Building on the framework of UDAN 1.0, UDAN 2.0 shifts its focus to scale, accessibility, and above all, operational sustainability, note Pushan Sharma, Mohit Adnani and Jagruti Mahapatra.
The Government of India announced
Ude Desh ka Aam Nagrik (UDAN) 2.0 regional connectivity scheme on March 25, earmarking a capital of `288.4 billion to develop 100 new airports and 200 helipads over fiscals 2027-36. The latest
regional connectivity scheme
considerably builds on UDAN 1.0, which had an outlay of `85.23 billion and was implemented over fiscals 2017-26.
Also, as compared with UDAN 1.0’s primary focus on enhancing regional connectivity by incentivising airlines through route-based viability gap funding (VGF), fare caps and revival of unserved or underserved airports, and strong emphasis on expanding network reach, UDAN 2.0 adopts a more holistic approach, such as dedicated allocations towards airport operation and maintenance (O&M) (9 per cent) to ensure continued operations on UDAN airports, development of helipads (13 per cent) for serving underserved and far off regions, extended viability gap funding (VGF) support (35 per cent) for sustaining thinner routes, and acquisition of indigenously manufactured aircraft (1 per cent) to strengthen domestic aircraft manufacturing capabilities, apart from the core initiative of developing airports (42 per cent).
The diversification in allocation also signals a recognition of the challenges faced in earlier rounds of the scheme, particularly related to route sustainability and airline participation. Higher allocation towards VGF and operational support suggests a continued need to bridge the viability gap for thin routes, especially in low-density markets. At the same time, incremental investments in helipads and smaller infrastructure formats indicate a push towards multimodal regional connectivity, where fixed-wing aircraft may not always be operationally feasible. This layered approach is expected to improve network depth rather than just network breadth.
Hence, UDAN 2.0 represents a step-up in both scale and scope, shifting from a connectivity initiative to a structural aviation infrastructure programme.
Last-Mile Connectivity
Since its launch, UDAN has played a role in enhancing last-mile connectivity, particularly across underserved and unserved regions. Under 1.0, 79 new airports have been operationalised, significantly increasing the overall airport base in the country to 163 in fiscal 2026 from 77 in fiscal 2016. Consequently, the share of UDAN airports in total airports has increased to 58 per cent from 21 per cent over the period.
This expansion in operational airports has significantly altered the supply landscape of Indian aviation, increasing the number of potential origin-destination pairs across the country. However, the conversion of infrastructure into sustained traffic remains contingent on airline capacity deployment and demand stimulation, coupled with continuous O&M for airports. While airport count has increased materially, utilisation levels across several UDAN airports remain relatively low, indicating that infrastructure creation alone does not immediately translate into traffic generation. This reinforces the importance of coordinated growth between airport infrastructure, airline capacity, and regional economic activity, as well as maintenance of these airports, where UDAN 2.0 stands out by carving out a separate allocation for O&M of these airports.
Under UDAN 1.0, connectivity gaps across all the length and breadth of the country were progressively addressed by bringing several previously underserved and remote locations onto the aviation map, with a strong focus on the Northeast (e.g., Arunachal Pradesh, Assam and Meghalaya), the Himalayan states (Himachal Pradesh and Uttarakhand) and parts of Eastern India, including Odisha, Jharkhand and Bihar.
The western and southern regions saw improved connectivity to Tier-2 and 3 cities as well, though these were relatively better served to begin with.
While UDAN airports now account for nearly 58 per cent of airports in India, these typically have limited flight operations. Despite this expansion, UDAN airports have contributed a relatively small share to total domestic passenger traffic, ranging from 2 to 3 per cent. However, their importance has been more structural than volumetric. The share increased from 0.7 per cent in FY2017-18 to a peak of 3.4 per cent during FY2021-22, before moderating to 2.3 per cent in FY2025. The higher share during the COVID-19 period highlights the role of UDAN routes in maintaining essential connectivity to underserved destinations used by migratory traffic when broader aviation demand was impacted.
The moderation in traffic share post-FY2021-22 also reflects normalisation in broader aviation demand, where metro and trunk routes recovered faster with the return of business and leisure travel. In comparison, regional routes, while essential, tend to have lower frequency and capacity, limiting their share in overall traffic despite strong percentage growth. This indicates that while UDAN has been effective in enabling access, its contribution remains structurally constrained by aircraft size, route economics, and demand density in smaller markets.
From an investment perspective, UDAN’s share in total airport capex has historically remained limited at 2-5 per cent. Under UDAN 2.0, this is expected to double with the increase, meaningfully moving up the share to 6 per cent over FY2027-31, driven by the higher capital outlay, signalling a stronger push towards regional infrastructure development.
Rising Airport Capex
The anticipated increase in UDAN’s share of airport capex over the medium term aligns with India’s broader infrastructure push, where regional connectivity is seen as a key enabler of economic decentralisation. Improved air connectivity can enhance access to markets, tourism, healthcare, and education in remote regions, thereby contributing to more balanced regional development. As such, investments under UDAN are likely to have multiplier effects beyond aviation, supporting local economies and improving overall accessibility.
Among all UDAN-enabled airports, only Hindon and Kannur have uniquely surpassed the 1 million annual passenger mark in FY2025-26. This milestone was achieved primarily due to increased capacity deployments by airlines, indicating the effectiveness of the UDAN scheme in stimulating demand and supporting significant traffic ramp-up at these locations. This demonstrates that increasing capacity deployment can directly lead to higher passenger numbers, highlighting the importance of continued investment in infrastructure and airline operations. Passenger traffic scaled up at these airports largely because they serve broader catchment areas.
UDAN 2.0 is expected to deepen connectivity in yet underserved pockets, particularly in the Northeast and northern hilly terrains, along with remote and aspirational districts in central and eastern India. Additionally, the scheme is likely to enhance last-mile access in island and coastal regions, such as Andaman and Nicobar, and Lakshadweep, and expand helicopter and small aircraft connectivity in challenging terrains, thereby shifting the focus from broad regional coverage to more granular, last-mile and terrain-specific connectivity gaps.
Another encouraging factor is the passenger traffic at UDAN and regional airports, which have sharply increased post-COVID (i.e., FY2020-25), significantly surpassing the national average. While overall India passenger traffic grew 1.2x over the period, several regional airports have recorded growth in multiples. Agra, Hindon and Tezpur airports have seen exponential growth (7-10x), whereas Jalgaon, Bhuj and Diu have grown 3-5x. This indicates that traffic recovery and growth have been much stronger at smaller, underserved airports, albeit on a lower base.
The disproportionately high growth observed at smaller airports should also be viewed in the context of a low base effect, where even modest increases in absolute
traffic translate into high percentage growth. Nevertheless, the trend reinforces the latent demand potential in underserved regions,
which can be unlocked through consistent capacity deployment and improved connectivity. Over time, sustaining this growth will require a transition from dependence on VGF-supported routes to more commercially viable operations.
The trend highlights the impact of UDAN in stimulating demand and improving connectivity in Tier-2 and 3 cities, where incremental capacity deployment has led to disproportionately higher traffic growth vs the overall aviation market.
Strengthening Regional Aviation
Going forward, while the share of passenger traffic from UDAN routes is expected to be broadly stable, the continued expansion in airport infrastructure and route connectivity is likely to further strengthen India’s regional aviation network by adding more underserved airports and making air travel accessible to the wider Indian populace, while also enabling airlines to expand their network post-developing routes aided by the VGF funding. The support for the acquisition of indigenous regional aircraft should also aid in improving passenger numbers under the UDAN scheme.
From a structural standpoint, UDAN 2.0 is positioned to play a critical role in shaping the next phase of India’s aviation growth story, particularly as the industry moves towards a more distributed network model. With increasing aircraft orders by Indian carriers and a growing focus on Tier-2 and 3 markets, regional connectivity is expected to become an integral part of airline network strategies.
The scheme’s success will depend on sustained policy support, efficient execution, and alignment between infrastructure development and airline economics.
UDAN 2.0, therefore, represents a continuation of the existing framework, with an increased focus on scale, accessibility and operational sustainability.
About the author
Pushan Sharma, Director; Mohit Adnani, Associate Director; and Jagruti Mahapatra, Analyst, Crisil Intelligence.