To enhance regional air connectivity, Centre will launch a modified UDAN (Ude Desh ka Aam Naagrik) scheme to connect 120 new destinations as well as ferry four crore passengers in the next 10 years, proposed Finance Minister Nirmala Sitharaman in Union Budget FY26 speech.

businessline was first to report that Finance Minister is considering to propose the new iteration of the scheme, unofficially known as “UDAN 2.0” which intends to provide a cost-effective means to develop and operate over 100 underutilised airstrips in the country.

In her budget speech, Sitharaman said the scheme will also support helipads and smaller airports in hilly, aspirational, and North East region districts.

Since its inception, the scheme has facilitated the travel of around 1.5 crore passengers across more than 2.8 lakh flights.

The scheme has operationalised 619 routes, including helicopter routes, while the number of operational airports in the country has doubled from 74 in 2014 to more than 157 in 2024.

As of now, the market-driven model of the first UDAN scheme allowed airlines to assess demand on specific routes and submit proposals during bidding rounds.

The scheme incentivises the creation of new airports as well as refurbishment and expansion of existing facilities, besides, airlines are supported to connect underserved regions by offering them Viability Gap Funding (VGF) and various concessions provided by airport operators, the Central, and State governments.

Greenfield Airport in Bihar

Besides, Sitharaman proposed to facilitate the development of greenfield airports in Bihar to meet the future needs of the state.

“These will be in addition to the expansion of the capacity of Patna airport and a brownfield airport at Bihar,” she said on Saturday.

Warehousing facility for air cargo

Furthermore, the finance minister proposed that the Centre facilitate the upgradation of infrastructure and warehousing for air cargo, including high-value perishable horticulture produce.

“Cargo screening and customs protocols will be streamlined and made user friendly,” Sitharaman said.

Budgetary allocation

In terms of budget FY26 estimates (BE FY26), the allocation for the older version UDAN scheme in the Union budget FY26 has been pegged at Rs 540 crore, which is far lower than the scheme’s grant of ₹800 crore given in the revised estimate (RE) of FY25. Nevertheless, on a year-on-year basis, the allocations are marginally higher by three per cent from ₹502 crore allocated in BE FY25.

Besides, the outlay for the Airports Authority of India, which is responsible for creating new airports and maintaining, refurbishing, or expanding existing facilities, has been pegged at Rs 4,193.83 crore (BE FY26), which will be accrued from internal resources, whereas the same was kept at Rs 3,912.92 crore RE in FY25.

The outlay target for AAI assumes significance since a majority of this fund is used in the erection of airports in tier-II and III cities. These airports play a major part in the UDAN scheme as a point of last-mile connectivity via air travel.

Overall, the Ministry of Civil Aviation’s budgetary allocation was raised to Rs 2,400.31 crore BE FY26 from Rs 2,357.14 crore BE FY25. The allocation includes provisions for central sector schemes or projects, establishment expenditures of the Centre, and other central sector expenditures.

Industry welcomes budget announcements

Citing the budget as forward-looking, Ajay Singh, Chairman and Managing Director of SpiceJet, said it is a middle-class-friendly budget that promises to boost spending, stimulate development, and set the stage for India’s growth in the coming years.

“With the launch of a modified UDAN scheme that will introduce 120 new destinations and bring four crore additional passengers into the fold over the next decade, the aviation landscape in India is set for a transformative shift. This initiative will not only make air travel more accessible to remote regions but will also drive economic growth and tourism, further empowering local economies,” Singh was quoted as saying.

According to Vinay Dube, Founder and CEO, Akasa Air, the Union Budget 2025 marks a significant step in supporting the sustained growth of India’s aviation sector.

“We commend the government’s commitment to infrastructure which will make air travel more accessible, thereby boosting tourism and the economy on the whole.

Aligned with the vision of Viksit Bharat 2047, this focus on aviation strengthens India’s position as a global hub, ensuring greater mobility for all and contributing to a more connected, inclusive nation,” Dube said.

In addition, Star Air said that the success of this expansion will depend on the seamless execution of new routes and a stronger focus on helping airlines manage operational costs more efficiently.

“Ensuring sustainability in regional connectivity is essential for long-term success,” the airline said.

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