The Ministry of Civil Aviation has launched a new phase of the UDAN scheme with a ₹29,000 crore budget for the next decade. The program expands eligibility for regional airport subsidies and extends financial support for airlines operating under-served routes. This move aims to improve connectivity in tier-2 and tier-3 cities while boosting domestic aircraft manufacturing.
The Ministry of Civil Aviation has introduced a modified version of the regional connectivity scheme, known as UDAN, to accelerate aviation infrastructure development across the country. With a financial commitment of nearly ₹29,000 crore planned over the next ten years, the government intends to broaden the scope of support for airports and regional airlines. The updated framework, which officially came into effect in July 2026, aims to build on the infrastructure expansion seen over the past decade.
Changes to Airport Eligibility and Airline Funding
A key focus of the revamped scheme is the relaxation of criteria for airports to qualify as underserved. The threshold for weekly flight frequency has been increased, allowing more airports to enter the program. Airports with 14 or fewer weekly flights now qualify, and this limit is even higher for strategically vital areas, including the Northeast and hilly states, where the threshold is 21 flights. By expanding these definitions, the government plans to bring a larger number of regional routes under the umbrella of viability gap funding, which provides financial support to airlines to make routes profitable.
Furthermore, the duration of this financial support has been extended from three years to five years. The funding will follow a tapering structure, starting at full support for the first two years and gradually reducing to 25% by the fifth year. This change is designed to give regional airlines more time to establish passenger demand and stabilize their operations before transitioning to a self-sustaining model.
Impact on Infrastructure and Domestic Manufacturing
The initiative targets the development of 100 new airports and 200 heliports over the next decade. To ensure these projects move forward efficiently, the government is introducing a challenge-mode approach, requiring closer collaboration with state governments. Beyond infrastructure, the scheme emphasizes the development of the domestic aerospace sector. Plans include the procurement of Hindustan-228 aircraft for Alliance Air and helicopters for Pawan Hans. This push is expected to support India's maintenance, repair, and overhaul ecosystem.
Growth Trends in Indian Aviation
The Indian civil aviation sector has experienced rapid growth, with the country now ranking as the world’s third-largest domestic aviation market. Recent data shows that the industry now handles about five lakh domestic passengers daily, reaching a record of over 1.5 crore passengers in May 2026. While the government views regional connectivity as a catalyst for local economic development—including sectors like tourism, real estate, and hospitality—investors will monitor how effectively these funds translate into sustained operational viability for airlines. The success of the scheme will likely depend on actual passenger demand at these smaller airports and the ability of regional carriers to manage their operational costs once the viability gap funding begins to taper.