The civil aviation ministry has announced to cap on air ticket prices and viability gap funding (VGF) under the Ude Desh ka Aam Naagrik (UDAN) scheme would be revised quarterly.
Viability gap funding is the grant or subsidies that government offers to support a project which is economically justified but get stalled due to lack of funding.
Air fares will be revised on the basis of inflationary trends while VGF would be revised after taking inflation, cost of aviation turbine fuel and the rupee-dollar exchange rates into consideration.
“While the airfare cap will be indexed to inflation, the VGF caps as well as VGF amounts determined for specific routes will be indexed to ATF prices and exchange rate of rupee vis-a- vis dollar in addition to inflation,” the ministry said.
Last month, Prime Minister Narendra Modi inaugurated the first Shimla-New Delhi flight under UDAN scheme to boost regional air connectivity.
With the regional connectivity scheme, also called UDAN, the government aims to connect 45 un-served and under-served airports and make flying affordable by capping fares at Rs 2,500 per seat per hour.