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From UDAN Scheme Faces Viability Challenges in Hyderabad

How will the UDAN scheme's viability issues in Hyderabad affect the Ministry of Civil Aviation?

Ministry of Civil Aviation plans policy adjustments to stabilize UDAN routes In response to the UDAN scheme's struggles, which include 14 out of 60 sanctioned sectors being non-operational, the Ministry of Civil Aviation is planning policy adjustments. The Ministry of State for Civil Aviation stated that the next phase of UDAN will introduce longer-duration Viability-Gap Funding (VGF) support with a tapered mechanism. Furthermore, state governments have been tasked with prioritizing high-potential aerodromes, and airlines must submit detailed business plans before new routes are awarded.

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The facts so far

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  • 14 of the 60 route sectors under UDAN are either non-operational or yet to commence in Hyderabad.indiatimes.com
  • Over ₹660 crore in VGF claims was disbursed between 2017-18 and 2025-26 for UDAN routes from Hyderabad.indiatimes.com
  • Passenger traffic on operational UDAN routes fell sharply to 0.96 lakh passengers in 2024-25.indiatimes.com
  • The next phase of UDAN will strengthen route sustainability through longer-duration VGF support with a tapered mechanism.indiatimes.com

Why it matters

The UDAN scheme is a flagship regional air-connectivity initiative by the Centre, and its viability is crucial for linking tier-2 and tier-3 cities. The Ministry of Civil Aviation is responsible for the scheme's success, and the current high failure rate—with one in four sanctioned sectors stalled—puts pressure on the Ministry to demonstrate effective governance and financial stewardship of the substantial VGF funds provided.

This situation reflects a broader challenge in regional air travel, where limited passenger demand and high operational costs make sustaining flights difficult. The Ministry's response, involving new mandates for state governments and airlines, signals a significant shift in how the government intends to manage and subsidize regional air connectivity moving forward.

What we don't know yet

  • Will the longer-duration VGF support be sufficient to overcome the current low passenger demand?
  • How will the Ministry enforce the requirement for airlines to submit detailed business plans before route awards?

What would change this answer

Airlines successfully demonstrate higher occupancy rates on existing routesThe Ministry may be able to reduce the scope or duration of VGF support, leading to cost savings.
State governments fail to prioritize high-potential aerodromes as mandatedThe Ministry may face increased scrutiny over the scheme's implementation and overall effectiveness.

Reporting

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The full eventUDAN Scheme Faces Viability Challenges in Hyderabad Everything aboutMinistry of Civil Aviation

Brind's analysis is written by AI from the reporting linked above and can be wrong. It explains possible effects; it is not investment advice.