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UDAN Scheme and the Role of Viability Gap Funding (VGF)



  Aug 24, 2023

UDAN Scheme and Viability Gap Funding(VGF)


1. What is the UDAN scheme?

UDAN (Ude Desh ka Aam Nagrik) is a regional connectivity scheme launched by the Government of India to promote affordable air travel to underserved and remote areas of the country.
 

2. What is the objective of the UDAN scheme?

The primary goal of the UDAN scheme is to make air travel more accessible and affordable for the common people by connecting unserved and underserved airports across India.
 

3. How does the UDAN scheme work?

Under UDAN, airline operators are offered financial incentives and subsidies to operate flights on underserved routes and provide affordable airfare to passengers.
 

4. What are the benefits of the UDAN scheme?

UDAN enhances regional connectivity, boosts tourism, generates economic activity, and improves accessibility to remote areas, thereby contributing to overall development.
 

5. Who is eligible to participate in the UDAN scheme?

Both existing and new airline operators can participate in the UDAN scheme by submitting competitive bids to operate on identified routes.
 

6. How are the routes selected for the UDAN scheme?

Routes are selected through a bidding process based on the proposals submitted by airline operators. Priority is given to connecting underserved and unserved airports.
 

7. What kind of financial support is provided to airline operators under UDAN?

Airline operators receive financial support through a mix of Viability Gap Funding (VGF) from the government, reduced airport charges, and exclusive rights to operate on certain routes for a specific period.
 

8. How does UDAN contribute to tourism and local economies?

UDAN increases air connectivity to remote areas, making them more accessible to tourists and enhancing economic activities such as trade, agriculture, and tourism.
 

9. How has UDAN impacted the aviation sector in India?

UDAN has expanded air connectivity, increased passenger traffic, encouraged competition, and paved the way for smaller towns and cities to have better access to air travel.
 

10. How does UDAN align with the government's vision for aviation in India?

UDAN aligns with the government's goal of ensuring inclusive development by providing air connectivity to all citizens, irrespective of their location, and promoting regional economic growth.
 

11. What role does the Ministry of Civil Aviation play in implementing UDAN?

The Ministry of Civil Aviation is responsible for overseeing the implementation of the UDAN scheme and ensuring its successful execution.
 

12. How can passengers benefit from UDAN?

Passengers benefit from UDAN through affordable airfares, reduced travel time, improved access to healthcare and education, and increased convenience for business and leisure travel.
 
 

Viability Gap Funding (VGF)

 

Q1: What is Viability Gap Funding (VGF)?

Viability Gap Funding (VGF) is a financial support mechanism employed by the government to enhance the feasibility of projects that might not attract sufficient private investment due to their limited profitability.
 

Q2: Is VGF a Loan or Grant?

VGF is not a loan. It is a grant provided by the government. It bridges the financial gap between the project's total cost and the amount of private investment available. This grant is given to encourage private players to invest in projects that have public benefit but may not be immediately profitable.
 

Q3: How does VGF work?

When a project—such as infrastructure development or public services—needs financial support to become viable, the government provides VGF to cover the shortfall between the project's cost and private investments. This makes the project attractive to private investors and ensures its completion.
 

Q4: What is the goal of VGF?

The primary goal of Viability Gap Funding is to ensure that projects crucial for public welfare and infrastructure development get implemented, even if they aren't financially lucrative. It strikes a balance between encouraging private investment and fulfilling public needs.
 

Q5: What are the benefits of VGF?

VGF encourages private players to invest in projects that provide essential services and better facilities, benefiting the public. It helps in creating better infrastructure, promoting regional connectivity, and overall economic development.
 

Q6: In which sectors is VGF commonly used?

VGF is often used in sectors such as infrastructure development, transportation, and public services. For instance, in the aviation sector, VGF can be used to incentivize airlines to operate on routes that might not be immediately profitable but contribute to better regional connectivity.
 

Q7: How does VGF contribute to public welfare?

VGF ensures that projects with social and economic benefits, which might not attract sufficient private investment, still get completed. This helps in improving overall public infrastructure, accessibility, and services.
 

Q8: How is VGF different from a loan?

Unlike a loan, Viability Gap Funding does not need to be repaid. It is a grant provided by the government to make projects more attractive to private investors and bridge the financial gap for their successful implementation.
 

Q9: Does VGF encourage private investment?

Yes, VGF encourages private investment by reducing the financial risk for private players. It assures them that their investment is backed by government support, making them more willing to participate in projects that have broader public benefits.


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