The Central Government of India has announced the final Regional Connectivity Scheme (RCS) under which the fares are capped at Rs 2500 for half of the seats in one-hour flights. The scheme, called UDAN or 'Ude Desh Ka Aam Naagrik', aims to provide connectivity to un-served and under-served regional airports for the common man at affordable prices.
The subsidised fares will be funded through a levy or fee on departure flights on major routes. The scheme will be based on market mechanism as well as bidding for a minimum of 50 per cent seats in the participating airline's flight and the rest would market-based pricing. Bidding of the seats will be conducted through a reverse auction basis, meaning, the airline quoting the lowest subsidy will be allowed to fly. Helicopter services will be part of the scheme too. Civil Aviation Secretary Rajiv Nayan Choubey said, "The successful bidder would have exclusive rights to operate the route for a period of three years. The support would be withdrawn after that as the route is expected to become self-sufficient by then."
UDAN caps the fare for a one-hour journey of approximately 500 km, on a fixed wing aircraft or a 30-minute journey on a helicopter at a price of Rs 2500, with proportionate pricing for routes of various lengths and flight durations. Minimum frequency of flights on each RCS route would be 3, maximum of 7 in a week. Choubety said that the interested entities can submitted their proposals to be part of the scheme from today. The government also plans to spend over Rs 4000 Crore rupees on upgrading 50 unserved and underserved airports to support the scheme and boost regional air connectivity.
Airline operators flying under the scheme will have to provide half the seats of the flight-minimum of nine and maximum of 40. The remaining seats can be sold at market prices. While the viability support is being offered for three years, the tenure of the scheme is 10 years. The Centre will support the project by keeping the rate of excise duty levied on jet fuel bought from regional airports at just 2 per cent. It will also give a service tax exemption on 90 per cent of the taxable value of tickets of flights for one year.
"Airlines support is very crucial for the scheme. We can have non-functional airports but not non-functional airlines. We are cautiously optimistic about the scheme," said Civil Aviation Minister Ashok Gajapathi Raju.
