Aiming for the skies

Budget 2020 in many ways opens new avenues for the Civil Aviation Sector. One hundred more airports will be developed by 2024 to support Regional Connectivity Scheme-UDAN to accelerate the growth in the sector. With 345 million passengers per year India is poised to become the third-largest aviation market globally soon. It is pleasing to see the proposal of Krishi Udaan of Civil Aviation under the Agriculture and Rural Development heading. This convergence between regional air connectivity scheme and agriculture marketing has been envisaged to improve value realization of niche products especially in North-East and tribal districts.

Currently, UDAN (Ude Desh ka Aam Nagrik) enables air operations on unserved regional routes to promote balanced regional growth and makes flying affordable for masses. This would be achieved through incentives (both monetary and non-monetary) and infrastructure development.

The idea of providing incentives and Viability Gap Funding (VGF) for air transportation was difficult to explain considering that the sector is seen as a luxury and serving to elite population. It took quite some time to establish the narrative of Civil Aviation sector as a growth engine. This is truer in case of the remote areas as connectivity is very critical for the growth of the local economy and air connectivity is the only option for many. In less than 3 years of implementation, UDAN has opened up 44 regional airports and transformed the way common people travel.

Indian aviation has established its resilience and has been on a high growth trajectory for the last 5-6 years. However, the fruit of this growth was limited to a few routes connecting metros where the profitability is predictable.

UDAN is not a budgetary supported programme and it generates the funds from the sector and distributes within the sector. A small levy is imposed on the large aircraft only on trunk routes to create a corpus for distribution of the Viability Gap Funding.

The scheme believes in leveraging the existing national assets especially airstrips spread across the country. As land is of very high value, the existing airstrips are like gold mines waiting to be explored. These airstrips, which may belong to state governments, PSUs, defence, private entities, all have been brought under the ambit of the scheme.

Upgradation of these airstrips depends on the commitments from the airlines through the bidding process, so that the investment will not become infructuous.

UDAN thrives on Cooperative Federalism Model. Perhaps, this is the only scheme where central government and state governments have come to an understanding of the clear cut role to respond to the demand triggered by the participation of the airlines. Two major stakeholders of the Civil Aviation sector are Airports and Airlines.

UDAN also provides a template for the operation of freighters which fits into the scheme announced in the Budget. Air connectivity can bring the sea change in remote tribal areas and North-East Region (NER) by promoting niche products which have demand world over.

A vertical of freighter connectivity under UDAN will become meaningful when there is an integrated supply chain management ensured by the concerned agencies in an eco-system where the role of each agency is defined.

As always said, implementation is the key to the success of the policy. It would be a better idea to have a dedicated implementation cell for UDAN with domain experts. A matrix model of embedding the professional implementing agency, within the government system would ensure that the convergence and worth experimenting.

Nonetheless, UDAN provides the solution for air connectivity by enabling the central government and state governments and private players to contribute.

It helps to leverage the resources of the sectors to continue to create a positive circularity by stimulating aviation growth. However, it can sustain in an ecosystem where financing, leasing, maintenance of aircraft and capability of the government to develop the infrastructure is adequate. Ease of doing business will drive the regulatory system to achieve world-class standards.

As always said, implementation is the key to the success of the policy. It would be a better idea to have a dedicated implementation unit for UDAN with domain experts. A matrix model of embedding the professional implementing agency, within the government system would ensure convergence and coordination.

(The writer is the joint secretary of the Ministry of Civil Aviation, Government of India.)