Whalesbook
UDAN: A Decade-Long Push for Regional Air Travel
The Union Cabinet has approved a ₹28,840 crore plan to revamp the Regional Connectivity Scheme (RCS)–UDAN, marking a decade-long investment (FY27-FY36) in expanding India's air travel network. The initiative aims to develop 100 new airports from existing airstrips, specifically targeting underserved Tier-2 and Tier-3 cities. This push is designed to drive economic growth, trade, and tourism, while also improving emergency services and healthcare access in remote regions. A key part of this plan is allocating ₹10,043 crore for Viability Gap Funding (VGF) over the next ten years. This funding will support airline operators on less-trafficked routes, helping to make their operations viable and encourage sustained services. Developing new regional airports is projected to cost around ₹100 crore each.
IVFRT System Modernized for Enhanced Border Security
In parallel, the Immigration, Visa, Foreigners Registration and Tracking (IVFRT) scheme will be extended for five years, from April 2026 to March 2031, with ₹1,800 crore allocated for technology upgrades and service improvements. The upgraded IVFRT system will integrate new technologies like mobile services and self-service kiosks for smoother and more secure passenger movement. Infrastructure at immigration posts and data centers will be modernized, using unified digital platforms. IVFRT has improved efficiency, enabling a contactless visa process with over 91% of e-visa applications processed within 72 hours and cutting average immigration clearance times to about 2.5 to 3 minutes. The Fast Track Immigration-Trusted Traveller Programme has further reduced clearance times at select airports to around 30 seconds for eligible travelers.
Challenges Ahead for UDAN and India's Aviation Sector
While the government is strongly promoting regional connectivity, the long-term success of the UDAN model faces questions. Past performance shows that many awarded routes struggled to start or continue operations after subsidies ended. As of early 2025, over 619 routes were active, linking 88 airports, but sustainability remains a concern once funding diminishes. India's aviation sector is facing significant challenges. Industry losses are projected to reach ₹170-₹180 billion in FY2026, worsened by slower passenger growth, currency depreciation, and supply chain issues affecting aircraft availability. Fuel costs remain a large part of operating expenses, accounting for 30-40% of airline costs. Governments often support regional airlines, especially in less populated countries, to maintain essential connectivity on routes that are not commercially profitable. However, a heavy reliance on subsidies raises questions about market-driven expansion.
Viability Concerns for Regional Routes Amidst Sector Headwinds
The significant Viability Gap Funding (₹10,043 crore) for UDAN highlights the underlying financial difficulties of regional routes. Previous phases of the scheme saw delays in VGF payments, straining airlines financially. Furthermore, low passenger demand on some routes has led to them being shut down. Alliance Air reported a net loss of ₹619.56 crore in FY23-24, showing the financial pressures on regional airlines even with support. Pawan Hans, though recently profitable, requires substantial funding for fleet upgrades, indicating an ongoing need for investment in its helicopter operations. Its helicopters average over 20 years in service, requiring continuous capital expenditure. UDAN's success depends on creating an environment where airlines can operate profitably without constant reliance on subsidies, a goal past performance suggests is hard to achieve.
Outlook: Balancing Growth with Sustainability
Despite sector challenges, India's aviation industry is expected to see substantial long-term growth, with passenger traffic predicted to double by 2030. The number of operational airports has risen from 74 in 2014 to 164 in 2025. The government's continued investment in regional connectivity through UDAN and in advanced border management via IVFRT shows a strategic plan for a more connected India. However, the success of the revamped UDAN scheme will rely on its ability to generate real market demand and improve operational efficiency, reducing airline dependence on subsidies and managing the sector's financial risks and infrastructure gaps.