Cabinet Approves Modified UDAN Scheme with ₹28,840 Cr Outlay for Regional Connectivity

The Union Cabinet, chaired by Prime Minister Narendra Modi, officially approved the launch and implementation of the 'Regional Connectivity Scheme – Modified UDAN' on March 25, 2026. This significant decision earmarks a total outlay of ₹28,840 crore, to be supported by the Government of India's budget, over a period of ten years, specifically from Financial Year 2026-27 to FY 2035-36. The Modified UDAN scheme, also referred to as UDAN 2.0 by some outlets, represents a substantial revamp and expansion of the original Ude Desh ka Aam Naagrik (UDAN) scheme, which was first launched in October 2016. The primary objective remains consistent: to make air travel affordable for common citizens and to enhance regional air connectivity, particularly to underserved and unserved areas across India. The revamped scheme aims to address some of the operational challenges and sustainability issues faced by its predecessor. A key component of this modified scheme is the planned development of 100 airports. These will be upgraded from existing unserved airstrips, aligning with the 'Viksit Bharat 2047' vision for infrastructure expansion and transforming India into a globally competitive aviation ecosystem. An estimated capital expenditure of ₹12,159 crore has been allocated for this airport development over the next eight years. Beyond airports, the scheme also places a strong emphasis on improving last-mile connectivity, especially in challenging terrains such as hilly, remote, island, and aspirational regions. To this end, the Modified UDAN scheme proposes the development of 200 modern helipads, with an estimated total requirement of ₹3,661 crore over the next eight years (inflation-adjusted). These helipads are intended to improve accessibility and emergency response capabilities in these difficult areas. Recognizing the financial strain on regional aerodromes due to high recurring operation and maintenance (O&M) costs and limited revenue streams, the scheme introduces O&M support for three years. This support is capped at ₹3.06 crore per annum per airport and ₹0.90 crore per annum per heliport/water aerodrome. The total estimated cost for this O&M support is ₹2,577 crore, covering approximately 441 aerodromes. One of the most significant policy shifts in the Modified UDAN scheme pertains to Viability Gap Funding (VGF) for airline operators. Under the earlier scheme, VGF was largely funded through a Regional Connectivity Scheme (RCS) levy on airfares of non-UDAN routes. The revamped scheme, however, shifts this funding mechanism to direct budgetary support from the exchequer. Furthermore, the subsidy period for airlines operating on select Tier-2 and Tier-3 routes has been extended from three to five years, with a tapered funding mechanism from the third year onward. A budgetary allocation of ₹10,043 crore has been proposed for VGF over the ten-year period, aiming to ensure longer-term route sustainability and more affordable fares. This extension addresses concerns raised by a Comptroller and Auditor General (CAG) report, which found that a large share of routes under the original scheme became unviable after the initial three-year subsidy period. In a push to strengthen the indigenous aerospace sector under the 'Atmanirbhar Bharat' initiative, the scheme also proposes the procurement of two HAL Dhruv helicopters for Pawan Hans and two HAL Dornier aircraft for Alliance Air. This move aims to address the shortage of small fixed-wing aircraft and helicopters required for operations in remote and difficult terrains. The overall impact of the Modified UDAN scheme is expected to be multifaceted. It aims to boost economic growth, trade, and tourism in Tier-2 and Tier-3 cities, making air travel more accessible and affordable for a broader segment of the population. Improved connectivity is also anticipated to enhance emergency response and healthcare access in remote and hilly regions. The scheme envisions greater viability and sustainability for regional aerodromes and airline operators, contributing significantly to India's aviation ecosystem and its long-term development goals. As of February 28, 2026, the original UDAN scheme had operationalised 663 routes across 95 airports, heliports, and water aerodromes, facilitating over 3.41 lakh flights and carrying 162.47 lakh passengers. The Modified UDAN scheme builds upon this foundation, with a strategic focus on expanding reach and ensuring long-term sustainability to benefit an estimated 4 crore passengers over the next decade. This Cabinet approval also comes alongside other significant government initiatives, though not the primary focus of this article, such as the continuation of the Immigration, Visa, Foreigners Registration and Tracking (IVFRT) Scheme with a separate outlay, demonstrating a broader governmental push for infrastructure and administrative modernization.

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