UDAN (Ude Desh Ka Aam Naagrik), a regional connectivity scheme (RCS) is a major step by Ministry of Civil Aviation to develop regional aviation market. The scheme envisages to provide connectivity to un-served and under-served airports of the country.
The main objective of UDAN is to ensure affordability, connectivity, growth and development. It is a market-based mechanism in which airlines bid for seat subsidies.
In the second round helicopter operators have also been given rights to fly on selected routes.
Under this scheme, the fare for one hour journey of approximate 500 km on a fixed wing aircraft or for a 30 minute journey on a helicopter is capped at Rs 2,500.
The selected airline operator will have to provide 50 percent of the flight seats (minimum of nine and a maximum of 40) as RCS seats for operations through fixed wing aircraft and a minimum of five and a maximum of 13 seats on the flights for operations through helicopters.
To reduce the cost of operations of airlines on flying such routes, a financial stimulus in the form of concessions from Central and State governments, airport operators and the Viability Gap Funding (VGF) to the interested airlines will be provided to start operations from such airports.
The Budget proposed Under the Regional Connectivity Scheme (RCS), exemption from service tax is being provided in respect of the amount of viability gap funding (VGF) payable to the airline operator for providing the services of transport of passengers by air, embarking from or terminating in a Regional Connectivity Scheme (RCS) airport, for a period of one year from the date of commencement of operations of the Regional Connectivity Scheme (RCS) airport as notified by Ministry of Civil Aviation.