With a proposed outlay of ₹30,000 crore over ten years, ₹18,000 crore will be allocated for aerodrome infrastructure and ₹12,000 crore for Viability Gap Funding
Apart from enhancing regional connectivity, the proposed modified Ude Desh Ka Aam Nagrik (UDAN) scheme will focus on the long-term operational sustainability of developed aerodromes, sources told businessline.
The revamped framework, sources said, marked a strategic shift from starting flights to ensuring the survival of ground infrastructure, moving away from a model that previously left regional airstrips vulnerable once initial subsidies expired.
Three-Year Exclusivity Model
In previous iterations of the scheme, the primary focus remained on immediate accessibility, with the government providing a fixed three-year exclusivity period for airlines to establish routes.
However, once this initial window closed, many airports struggled to remain functional, as there was no dedicated provision for the high recurring costs of ground operations.
O&M Support Mechanism
To address the high gestation costs that affect new regional airports, the proposed modified UDAN scheme is expected to introduce a three-year Operations and Maintenance (O&M) support mechanism.
Accordingly, this support acts as a financial bridge, covering essential utilities, security, and staffing costs during the early years, when passenger traffic is typically too low to generate self-sustaining revenue.
Stabilising Airport Balance Sheets
The proposed scheme, sources said, intends to stabilise airport balance sheets to prevent the emergence of aerodromes that fall into disrepair due to a lack of operational funding.
Notably, the proposed outlay of Rs 30,000 crore for the upcoming scheme is designed to fund a ten-year roadmap for regional aviation.
Infra And VGF Split
Of this budget, Rs 18,000 crore is earmarked specifically for aerodrome infrastructure, while Rs 12,000 crore is allocated for Viability Gap Funding (VGF).
This dual-track investment aims to connect 120 new destinations and facilitate travel for 4 crore additional passengers, with an emphasis on hilly areas, the North-Eastern region, and aspirational districts.
Extended VGF Support
Regarding airline operations, sources said the modified scheme offers an extended runway for commercial viability by extending VGF support to the fourth and fifth years.
The policy, sources cited, recognises that regional routes often require more than the standard three years to mature.
Tapering Funding Model
Previously, Viability Gap Funding was capped at 3 years, which frequently led to flight suspensions when government support ended.
Besides, to discourage indefinite dependence on state aid, the new funding will follow a strict tapering schedule, reducing from 75 per cent in the third year to 25 per cent by the fifth year.
Challenge Mode Selection
This structure is intended to incentivise operators to build a genuine local market and transition to a commercial model.
Furthermore, the selection of new sites will be conducted through a “Challenge Mode” framework.
In this system, aerodromes are prioritised based on a scoring matrix that evaluates infrastructure readiness, development potential, and the financial commitments made by state governments.
Published on March 4, 2026