UDAN revamp: Centre extends subsidy to five years, shifts funding to exchequer

The government has approved an expanded version of the UDAN scheme, its flagship aviation connectivity programme, with a total outlay of ₹ 28,840 crore; This represents an almost sixfold increase over the previous allocation. The renewed plan goes beyond the redevelopment of the airport to include ongoing support for operations and maintenance.

In a major policy change, the Union government has extended the subsidy period for airlines on selected Tier-2 and Tier-3 routes under the UDAN scheme from three years to five years after a large portion of these routes fell into disuse. The subsidy will also shift from a tax added on airline tickets to direct financing from the exchequer.

On Wednesday, March 25, 2026, the Union Cabinet approved the amended UDAN scheme totaling ₹ 28,840 crore; of this, ₹10,043 crore has been earmarked for a subsidy to support airlines flying regional routes for the next 10 years. A government official has announced that airlines will receive subsidy support for certain routes for five years.

As per the earlier scheme design, these subsidies were not financed by the exchequer but through the Regional Connectivity Scheme (RCS) tax added on airfares on non-UDAN routes.

Viability concerns

Subsidies were also limited to three years to guide airlines towards self-sustaining routes. However, the Comptroller and Auditor General (CAG) report found that only 7% to 10% of these routes remained viable beyond the subsidy period. As of February 2026, 327 of the 663 routes launched since 2017 under the UDAN scheme have been discontinued, according to data presented in Parliament recently by Minister of State for Civil Aviation Muralidhar Mohol. The data showed that 15 of the 95 airports revitalized under the program remained out of use.

The plan is essentially based on a bidding mechanism in which airlines compete for routes connecting smaller cities; This mechanism gives winning airlines affordability gap financing or subsidies from the RCS tax equivalent to 50% of the seating capacity on their aircraft. In response, airlines sell 50% of their seats on awarded routes at a fixed fee of ₹2,500 per flight hour to make air travel on these routes affordable.

6x increase in funding

The ₹28,840 crore outlay marks an almost six-fold increase in UDAN’s funding. At its launch in 2017, the government had allocated ₹4,500 crore over 10 years, primarily to revive disused airports.

Aiming to expand the regional aviation network, 100 airports will be redeveloped from disused airstrips at an outlay of Rs 12,159 crore over eight years, according to the amended UDAN announced on Wednesday.

However, the revised plan goes beyond infrastructure development to support airport operations and maintenance at low-traffic airports, capped at ₹3.06 crore per airport and ₹90 lakh per helipad or water aerodrome, with a total estimated cost of ₹2,577 crore covering around 441 airports.

In an effort to improve last mile connectivity, especially in remote and challenging terrains, the program also proposes to develop 200 helipads at a cost of 15 billion Indian rupees each, making a total of 3,661 billion Indian rupees.

The plan also proposes the procurement of two HAL Dhruv helicopters for Pawan Hans and two HAL Dornier aircraft for Alliance Air to support aircraft purchases.