Regional Connectivity Scheme receives an allocation of ₹502 crore for the Financial Year 2024-2025
Upstox
3 min read • Updated: February 1, 2024, 4:16 PM
Summary
The Union Budget for FY 2024-2025 allocates ₹502 crore to the Regional Connectivity Scheme (RCS), a decrease from last year's ₹1,244 crore. The RCS aims to enhance connectivity, especially in remote areas, and stimulate growth in the aviation sector. Despite challenges like limited industry capacity and fuel price surges, the government remains committed to RCS-UDAN's viability. The allocation will focus on reviving airports and initiating operations on 100 RCS routes. While the interim budget sets the tone, anticipation surrounds the full-year budget post-elections for a clearer view of allocations and plans.
Key takeaways:
- The Union Budget 2024-2025 proposes allocation of ₹502 crore for the Regional Connectivity scheme as opposed to the ₹1,244 crore allocated last year.
- The allocation will be put towards fulfilling the government’s aim of reviving 22 airports and 100 RCS routes
As part of the Union Budget for the financial year 2024-2025, the Finance Minister announced that the Regional Connectivity Scheme (RCS) would receive an allocation of ₹502 crore. The allocation for FY25 is a drop from the amount allocated during the last financial year, which was to the tune of ₹1,244 crore. Out of the amount allocated, ₹850 crore was spent as per Revised Estimates.
Regional Connectivity Scheme: An overview
The Regional Connectivity Scheme (RCS), also known as UDAN (Ude Desh Ka Aam Nagrik), is a government-led initiative that aims at improving connectivity across India, especially in remote and under-served areas by setting up adequate and effective infrastructure. Launched by the Ministry of Civil Aviation, the scheme emphasises streamlining unused air routes leading to remote areas of the country, making air travel easier for citizens.
One of RCS-UDAN’s primary aims is to create growth in the aviation industry and develop a sustainable business model. To that end, the scheme has generated a demand for aircraft of various sizes and capacities. Along with increasing accessibility and connectivity to tier-2 and tier-3 cities, RCS-UDAN also contributes to the ever-growing tourism industry in India. In the Union Budget 2024-2025 speech, the Finance Minister revealed that RCS-UDAN has facilitated air travel for 1.3 crore passengers and operationalised around 517 routes.
What the FY25 Budget allocation for the Regional Connectivity Scheme signify?
Post-pandemic, India’s air travel numbers have surpassed pre-COVID-19 numbers and tourism has once again become a significant contributor to the economy. With that in mind, the government is looking to boost passenger footfalls and increase air routes to better regional connectivity. To that end, RCS-UDAN has received an allocation of ₹502 crore under the Budget FY25.
As per the Interim Budget for FY24, the Finance Minister had allocated ₹1,244 crore towards RCS-UDAN. This amount was double what was allocated to the scheme in FY23. The funds allocated in the last financial year were to be used to revive 22 airports and begin operations on 100 RCS routes. As of December 2023, the government had managed to execute the initiation of operations on 40 RCS routes and revive three airports. Experts have attributed various reasons as to why the government’s plans could not be fulfilled in their entirety. Limited capacity in the industry, the collapse of an airline, large-scale elections and surging fuel prices were some of the factors that created an uncertain landscape within which new RCS routes and airports could not be worked on.
However, experts have maintained that the government remains confident in the viability of the RCS-UDAN scheme, especially with newer entrants like JettWings Airways, FlyBig, and FLY91 entering the market. Industry insiders are hoping that the allocated amount will be used to boost capacity expansion and expedite another round of airport privatisation.
Conclusion
It’s pertinent to note that the Finance Minister has only announced the interim budget as of now. All eyes are on the full-year budget to be announced post-elections for a more comprehensive and firmer grasp of allocations.