Prime Minister Narendra Modi today kickstarted cheap flights for small town flyers by inaugurating the Shimla-Delhi flight from a long defunct Jubbarhatti airport on the outskirts of the capital of Himachal Pradesh.
"This is the first UDAN flight under Regional Connectivity Scheme(RCS) on Shimla-Delhi sector. Air travel is now not just for the rich, I want air travel to be for all," Modi said.
The Prime Minister, with a penchant for acronyms for his all schemes, has coined UDAN, literally meaning flight, which is the short form of "Ude Deshka Aam Nagarik" that is "the common man flies."
"It was my dream to see that a person who walks in a hawai chappal (slippers) can also fly in a hawai jahaz (aircraft)," Modi told the gathering after flagging off the flight. "The lives of the middle class are being transformed, their aspirations are increasing and given the right chance they can do wonders. Earlier flying was considered to be the domain of a select few but it has changed now. Tier-2 and Tier-3 cities are becoming growth engines. If connectivity is enhanced in these places, it will boost growth," he said.
A typical UDAN airfare for a one-hour trip of approximately 500 km on an aircraft, or for a 30-minute journey on a helicopter, is capped at Rs 2500, with proportionate pricing for routes of different lengths and durations. Shimla-Delhi flight operates five times a week and the fare is Rs 1920 only.
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 in an aircraft and a minimum of five and a maximum of 13 RCS seats in a helicopter.
The rock bottom fare is a key feature of the UDAN policy; the government has sought to make the operations viable for the operators by floating Viability Gap Funding (VGF), besides providing financial stimulus in the form of concessions from Central and State governments. The State Government will provide 20 per cent of the VGF and the North East states will pool in only 10 per cent. The total VGF outflow has been pegged at INR200 crore.
To encourage investment in the RCS sector, the Government last year threw open the regional connectivity sector for 100 per cent FDI under its National Civil Aviation Policy compared to an earlier 49 per cent on the automatic route.
The Airports Authority of India (AAI) has earmarked 27 proposals under UDAN. Out of 70 airports under consideration, 27 are currently served, 12 are underserved and 31 are unserved. Of these, 24 airports are in the in the western India, 17 in north, 11 in south, 12 in east and 6 in the North East.
The Government is keen on modernisation of the abandoned airports to help ease the pressure on the existing airports. In the brownfield airport projects, 100 per cent FDI under automatic route has been allowed.
This move is expected to boost the domestic aviation infrastructure. The FDI limit for Scheduled Air Transport Service, Domestic Scheduled Passenger Airline and regional Air Transport Service has been raised from 49 to 100 per cent, with FDI up to 49 per cent permitted under automatic route and FDI beyond this through Government approval.
For Non-Resident Indians (NRIs), 100 per cent FDI will continue to be allowed under automatic route. However, foreign airlines would continue to be allowed to invest in capital of Indian companies operating scheduled and non-scheduled air transport services up to the limit of 49 per cent of their paid up capital and subject to the laid down conditions in the existing policy.
Increasing the FDI limit for these aviation services will not only encourage competition by lowering prices but shall also accord choice to consumers – something which has been resented by the domestic operators who fear foreign operators with deep pockets will drive them out of business.