Economic Highlights

New Delhi, 30 March 2026

High Fuel, No User Grounds UDAN

BUILD RAIL, NOT RUNWAYS

By Shivaji Sarkar 

At a critical time of fuel scarcity, the push to the nearly a decade-old India’s Regional Connectivity Scheme—UDAN (Ude Desh ka Aam Nagrik)—is confronting a hard truth: aviation cannot be socially engineered into viability. 

Despite a renewed push involving tens of thousands of crores in public spending— now again allocated Rs 28,840 crore in expanded commitments—the scheme’s structural weaknesses are becoming more pronounced, not less. The country needs to review the policy as railway and regional metro transit are serving better. 

The bus services are becoming scarce even in cities like Delhi, which has the lowest number of 1300 DTC buses now. Most regions – Bengal to Gujarat - are suffering because of vehicle-scrapping policies, instead of incentivising proper maintenance and diesel junking in favour of high-cost low-utility battery buses with far shorter life, often said to reach half-life in four years.  

What was conceived as a democratisation of air travel risks turning into a cautionary tale of misplaced priorities. Even in the North-East with a difficult terrain could not succeed as most operators ceased services. The reason no different from other areas – routes could not attract enough passengers. 

Between 2020 and March 2026, India saw multiple fatal helicopter and small aircraft crashes involving military, government, and pilgrimage services. Major incidents include 2022 Pawan Hans accident in the Arabian Sea, and several 2025 crashes in Uttarakhand’s Kedarnath sector killing multiple pilgrims. 

The region has seen repeated accidents due to difficult terrain, unpredictable weather, and heavy traffic. Common causes include Controlled Flight into Terrain (CFIT) and low visibility. Authorities have periodically suspended services and tightened safety norms, but risks remain significant as the latest Baramati accident of a private company plane killing Maharashtra minister Ajit Pawar shows. 

Infrastructure Without Passengers

UDAN’s premise was simple: build airports, subsidise airlines, and demand will follow. But aviation demand does not arise from infrastructure alone. It is a function of income, business activity, and time sensitivity. 

Many small airports revived under the scheme remain underutilised or intermittently operational. Seven airports were closed in Uttar Pradesh alone. Ayodhya airport has hardly any commercial flight. The reason is straightforward—passenger volumes are too low. India’s air traffic continues to be concentrated along major metro and high-density routes, while Tier-III towns lack the economic base to sustain regular flights.Even where routes exist, load factors remain weak. Aircraft often fly half-empty, making operations commercially unviable despite subsidies. 

The Broken Economics of Small Aircraft

Regional aviation depends on turboprops and small aircraft. These planes are ideal for short runways but are significantly more expensive per seat than larger jets.It has been surviving on viability gap funding by the government (VGF), which now again is extended by Rs 10,042 crore. Airlines grumble that the payments are delayed and say subsidies cannot compensate indefinitely for poor economics. 

Smaller airlines operating these routes have struggled with thin margins, high maintenance costs, and low yields.Many have either exited or reduced operations. In several cases, routes survived only when taken over by larger carriers deploying bigger aircraft—defeating the purpose of regional connectivity. 

The Fuel Shock: Iran War Changes the Equation

If UDAN was already fragile, the ongoing Iran conflict has exposed its vulnerability.The war has disrupted global energy flows and pushed up aviation turbine fuel (ATF) prices, which already account for 30–40% of airline operating costs.Since early March 2026, fuel prices have surged due to supply disruptions, forcing Indian airlines such as Air India, IndiGo, and Akasa Air to impose fuel surcharges. 

For regional aviation, this is devastating. Small aircraft operations are highly fuel-sensitive. Unlike major carriers, regional operators lack the financial strength to absorb shocks or hedge fuel costs. In effect, the Iran war has not just increased costs—it has rendered the UDAN model even more unsustainable. 

Rising Costs, Falling Demand

The crisis is not limited to fuel. Currency depreciation, maintenance costs, and insurance premiums have all risen, adding pressure on airlines.At the same time, passenger growth has slowed. India’s aviation sector is expected to incur losses of up to Rs 10,500 crore in FY2026 due to high costs and subdued traffic. 

This combination—rising costs and weak demand—is lethal for regional routes. Airlines respond predictably: cut frequencies, withdraw from routes, or avoid smaller airports altogether.UDAN, designed in a low-cost, high-growth environment, is now operating in a high-cost, uncertain one. 

Uniform Pricing, Unequal Pain

One of the most overlooked flaws of the scheme is its pricing distortion. Subsidised fares and flat cost structures do not reflect market realities.In practice, small exporters, low-income passengers, and thin routes bear disproportionate burdens. When costs rise—especially fuel—there is little flexibility to adjust pricing without killing demand altogether. It also compromises with safety in a fragile ecosystem. 

Connectivity vs Viability: Rail vs Air

The government’s response to UDAN’s shortcomings has been to expand—adding over 100 destinations, more helipads, and committing large public funds. Yet expansion does not fix viability; it spreads inefficiency. Each new airport brings fixed costs—maintenance, staffing, security—without assured passenger traffic, risking underused assets turning into liabilities. The real question is not whether UDAN can grow, but whether it should. 

India’s connectivity needs are undeniable, but aviation is not always the best solution. For distances of 300–800 km, railways—especially trains like Vande Bharat Express—offer faster, cheaper, and more energy-efficient travel. Railways carry more passengers, require less investment, and integrate better with local transport systems. Strengthening rail links between Tier-II and Tier-III cities could yield far higher returns than building idle airports. 

At its core, UDAN reflects a policy contradiction: treating aviation as a public good while expecting private airlines to operate profitably on weak routes. This has led to a cycle of expansion, underperformance, and repeated funding. With rising fuel costs, safety concerns, and weak demand, regional aviation cannot survive on subsidies alone. In many cases, the answer lies not in more flights—but in better trains. 

A more rational approach would prioritise economic viability over geographic coverage, and invest where demand already exists—or can realistically emerge.In many parts of India, that may not mean more flights.It may simply mean better trains.---INFA 

(Copyright, India News & Feature Alliance)