had no authority to impose a levy in the nature of tax on air services. Major airlines opposing the government’s move had put a question on VGF.

Prime Minister launches UDAN — from Shimla

Prime Minister Narendra Modi flagg ing-off the first UDAN flight by alliance air (a subsidiary of Air India) from Shimla, on April 27, 2017. The Union Minister for Civil Aviation P. Ashok Gajapa thi Raju, the Chief Minister of Himachal Pradesh Virbhadra Singh and the Secretary, Ministry of Civil Aviation, R.N. Choubey are also seen.

Prime Minister Narendra Modi launched UDAN — the Regional Connectivity Scheme (RCS) for civil aviation — from Shimla Airport on April 27, 2017. Under this scheme, flights have begun from Shimla, Nanded and Kadapa airports.

The Prime Minister addressed the gathering at Shimla Airport, and also at Nanded and Kadapa via video link.

He said the lives of the middle class are being transformed, and their aspirations are rising. He said that given the right chance, they can do wonders. He added that the aviation sector in India is filled with opportunity. Mentioning the scheme name ‘Ude Desh ka Aam Naagrik’ (UDAN) — he said that aviation was once considered the domain of a select few, but that has changed now. He said the new civil aviation policy marks an opportunity to cater to the aspirations of the people of India. He said Tier-II and Tier-III cities are becoming growth engines, and enhanced aviation connectivity between them will be beneficial. He said the UDAN scheme will help the tourism sector in Himachal Pradesh.

The Ministry of Civil Aviation (MoCA) is committed to providing air connectivity to currently underserved and unserved airports. To make air travel accessible to citizens in regionally important cities, the Ministry launched UDAN RCS in October 2016. The UDAN scheme was developed through extensive consideration of various issues and consultations with stakeholders. This is a first-of-its-kind scheme globally to stimulate regional connectivity through a market-based mechanism.

The UDAN scheme is a key component of the National Civil Aviation Policy (NCAP) which was released by the MoCA on June 15, 2016. The Airports Authority of India (AAI) followed a transparent bidding process by inviting interested bidders and airline operators to submit their initial proposals under the provisions of RCS and subsequently inviting counter proposals against such initial proposals. The routes and networks are awarded to bidders who submitted valid proposals and quoted the lowest Viability Gap Funding (VGF) from the government for such routes and networks.

The UDAN scheme is a key component of the National Civil Aviation Policy (NCAP) which was released by the MoCA on June 15, 2016. The Airports Authority of India (AAI) followed a transparent bidding process by inviting interested bidders and airline operators to submit their initial proposals under the provisions of RCS and subsequently inviting counter proposals against such initial proposals. The routes and networks are awarded to bidders who submitted valid proposals and quoted the lowest Viability Gap Funding (VGF) from the government for such routes and networks.

• Airports to be connected: 27 currently served airports, 12 currently underserved airports and 31 currently unserved airports (for a total of 70 airports) will be connected through these 27 proposals.
• Geographical spread: There is a good geographical spread in the proposals: 24 airports in the western, 17 in north, 11 in south, 12 in east and 6 in north-eastern regions are proposed to be connected. 22 states and 2 union territories will be connected through these 27 proposals.
• Routes and network: 16 awarded proposals are for single routes (connecting two cities) and 11 are for networks (connecting three or more cities). Six proposals have been bid with zero Viability Gap Funding (VGF) reflecting the fact that there is potential latent demand.
• Routes and network: 16 awarded proposals are for single routes (connecting two cities) and 11 are for networks (connecting three or more cities). Six proposals have been bid with zero Viability Gap Funding (VGF) reflecting the fact that there is potential latent demand.

The airfare for a one-hour journey of approximately 500 km on a fixed-wing aircraft or for a 30 minute journey on a helicopter would be capped at Rs. 2,500, with proportionate pricing for routes of different stage lengths and flight duration. The selected airline operator would have to provide 50 per cent of the flight capacity (subject to a minimum of nine and a maximum of 40) as RCS seats for operationsthrough fixed wing aircraft and a minimum of five and a maximum of 13 RCS seats on the RCS flights for operations through helicopters and would be given a three years exclusivity of operations. To reduce the cost of operations of airlines on flying such routes, a financial stimulus in the form of concessions from Central and State government, airport operators and the VGF to the interested airlines would be provided to kick-off operations from such airports, so that the passenger fares are kept affordable. State government will provide a certain share of VGF (20 per cent for States other than north-east states where the ratio will be 10 per cent of VGF determined). In this regard, till now 19 states and three UTs have signed MoU whereas five more states have given consent to sign MoU.