REGIONAL CONNECTIVITY SCHEME - UDAN

RCS plans are to connect these underserved airports to key airports through flights that will cost Rs 2,500 for per hour flight.
Under RCS envisages to provide subsidy to airlines to offer these fares.
AAI would invest Rs 17,500 crore in upgrading airport infrastructure over a period till 2019-20.
Airports Authority of India (AAI) will connect 22 airports under regional connectivity scheme in the first phase.
22 airports include one is in Andaman Nicobar, three in Assam, two each in Gujarat, Uttar Pradesh, Punjab and Rajasthan.

The regional connectivity scheme will be applicable on route length between 200 to 800 km with no lower limit set for hilly, remote, island and security sensitive regions.
The Central government will provide concessions to the tune of 2 per cent excise on Value Added Tax (VAT) and service tax at 1/10th the rate and liberal code sharing for regional connectivity scheme airports.
A Regional Connectivity Fund (RCF) will be created to fund the scheme via a levy on certain flights. States are expected to contribute 20 per cent to the fund.
For balanced regional growth, allocations will be spread equitably across 5 regions – North, West, South, East and North East with a cap of 25 percent.
Market-based reverse bidding mechanism to determine least Viability Gap Funding (VGF) to select the airline operator with the right to match to the initial proposer.
VGF will be reduced if passenger load factor remains high and will be discontinued after 3 years when route becomes self.

Viability Gap Funding (VGF) : The fund provided for the projects that are not financially viable.

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