The Ministry of Civil Aviation has launched the nomination process to select the first 50 airports for development under the new 10-year UDAN scheme. With a total outlay of ₹28,840 crore, the policy aims to boost regional connectivity while shifting to direct government funding to improve long-term route sustainability.
The Ministry of Civil Aviation has initiated the nomination process for state and union territory governments to identify the first 50 airports to be upgraded under the modified UDAN (Ude Desh ka Aam Nagrik) scheme. This move marks the start of a broader 10-year development roadmap running from 2026 to 2036, which aims to improve connectivity across India's remote, hilly, and island regions.
The government has allocated a total budget of ₹28,840 crore for this decade-long initiative. The plan includes the development of 100 new airports and aerodromes with an investment of ₹12,159 crore, alongside the construction of 200 modern helipads, which has been allocated ₹3,661 crore. Unlike previous versions of the scheme that relied on passenger levies, this iteration is supported by direct funding from the government exchequer, which is intended to provide a more stable financial foundation for regional projects.
Selection and Evaluation Process
The selection of these sites will follow a competitive framework known as the "challenge mode." Under this process, the Airports Authority of India (AAI) will evaluate proposals from states based on several technical and economic parameters. These include land availability, existing infrastructure, technical feasibility for flight operations, tourism potential, and projections for passenger traffic. This selection method is designed to prioritize sites where the infrastructure is most likely to be utilized effectively.
For the scheme to succeed, state governments are required to provide specific support to ensure operational viability. This includes providing land, committing to concessional electricity and water supply, offering free security and firefighting services, and capping the Value Added Tax (VAT) on Aviation Turbine Fuel (ATF) at 1 percent. These measures are intended to lower the operating costs for airlines, making regional routes more commercially attractive.
Focus on Long-Term Sustainability
A critical change in this modified framework is the focus on the financial sustainability of regional routes. Historically, many regional routes struggled once government subsidies ended. To address this, the new policy extends Viability Gap Funding (VGF) for airlines from three years to five years. Additionally, the government has earmarked ₹2,577 crore for direct Operations and Maintenance (O&M) support at regional airports. This financial assistance covers essential services such as air traffic management, communication, and meteorological services, which is expected to reduce the burden on regional airport operators.
Sector Challenges and Risks
While the scheme aims to expand the aviation network, the infrastructure and aviation sectors face certain risks. The operational success of these regional airports depends heavily on whether passenger demand scales enough to make flights profitable without permanent subsidies. High O&M costs in low-traffic regions remain a long-term financial concern if volume does not pick up. Additionally, executing infrastructure projects in difficult terrains like hilly or island regions presents logistical and technical challenges that could impact project timelines. Finally, the project's pace will depend on the cooperation of state governments, particularly regarding the land and utility concessions required to launch operations efficiently.
The next important update for market observers will be the final list of the first 50 selected airports, which will provide insight into the government's regional priorities and the potential pipeline for infrastructure and construction contracts related to these sites.