Wednesday, October 26, 2016

Let UDAN spread its wings

With about 400 ghost airports having been built at huge costs and several others being underserved by airlines, India always required an out-of-box idea to connect smaller cities with a sizeable population to the large cities via aerial route. While Indian Railways has a good network within the country’s smaller cities, it suffers from capacity constraint with the result that people in cities like Davanagere, Chikkamagaluru, Kanpur, Vadodara or Visakhapatnam do not get any decent transport at a reasonable price. Surely, the Railways needs to raise capacity but what about the existing infrastructure built for the airlines but left unused for lack of viability? It is in this backdrop that the Union government has unveiled its first flight under the UDAN (Ude Desh Ka Aam Naagrik) scheme to begin operation in January, 2017. The fare for at least half of the capacity of the airlines opting under the scheme on a 200-800 km distance will be capped at Rs 2,500 apiece. So far so good.

The trouble is, who foots the bill for filling the viability gap for the airlines. In the existing scheme of things for the operators, running smaller aircraft works out to be more expensive in terms of average passenger cost than the big planes. Besides, thanks to the neglect of smaller cities as hinterland, the operators do not even have adequate number of small aircraft. Under the UDAN scheme, the viability gap would be filled by subsidies to be coughed up by the Centre, states and the airlines. As things stand, a maximum of the subsidy is expected from the states while the operators have started murmuring about a levy on long-haul domestic flights for funding the short duration flights. No wonder, Civil Aviation Minister Ashok Gajapathi Raju sounded “cautiously optimistic” about UDAN.
26/10/16 Deccan Herald