11/07/2020 - Government Polices

KEY POINTS

·         The UDAN scheme is a supply-side focused initiative, and entices airlines to fly underserved routes, through economic incentives. These include a reduction of charges and also cash subsidies for a portion of seats on the aircraft. The cash is generated from levies on passengers flying on core routes, mostly between metro cities.

·         The only caveat is that, in exchange for this cash, the airfares on these routes have to be capped at pre-determined levels. And, the cash-subsidy is only valid for three years, after which the route is assumed to have gained enough traction.

·         The subsidy burden on the government, if all UDAN route flights operate as planned, is estimated to be between Rs 1,700-1,900 crore per annum.

·         It doesn’t help that some regional airlines, including ones that are about to get launched, have developed route-networks that have 60-90% of flights under UDAN.

·         It was widely believed that areas such as the North-East, which has been a focus area of the government, would finally get the connectivity they required; not only to the metro-cities, but also intra-region connectivity.

·         Estimates are that the UDAN routes have not been cash- or value- accretive to airlines. Few airlines, such as Air Odisha and Air Deccan, have ceased operations altogether (together, they were to fly 84 UDAN routes).

·         Others such as StarAir and TruJet continue, but the business plan fails to hold when the cash from subsidies is delayed or taken away. Alliance Air (a subsidiary of Air India), which continues to fly several un-served and underserved routes is doubly funded by taxpayer money—since it is government-owned and loss-making, and further because it receives UDAN subsidies.

·         If the intent of the scheme was to make for viable and sustainable regional operations, as of now, this has not got fructified. This, while passengers on core metro-routes are forced to pay an additional Rs 50 as UDAN levy.

·         The difference between intent and impact can also be traced to a failure to address structural challenges, an inability to take on airport monopolies, a lack of focus on the demand side and attempting to address the chances of failures without adequately addressing the costs of failure. These are areas that the government will have to address if the scheme is to be revived.

Kindly review

please review

kindly review... thanks

Sir pls review