UDAN Scheme Turns 10: VGF, CAG Audit and Modified UDAN

🗞️ Why in News The Regional Connectivity Scheme (RCS), UDAN (Ude Desh ka Aam Nagrik), completes ten years on 21 October 2026. A PIB backgrounder of 20 October 2026 puts the decade in numbers: according to the backgrounder, 687 routes and 95 aerodromes have been operationalised and 1.72 crore passengers have flown under the scheme, with Rs 5,091.23 crore of Viability Gap Funding (VGF) disbursed.

The anniversary invites the question an examiner asks about any subsidy: how does it make a thin route fly, and what happens when the support ends? Three documents answer it. The scheme’s 2016 design shows how a regional seat is paid for. The Comptroller and Auditor General’s (CAG) audit of the first three rounds shows how many routes outlived that support. And Modified UDAN, the redesign launched this year, shows what the government has changed.

UDAN at a Glance

A Decade in Rounds: From NCAP 2016 to 687 Routes

The National Civil Aviation Policy (NCAP), 2016, announced in June 2016, envisaged a Regional Connectivity Scheme “to enhance regional air connectivity through fiscal support and infrastructure development”, as the CAG records it. UDAN followed on 21 October 2016, launched in New Delhi by the then Civil Aviation Minister P. Ashok Gajapathi Raju. Proposals were first called the same month, and the first RCS-UDAN flight, from Shimla to Delhi, was inaugurated in April 2017.

Routes are awarded through bidding rounds. The CAG lists the first three, for which bidding was completed by March 2021:

Later rounds widened the mix. Under UDAN 3, seaplane operations were brought in; UDAN 4.1, a special round, focused on awarding and operationalising routes cancelled in past rounds, with helicopter and seaplane routes still prioritised (MoCA’s RCS-UDAN Manual 2021). The scheme document’s Version 5.5 is dated November 2024.

Ten years on. As of October 2026, per the Ministry, the scheme has operationalised 687 regional routes and 95 aerodromes, including 17 heliports and 2 water aerodromes; more than 3.68 lakh flights have been operated and 1.72 crore passengers carried. In the North-Eastern States, 90 priority RCS routes have been operationalised, and of 52 aerodromes identified in the region, 12 have been operationalised.

The 687 is a cumulative count of routes ever operationalised. It is not the number of routes flying today, and the CAG audit below shows why the difference matters.

The wider sector grew alongside: India’s operational airports rose from 74 in 2014 to 166, and India is now the world’s third-largest domestic aviation market, the backgrounder notes. These are all-India figures, not UDAN’s alone.

Four Airports the Ministry Cites

How UDAN Pays for a Regional Seat

UDAN is, in the words of the Ministry’s launch release of 21 October 2016, “a market-based mechanism in which airlines bid for seat subsidies”. An airline that wins a route flies it at capped fares and receives Viability Gap Funding (VGF) from a dedicated fund for three years. Once the three years end, the route has to pay its way without VGF.

• The fare cap (2016 design): “The fare for a one hour journey of appx. 500 km on a fixed wing aircraft or for a 30 minute journey on a helicopter would now be capped at Rs. 2,500”.
• Who shares the cost: VGF is shared between MoCA and the State Governments in the ratio 80:20, and 90:10 for North-Eastern States and Union Territories.
• The levy: the fund’s major source is a Regional Air Connectivity Fund (RCF) levy on scheduled airlines’ domestic operations, imposed by amending the Aircraft Rules 1937 from 1 December 2016. Most airline operators were unwilling to pay it; MoCA revised it in August 2017, with effect from 1 September 2017. It now applies to all domestic flights other than Category II and IIA routes, RCS routes and small aircraft below 80 seats.
• The trust: the Regional Air Connectivity Fund Trust, formed in April 2017, manages the fund and pays VGF to the selected airline operators for three years.
• Concessions: under the 2016 design, airport operators were not to impose landing and parking charges or Terminal Navigation Landing Charges, and airports were selected in consultation with State Governments after confirmation of their concessions.
• The agency: AAI is the Implementing Agency.

What the CAG Found Up to UDAN-3

CAG Report No. 22 of 2023, a Compliance Audit of the Regional Connectivity Scheme UDAN, was tabled in August 2023 and covers the first three rounds. Its central finding, in its own words:

“Upto UDAN-3, 52 per cent (403 out of 774 routes) of the awarded routes could not commence operations and from the 371 commenced routes, only 112 routes (30 per cent) completed the full concession period of three years. Further, out of these 112 routes, only 54 routes (i.e., 7 per cent of the awarded routes) connecting 17 RCS Airports could sustain the operations beyond the concession period of three years, as of March 2023.”

The audit’s other findings:

• Demand grew: passengers on RCS routes rose from 2.63 lakh in 2017-18 to 24.97 lakh in 2022-23.
• The levy: “MoCA did not frame any rules to regulate the collection and remittance mechanism of Regional Air Connectivity Fund levy.” A test check of six sample airlines found that from 2019-20 to 2021-22 they had collected more RCF levy from passengers than they remitted to the RCF Trust.
• Heliports: “There was no exercise carried out by MoCA/ AAI to identify eligible heliports on the basis of its potential.”
• Recommendations: the audit made 16.

The audit covers only the first three rounds and predates Modified UDAN.

Modified UDAN: The Next Phase

• 1 February 2025, Union Budget 2025-26 (para 67): Finance Minister Nirmala Sitharaman announced that “a modified UDAN scheme will be launched to enhance regional connectivity to 120 new destinations and carry 4 crore passengers in the next 10 years. The scheme will also support helipads and smaller airports in hilly, aspirational, and North East region districts.”
• 25 March 2026, Cabinet approval: the Union Cabinet chaired by Prime Minister Narendra Modi approved Modified UDAN for ten years, FY 2026-27 to FY 2035-36, with a total outlay of Rs 28,840 crore and budgetary support of the Government of India (our report on the approval).
• 4 July 2026, launch: Prime Minister Narendra Modi launched the scheme from Jodhpur Airport.
• 22 September 2026, MoUs: MoCA signed 21 MoUs with States and Union Territories, with AAI, under the next phase, and launched a Challenge Mode for Aerodrome Development, through whose portal States and UTs nominate airstrips and helipads (22 September roundup).

What the Rs 28,840 Crore Buys

Existing UDAN and Modified UDAN Compared

The Civil Aviation Ministry set out this comparison at a stakeholder workshop on Modified UDAN in July 2026:

The backgrounder says the new measures “seek to address the infrastructure and viability challenges of regional air travel”, and that the focus is now also on an ecosystem for Made in India civil aircraft.

Mains Lens: Operationalised Is Not Sustained

1. Access is real. 1.72 crore passengers, 95 aerodromes and 90 priority routes in the North-Eastern States show that a capped-fare seat reaches places the market had left out; Tezu, near the China border, and Deoghar, a pilgrimage town, are the Ministry’s own examples.
2. Viability is the weak link. Up to UDAN-3, only 54 of 774 awarded routes flew beyond their three-year concession. A route that needs VGF in year three may not survive year four.
3. The headline number flatters. A cumulative count of routes operationalised adds a route the day it starts and never subtracts it. Route survival after VGF is the better test of the scheme.
4. Governance gaps. The CAG found no rules for collecting and remitting the levy, sampled airlines keeping more levy than they remitted, and heliports picked without a study of their potential.
5. The redesign answers some of this. Modified UDAN tapers VGF over five years instead of ending it at three, funds aerodrome capital works and O&M, and lets States nominate sites through the Challenge Mode: a shift from route subsidy to infrastructure and cooperative federalism.

Way Forward

• Measure survival: report routes still flying after VGF ends alongside routes operationalised.
• Fix the levy: frame rules for the collection and remittance of the RCF levy, as the CAG pointed out.
• Choose sites by demand: use the Challenge Mode nominations with an assessment of each site’s potential, the gap the CAG found for heliports.
• Build demand before support tapers: the Ministry’s four airports show what sustains a route: pilgrims, patients, tourists and cargo such as marble and ginger.
• Indigenous fleet: the HAL Dhruv and Dornier allocation suits remote areas and difficult terrain.

UPSC Relevance

GS Paper 3: Infrastructure: energy, ports, roads, airports, railways; investment models.

GS Paper 2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation; Centre-State cooperation.

Prelims: UDAN full form; NCAP 2016; AAI as Implementing Agency; VGF sharing 80:20 and 90:10; RCF levy and RCF Trust; CAG Report No. 22 of 2023; Modified UDAN outlay and period.

Mains: “Ten years on, UDAN has operationalised hundreds of routes, yet many did not outlive their subsidy. Examine the design of viability gap funding under UDAN and assess whether Modified UDAN addresses its weaknesses.” (GS3, 250 words)

📌 Facts Corner, Knowledgepedia

Prelims, statement-ready facts:

• UDAN: Ude Desh ka Aam Nagrik, the Regional Connectivity Scheme (RCS) of the Ministry of Civil Aviation, launched on 21 October 2016.
• UDAN flows from the National Civil Aviation Policy (NCAP) 2016, announced in June 2016.
• Airports Authority of India (AAI) is the Implementing Agency.
• First RCS-UDAN flight: Shimla to Delhi, inaugurated in April 2017.
• VGF is shared by MoCA and the States 80:20; 90:10 for North-Eastern States and Union Territories.
• RCF levy: on domestic flights except Category II and IIA routes, RCS routes and aircraft below 80 seats; the RCF Trust was formed in April 2017.
• As of October 2026, per the Ministry: 687 routes and 95 aerodromes (17 heliports, 2 water aerodromes) operationalised; 1.72 crore passengers.
• VGF disbursed: Rs 5,091.23 crore, as of 15 October 2026.
• CAG Report No. 22 of 2023: up to UDAN-3, 403 of 774 awarded routes (52 per cent) could not commence; only 54 sustained beyond three years.
• Modified UDAN: FY 2026-27 to FY 2035-36, Rs 28,840 crore; Cabinet approval 25 March 2026; launched 4 July 2026 from Jodhpur Airport.
• Budget 2025-26, para 67: Modified UDAN to reach 120 new destinations and carry 4 crore passengers in the next 10 years.

Prelims, the traps:

• 687 routes is a cumulative count of routes ever operationalised, not the number of routes flying today.
• Modified UDAN was approved by the Cabinet on 25 March 2026 but launched on 4 July 2026; the 21 MoUs of September 2026 are not the launch.
• Existing UDAN gives VGF for 3 years; Modified UDAN gives up to 5, tapered from Year 3.
• The Rs 2,500 cap for a one-hour flight of about 500 km is the 2016 design, not the Modified UDAN rule.
• The CAG report is a Compliance Audit of rounds 1 to 3 only, tabled on 10 August 2023.

Mains, arguments and keywords:

• Keywords: regional connectivity; viability gap funding; route sustainability; cooperative federalism; last-mile access; Atmanirbhar Bharat in aviation.
• Access gains are real (1.72 crore passengers; 90 priority routes in the North-Eastern States), but only 54 of 774 early routes outlived their three-year VGF.
• Modified UDAN shifts weight to aerodromes, O&M and tapered VGF; judge it by the routes that survive after support ends.
• Way forward: report route survival, frame rules for levy collection and remittance, and choose aerodromes and heliports by demand.

Interview, be ready for:

• “Is UDAN a success after ten years?” Give both sides with numbers: 1.72 crore passengers and 95 aerodromes, against the CAG’s 54 sustained routes; then say what Modified UDAN changes.

Revision Flowchart

Sources: PIB Backgrounder, “Wings of Change: 10 Years of Redefining Regional Air Connectivity through UDAN”, 20 October 2026. PIB, Ministry of Civil Aviation: UDAN launch release, 21 October 2016; Modified UDAN stakeholder workshop, July 2026; MoUs with 21 States and UTs, September 2026. PIB, Cabinet approval of Modified UDAN, March 2026. Comptroller and Auditor General of India, Report No. 22 of 2023 (Compliance Audit) on the Regional Connectivity Scheme UDAN. Union Budget 2025-26, Budget speech (para 67). MoCA, RCS-UDAN Manual 2021; AAI, UDAN scheme document, Version 5.5 (November 2024).

Source: UDAN Scheme Turns 10: VGF, CAG Audit and Modified UDAN — Ujiyari.com | Free UPSC & State PCS Current Affairs