UDAN Scheme: Legal Structure, Viability Gap Funding, And What Operators Need To Know

Democratisation of air travel has been a policy priority for India to promote balanced economic development and to improve regional air connectivity. UDAN scheme is one such example that represents this significant initiative in furtherance of such an objective. This scheme was introduced in 2016, under the National Civil Aviation Policy, and it was operationalised through a tripartite framework agreement between the Ministry of Civil Aviation, the Airports Authority of India, and participating state governments. The scheme rests on an uncomplicated but legally precise pillar: a competitive bidding process. Airlines surrender fare autonomy on a defined share of seats in exchange for a government-funded Viability Gap subsidy. Their rights and obligations are governed by a concession agreement enforced by the Airports Authority of India (AAI).