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Some of the primary guiding principles of UDAN include:

a. Self-financing & sustainable nature: The Scheme is funded through a nominal levy
charged on certain domestic routes, hence creating a circular economy wherein funds from
the sector are used to benefit the sector itself. Recognizing the larger benefits of regional
connectivity, this levy was voluntarily agreed to by airlines.

b. State Government buy-in and cooperative federalism: It is a unique scheme wherein
various State/UT Governments have voluntarily extended their support to reap the benefits of
UDAN. MoUs have been signed with 30 States/UTs. Certain States such as Uttar Pradesh,
Madhya Pradesh, Odisha, Assam, Karnataka and Islands have introduced their own spin-off
schemes building upon the framework of UDAN to further enhance connectivity.

c. Market driven mechanism: The model for UDAN is market driven wherein airlines are
allowed to bid for routes and form their own networks so that it is amenable to their existing
operations and assessments of demand.

d. Sustainability in operations: UDAN also incorporates a sunset clause by limiting support to
a three year period. Airlines are encouraged to experiment with market determined airfares
on some of the seats so that routes can commercially take-off after the support period.

RCS-UDAN Scheme was formulated in the following manner:

Step1: Conceptualize:
Broad outline and guiding principles of the Scheme were formulated based on a review of NCAP,
review of a wide range of literature pertaining to similar programs implemented worldwide and
analysis of Indian Aviation Industry including the diverse operating models of airlines,
infrastructure facilities, policy and regulatory regime etc.

Step 2: Develop:
Key scheme features in the shape of multiple options for achieving the guiding principles enlisted
above were developed. A study of pros and cons of all the options was undertaken.

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