Udan levy on airlines to double from Jan due to inflation, route expansion

The civil aviation ministry has decided to double the per-flight regional connectivity levy it collects from airlines to Rs 10,000 from January.

The hike has been proposed due to inflation and planned expansion in the regional routes, according to a civil aviation ministry official.

The government launched a regional connectivity scheme called Udan in April 2017. The scheme is funded by a levy on major domestic routes and contributions from state governments. Airlines in turn have been allowed to levy Rs 50 on flight tickets on major routes.

In the past five years, more than 10 million passengers have flown on Udan flights that connect over 58 airports. As of March-end, the government had collected around Rs 2,460 crore in the regional air connectivity fund and disbursed over Rs 1,785 crore in viability gap funding (VGF) to airlines operating the Udan flights.

“There is a huge demand for expansion of the Udan scheme. By 2026, it is proposed to operationalise 1,000 routes and that would require additional VGF. There has been no increase in the levy since the project’s launch in 2017. The VGF paid to airlines is indexed to inflation and airlines are paid at enhanced rates. This could create a fund deficit in future and hence the hike in levy has been proposed,” the official explained.

The official added that a 20 per cent contribution from state governments to the regional connectivity fund had been factored in while proposing the hike. The northeastern states would be contributing only 10 per cent of the fund.

“In the last five years, Udan has significantly increased regional air connectivity in the country. There were 74 operational airports in 2014. Because of the Udan scheme, this number has increased to 141 by now,” the civil aviation ministry said in a press release in August.