Govt puts UDAN 2.0 on runway with a total outlay of ₹28,840 crore

Government approves next phase of UDAN scheme to boost regional connectivity, develop airports and helipads, and support airlines operating in underserved regions

To boost air connectivity to remote and underserved parts of India, the Union Cabinet on Wednesday approved the next phase of the regional air connectivity scheme, UDAN (Ude Desh ka Aam Nagrik), with a total outlay of ₹28,840 crore over a 10-year period starting 2026-27. 

The allocation for the second phase is markedly higher than spending over the past decade. In the past 10 years, the government has spent at least ₹4,593 crore on viability gap funding (VGF) — a subsidy given to airlines to operate routes that are not commercially viable — and at least ₹4,638 crore on airport development under UDAN, according to previous replies tabled in Parliament. 

 

The Cabinet cleared the Regional Connectivity Scheme — Modified UDAN on Wednesday, aiming to expand air connectivity to underserved and unserved regions, improve emergency response and healthcare access in remote and hilly areas, make small airports more sustainable, and support the viability of regional airlines. 

A key component of the modified scheme is the development of 100 airports from existing unserved airstrips, with a capital expenditure outlay of ₹12,159 crore over the next eight years. 

The government said this would help “transform India into a globally competitive aviation ecosystem”. 

Recognising that regional airports face high recurring operation and maintenance (O&M) costs and limited revenue streams, the scheme will provide O&M support for up to three years. The support is capped at ₹3.06 crore per airport annually and ₹90 lakh for heliports and water aerodromes, with a total allocation of ₹2,577 crore covering around 441 aerodromes. 

To improve last-mile connectivity, especially in difficult terrain, the government will develop 200 modern helipads at a cost of ₹3,661 crore over the next eight years. These helipads will be built to address connectivity challenges in hilly, remote, island, and aspirational regions. 

Under Udan, airline operators receive financial support in the form of VGF for operating awarded routes. “Recognising the need for longer market development, VGF support to airline operators is proposed at ₹10,043 crore over 10 years,” the government said.

 

The modified scheme also includes plans to procure two Dhruv helicopters for Pawan Hans and two Dornier aircraft for Alliance Air to address the shortage of small aircraft in remote and difficult terrains and to “advance the Aatmanirbhar Bharat vision”. Both the Dhruv helicopter and the Dornier aircraft are manufactured by state-run Hindustan Aeronautics.

 

The government said the modified scheme is expected to “boost economic growth, trade, and tourism in Tier-II and Tier-III cities” and “support affordable air travel for common citizens”.

 

Launched in October 2016, Udan aims to make air travel affordable by connecting unserved and underserved airports through capped fares and VGF support to airlines. Routes under the scheme are allocated through a competitive bidding process.

 

State governments support the scheme by reducing value-added tax on aviation turbine fuel and providing land and security for building aerodromes, while airport operators waive various charges on Udan flights.

 

However, the scheme has faced major challenges. In a written reply to the Rajya Sabha (RS) on March 16, Minister of State for Civil Aviation Murlidhar Mohol said that since the scheme’s launch, 925 routes have been awarded, of which 663 had been operationalised as of February 28 this year. He said 327 routes have been discontinued due to disruptions caused by the Covid-19 pandemic, aircraft shortages, supply chain and maintenance issues, airport or runway constraints, and low passenger demand.

 

Mohol added that a total of ₹4,593 crore has been disbursed as VGF since the scheme’s inception. The funding is released after flights are operated, based on actual performance, and there are no provisions for recovery or clawback.

 

In a separate RS reply on December 8, 2025, Mohol said 14 Udan airports were non-operational due to factors such as the end of the three-year VGF period, poor visibility, aircraft shortages, leasing issues, temporary discontinuation by airlines, route renovation, low passenger load factors, and daytime runway restrictions at “visual flight rules (VFR)-only airports”.

 

Airports equipped for instrument flight rules, in contrast, can operate in low visibility and at night using navigation aids, while VFR-only airports are restricted to daytime operations in good weather, limiting frequency and reliability. 

Ready for takeoff

• Develop 100 airports with a capex outlay of ₹12,159 cr
• Provide ₹2,577 cr in O&M support to 441 aerodromes
• Build 200 helipads with an allocation of ₹3,661 cr
• Allocate ₹10,043 cr in VGF support to improve route viability for airlines
• Procure HAL-built Dhruv helicopters and Dornier aircraft under the Aatmanirbhar push