India Relaunches UDAN Scheme With ₹28,840 Crore Outlay

The Shift to Modified UDAN

India is preparing to launch the second phase of its regional air connectivity program, known as Ude Desh ka Aam Nagrik (UDAN), as the government seeks to address a high rate of route closures. The Ministry of Civil Aviation (MoCA) has confirmed that while 669 routes have been operationalized since the scheme began in 2017, only 336 remain active today. This performance gap underscores the ongoing challenges in maintaining sustainable Indian regional airlines operations on thin, remote routes.

To stabilize the sector, the government has announced a significant financial commitment. The Cabinet-approved Regional Connectivity Scheme – Modified UDAN features a total outlay of ₹28,840 crore, which includes ₹10,000 crore earmarked specifically for Viability Gap Funding (VGF). This policy shift extends the subsidy period for carriers from three years to five years, aiming to provide a longer runway for routes to achieve commercial viability.

Operational Hurdles for Regional Carriers

Industry participants report that the struggle to maintain connectivity is driven by structural barriers. Many smaller airlines have faced bankruptcy or were forced to curtail operations once their initial three-year subsidy window expired. For example, regional carrier Star Air ceased daily flights to Bidar and Kalaburagi in Karnataka after its VGF support concluded. Fly91, which operates a six-aircraft fleet, has emphasized that integration with major hubs is essential for long-term success. According to Manoj Chacko, MD and CEO of Fly91, major gateway airports like Delhi and Mumbai must provide dedicated support for regional carriers if the scheme is to achieve its intended impact.

Beyond route economics, infrastructure and fleet acquisition remain significant bottlenecks. Many remote airstrips identified for development remain unready due to high compliance costs and regulatory delays. Furthermore, regional carriers face difficulty securing sub-100 seat aircraft, as lessors remain cautious regarding the financial stability of smaller operators. Vishokh Mansingh, founder-CEO of Vman Aero Services, suggests that state governments could mitigate these risks by directly leasing aircraft to smaller operators.

The Cost Curve of Regional Connectivity

Historically, the program has been marked by high attrition. In 2018, early operators such as Air Deccan and Air Odisha had their route awards cancelled by the DGCA (Directorate General of Civil Aviation) due to undercapitalization and fleet shortages. The current policy revision aims to avoid this pattern by providing more robust financial support. In addition to the subsidy extension, the government has allocated ₹2,577 crore for airport maintenance during the early years of operation, mitigating the burden on remote airports with thin passenger traffic.

What Comes Next: The Modified UDAN Rollout

The official launch of the modified scheme is expected on July 4, 2026. This milestone marks the start of a ten-year financial framework intended to resolve the sustainability issues that plagued the initial iteration of the scheme. Success will depend on the ability of the MoCA to coordinate between major metro airport slot allocations and the operational readiness of remote airstrips.

Why This Matters for Indian Aviation

The sustainability of the UDAN scheme is critical to the broader goal of democratizing air travel in India. For regional airlines, the five-year subsidy window represents a vital shift in risk management, allowing more time to build passenger demand. However, the outcome hinges on whether major hubs will prioritize regional access and if the government can effectively bridge the gap between infrastructure investment and airline fleet availability.