The flagship regional connectivity scheme, UDAN 4.2 will see the award of 132 new routes with special focus on sea plane and helicopter routes, the Union Minister for Civil Aviation and Steel, Jyotiraditya Scindia, said.
The UDAN scheme, according to him, benefited over 1.1 crore passengers and given a fillip to connectivity across smaller towns, that were previously unheard of.
In an interview to businessline, Scindia talks about the UDAN 4.2, success of the scheme so far and the new ATF pricing mechanism that seeks to protect airlines from price volatility. Excerpts:
What is the update on UDAN 4.2?
Under UDAN 4.2, bids have been declared; and I think roughly we had put out 150-odd routes. Some 132 bids have been received and awarded. What was done this time around was that we introduced a larger proportion (of the routes) for both helicopters and sea planes. We have about 19 or 20-odd helicopter routes and about 50-odd seaplane routes in this bouquet. And the awarding of most of these routes have already occurred. The minutes should be out soon in the next couple of days.
It is being said, many of the existing routes close down after the completion of the 3-year viability gap funding period. Your comments.
That’s not true. We have 453 routes that are today on on-board. Some of the routes have closed down but that’s more on account of either the airline operator shutting down itself; or some of them having their time period of three years having expired.
(But) many of them actually even post expiry of the three-year time period where the VGF is applied, are still flying. And those routes have become permanent, which talks of the success of the UDAN scheme.
If you look at the history of UDAN from 2016, we’ve flown 1.1 crore passengers and 2.15 lakh flights. We have built out 70 airports, waterdromes and heliports. We created 11 new airlines, out of which three have been start-ups. So the track record of what UDAN has created in terms of value for the country is tremendous.
Some airports, which you and I would have never dreamt would ever exist or be created in our country have been created, because of UDAN.
Whether you look at Dharbhanga (Bihar) or Jharsuguda (Odisha) or Rupsi (Assam) or even Kishangarh (Rajasthan), all of them were possible only because of UDAN. And they are all offering offering tremendous amount of passengers today. Darbhanga, for instance witnesses almost 5.50 lakh passengers per year. So, the robustness of this scheme is tremendous.
The Ministry hiked regional connectivity scheme (RCS) levy on domestic carriers. Won’t this affect the scheme or lead to further volatility in ticket prices?
I do believe that the increase in (RCS) levy is a spread over a large number of customers. And I don’t think it will account for huge volatility in terms of pricing. But what it does do is that it provides connectivity to hitherto underserved or un-served airports in the history of India’s existence. Therefore, the fillip that is provides to those who have possibly never had the opportunity to fly ever in their lives before is tremendous.
In terms of jet fuel pricing, India moved to the Mean of Platts Arab Gulf (MoPAG) index. What prompted this moved?
Yes (indexing has changed). ATF follows a pricing of the base of crude within India. And generally, the crack between the price and the cost to companies has been roughly about $12 or so. But lately during the pandemic, the volatility and the crack assumed gargantuan proportions. And that led to huge amounts of risk and vicissitudes with regard to ATF pricing for airlines.
I must thank both the Ministry of Petroleum and Natural Gas, including my colleague HS Puri, and the OMCs (oil marketing companies), who have worked together with the Ministry of Civil Aviation, to come up with this formula wherein the volatility has been reduced. Now, there’s been a band that’s been introduced for the crack, and it’s between $12 and $22; thereby reducing volatility for airlines. And this is already put in place as we speak.
I do believe that 11 major airports came on-board in October, and all other airports have come on board from the first of November, in terms of this pricing of the upper and lower bands for the crack as far as oil-pricing is concerned.