Tuesday, October 25, 2016

UDAN: A case of misplaced priorities in NDA’s aviation policy

Jayant Sinha, minister of state for civil aviation, in an interview to Business Standard explained the Narendra Modi government’s intent in crafting a new regional connectivity scheme in Indian aviation.
The scheme, which has been given the acronym Udan, hopes to increase air traffic to smaller airports that are sporadically served or not served at all. The scheme rests on a set of interlocking subsidies.
Subsidizing air travel to remote regions is not unusual. US, U.K and China subsidize such travel though their preferred option is provide a direct subsidy.
India also subsidizes regional connectivity where the subsidy costs are borne by passengers flying high traffic density routes. Since 1994, airlines have had operate on regional routes based on a formula. The formula mandates a minimum number of trips on unviable regional routes, where this number is linked to the flights on routes with high traffic.
While a subsidy model to enhance regional connectivity is not out of place, to simultaneously operate two separate subsidy models to push regional connectivity seems ill-conceived.
24/10/16 Sanjiv Shankaran/The Times Of India