The Union Cabinet on Wednesday (March 25) approved the Regional Connectivity Scheme – Modified UDAN, allocating Rs 28,840 crore for its implementation over the next ten years.
The revised framework, scheduled to run from fiscal year 2026-27 to 2035-36, introduces new financial mechanisms and infrastructure targets to address the operational failures of the original program.
“The package is designed to strengthen infrastructure and support long-term economic growth by expanding aviation access to underserved regions,” Minister of Railways Ashwini Vaishnaw said while announcing the scheme.
The modified scheme includes the development of 100 new airports in challenge mode with an average cost of Rs 100 crore per airport, with a total outlay of Rs 12,159 crore over the next eight years. The scheme also aims to develop 200 helipads at Rs 15 crore each, amounting to a total requirement of Rs 3,661 crore over the next eight years.
The Cabinet approved three-year operations and maintenance support for RCS airports, capped at Rs 3 crore annually per airport and Rs 90 lakh for helipads, totalling Rs 2,577 crore. The Centre will provide viability gap funding support of 80-90 percent to airlines, tapered over five years, with a budgetary allocation of Rs 10,043 crore.
The subsidy period may need to be extended beyond the current three years, requiring an increase in the overall fund size, senior government officials said on the sidelines of the scheme’s announcement.
Domestic Fleet Expansion
The government has also proposed the acquisition of domestically manufactured aircraft, including HAL Dhruv helicopters for Pawan Hans and HAL Dornier aircraft for Alliance Air, to address shortages in smaller aircraft suited for regional operations.
The revised RCS aims to tackle problems faced by the original Ude Desh ka Aam Naagrik (UDAN) scheme by focusing on key areas of improvement and making provisions for better airport infrastructure, enhanced operational clarity, and measures to ensure fare predictability.
C.V. Deepak, Executive Director of Regional Connectivity Scheme at the Airports Authority of India (AAI), said at Wings India 2026 that the revised scheme addresses structural bottlenecks that slowed service rollout, particularly in remote and mountainous regions.
“UDAN 2 will take care of many of the issues that operators have raised. The agreement period is likely to be longer, and viability gap funding mechanisms are being refined,” Deepak said.
The Cabinet decision is part of a wider package involving regional air connectivity, immigration system modernisation, and climate commitments, with a total financial implication of Rs 30,640 crore. The Union Cabinet also approved the continuation of the Immigration, Visa, Foreigners Registration and Tracking (IVFRT) Scheme beyond March 31, 2026, for a period of five years — from April 1, 2026, to March 31, 2031 — with a budget outlay of Rs 1,800 crore.
The IVFRT platform seeks to interlink and optimise functions related to immigration, visa issuance, and registration of foreigners in India. The core objective of the IVFRT is to modernise and upgrade immigration and visa services within a secure and integrated service delivery framework. It aims to facilitate legitimate travellers while strengthening national security, according to an official statement.
Fixing the Flight Path
The original RCS faced several issues, including the lack of viable infrastructure in regional airports, fluctuations in fares leading to unpredictable ticket prices, and limited participation from airlines due to financial viability concerns.
However, a 2023 audit by the Comptroller and Auditor General (CAG) found that of 774 routes awarded up to UDAN-3, only 371 began operations. Of those, merely 112 routes completed the mandatory three-year concession period, and only 54 routes across 17 airports sustained operations after subsidies ended. The CAG identified problems with tender compliance, fund management, and viability gap funding disbursement.
According to a 2025 research paper by the International Journal of Scientific Research in Engineering and Management (IJSREM), examining the scheme’s impact on airline profitability, while UDAN opened travel opportunities in less-connected areas, financial benefits for airlines remained unclear.
“Low passenger volumes and high costs are still a challenge for many carriers,” the research paper said.
Passenger traffic under the UDAN scheme grew initially from 2017 to 2020 but stagnated before declining 39.39 percent in 2022-23 due to operational inefficiencies, low demand, and airline sustainability issues.
Of the 64 airports and heliports identified for development in 2016, only 15 have been operationalized, with the Ministry of Civil Aviation spending nearly Rs 900 crore. The AAI cited land acquisition hurdles, delayed state government clearances, and procedural bottlenecks as primary reasons for the delays.
Budget allocations for the scheme have also declined for the last few years, with funding flat at Rs 550 crore in Budget 2026, down from Rs 789.3 crore disbursed in 2024-25. Viability gap funding payouts peaked at Rs 807 crore in 2023-24 before falling to Rs 628 crore in 2024-25.