This document summarizes the Indian Ministry of Civil Aviation's response to Lok Sabha Unstarred Question No. 2014, answered on July 31, 2025, regarding supportive financial mechanisms for airlines.
The Ministry acknowledges that Indian airlines face challenges in raising airfares to cover increasing operational costs, but notes that airlines are free to set prices based on market demand, seasonality, and other market forces, as per Sub Rule 1 of Rule 135 of the Aircraft Rules, 1937.
To enhance regional air travel affordability, the government launched the Regional Connectivity Scheme-UDAN (RCS-UDAN) in 2016. This scheme offers financial incentives to airline operators on identified regional routes, including concessions from the Central Government, State Governments, Union Territories, and airport operators, all designed to lower operational costs. The scheme also provides Viability Gap Funding (VGF) to bridge the gap between operational costs and expected revenues on these routes. Airfares on RCS seats benefiting from VGF are capped for a 3-year period. These measures are intended to improve affordability, accessibility, and passenger convenience, fostering regional development and economic growth within the aviation sector.
Key Entities Referenced
Ministry of Civil Aviation: The Indian government ministry responsible for the formulation of national policies and programmes for the development and regulation of the Civil Aviation sector.
Shri Vishaldada Prakashbapu Patil: Member of Parliament who posed the question regarding supportive financial mechanisms for airlines.
Shri Murlidhar Mohol: Minister of State in the Ministry of Civil Aviation who provided the answer to the question.
Aircraft Rules, 1937: A set of rules governing air transport undertakings and tariff establishment in India.
RCS-UDAN scheme: A Government scheme launched in 2016 to ensure the affordability of regional air travel by providing financial incentives to airline operators on identified regional routes.
Viability Gap Funding (VGF): Financial support provided to bridge the gap between operational costs and expected revenues on regional air routes under the RCS-UDAN scheme.
Central Government: The executive branch of the government in India.
State Governments: The governments of the individual states within India.
GOVERNMENT OF INDIA
MINISTRY OF CIVIL AVIATION
LOK SABHA
UNSTARRED QUESTION NO. : 2014
st
(To be answered on the 31 July 2025)
SUPPORTIVE FINANCIAL MECHANISMS FOR AIRLINES
2014. SHRI VISHALDADA PRAKASHBAPU PATIL
Will the Minister of CIVIL AVIATION
be pleased to state:-
(a) whether the Government is aware that Indian airlines are experiencing
difficulties in increasing airfares to cover rising operational costs and if so, the
details thereof;
(b) whether there are any supportive financial mechanisms for the same and if so,
the details thereof; and
(c) whether there is any comprehensive strategic framework for aviation
affordability and if so, the details thereof?
ANSWER
Minister of State in the Ministry of CIVIL AVIATION
(Shri Murlidhar Mohol)
(a) : Under the provisions of Sub Rule (1) of Rule 135 of the Aircraft Rules, 1937,
every air transport undertaking engaged in scheduled air services is required to
establish a tariff having regard to all relevant factors, including cost of operation,
characteristics of services, the generally prevailing tariff etc. The prices are fixed
by airlines keeping in view the market demand, seasonality and other market
forces.
(b) & (c): To ensure the affordability of regional air travel, the Government has
launched the RCS-UDAN scheme in 2016. The Scheme provides financial
incentives to airline operators on identified regional routes that include concessions
by the Central Government, State Governments/ Union Territories and airport
operators to reduce airline operation costs and also the Viability Gap Funding
(VGF) to bridge the gap between operational costs and expected revenues on such
routes. The airfare on the RCS seats on which VGF is provided to the Selected
Airline Operators (SAOs) is capped for a 3-year tenure. The above measures aim to
strengthen affordability, accessibility and overall passenger convenience in the
aviation sector, thereby promoting regional development and economic growth.
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