A Kick-start For Regional Cargo?

The government’s decision to provide viability gap funding for cargo flights from regional to urban centres would not only boost the economy but help domestic cargo sector.

The Indian government’s initiative to connect to the last man saw the launch of the regional connectivity scheme UDAN (Ude Desh ka Aam Nagrik or “letting the common citizen of the country fly”). Some of the routes have not taken off – largely due to new airlines inability to acquire planes – even with the government providing financial help through what is known as viability gap funding (VGF). There have been three rounds of bidding for routes and at last count 688 routes had been awarded to airlines.

UDAN states that the civil aviation ministry contributes 80 percent of the VGF amount, while the remaining comes from the governments of the states the flights are from. Established carriers, however, like the low-cost SpiceJet has started connecting unserved and under-served airports at affordable prices – without taking the help of VGF. Under the UDAN plan, the government has fixed fares on flights to unserved and underserved destinations in the country at ₹2500/hour of flights.