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Government grants 400 cr for UDAN scheme bailout

PW Bureau

After the aviation ministry finalised the third phase of the scheme, total subsidy burden doubled to Rs 1,250 cr per annum New Delhi: The government has granted Rs 400 crore for bailing out Ude Desh ke Aam Naagrik (UDAN), its flagship regional connectivity scheme after the aviation ministry finalised the scheme’s third phase, which almost doubled the total subsidy burden to Rs 1,250 crores per annum. “The government has agreed to pay Rs 400 crore from the dividend payment that AAI (Airports Authority of India) makes to them. This should take care of our subsidy payment in the interim,” a government official said.

Phase III winners to be announced after funding approval

The aviation ministry had approached the finance ministry as it was in need of money to fund the subsidy and for help. The ministry will announce the winners for routes in the third phase following the approval of the funding. Under the scheme’s first phase, the total subsidy outlay was Rs 214 crore per annum, which increased to Rs 500 crore annually under the second phase. In order to fund the second phase of the scheme, the aviation ministry had sought Rs 200 crore. Under third phase of UDAN, the subsidy outlay is estimated to go up to Rs 1,250 crore with the government announcing international as well as seaplanes operations.
The scheme is funded by contributions from states that provided 20 percent of the total subsidy cost and a charge on airlines.
Under UDAN, announced in October 2016, the government puts a cap on airline fares, while offering incentives to airlines taking less frequent routes in the world’s fastest-growing aviation market.

UDAN funding

The scheme is funded by contributions from states that provided 20 percent of the total subsidy cost and a charge on airlines. As the charge on airlines generates Rs 370 crore per annum, states contribute their respective share to the aviation ministry.