Regional Connectivity Scheme (RCS or the Scheme) Ministry of

Regional Connectivity Scheme

(RCS or the Scheme)

Ministry of Civil Aviation,

Government of India

Version 4.0 – November 2019

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Contents 
 
Scheme Objectives and Guiding Principles ..................................................................... 5 
1  Background ............................................................................................................. 5 
2  Scheme Objective ................................................................................................... 7 
3  Guiding Principles of the Scheme ........................................................................... 7 
4  Definitions .............................................................................................................. 8 
Features of the Scheme ................................................................................................. 14 
1  Key Constructs...................................................................................................... 14 
2  Airports / Water Aerodromes / Helipads to be covered under the Scheme ............. 19 
3  Airfare Caps .......................................................................................................... 20 
4  Aircraft Categories ................................................................................................ 21 
5  VGF Cap............................................................................................................... 21 
6  RCF Allocation ..................................................................................................... 24 
7  ASKMs on RCS Flights ........................................................................................ 25 
8  Exclusivity of operations ....................................................................................... 25 
9  Miscellaneous ....................................................................................................... 26 
Operating Mechanism of the Scheme ............................................................................ 27 
1  Introduction .......................................................................................................... 27 
2  Eligibility Criteria for Proposals ............................................................................ 27 
3  Minimum Performance Specifications for an RCS Flight ...................................... 29 
4  Submission of Initial Proposals ............................................................................. 30 
5  Network Proposal.................................................................................................. 31 
6  Proposal submission requirements ......................................................................... 32 
7  Identification of RCS Routes as part of Initial Proposal(s) ..................................... 34 
8  Selection of proposals for counter bidding............................................................. 35 
9  Invitation of Counter Proposals ............................................................................. 36 
10  Evaluation of proposals and Applicant selection .................................................... 37 
11  Evaluation of Financial Proposal for an Individual Route Proposal ....................... 38 
12  Evaluation of Financial Proposals for a Network Proposals ................................... 39 
13  Evaluation of Financial Proposals for Simultaneous Proposals .............................. 40 
14  Right to Match ...................................................................................................... 42 
15  Performance Guarantee ......................................................................................... 44 
16  Change in deployed capacity ................................................................................. 45 
17  Prioritisation Framework ....................................................................................... 48 
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3 
3.18  Exit from the Scheme ............................................................................................ 49 
3.19  Reporting Obligations for a Selected Airline Operator .......................................... 49 
3.20  Disbursement of Funds ......................................................................................... 50 
Annexure – 1A: List of Underserved Airports / Airstrips in the country .............................. 52 
Annexure – 1B: List of Unserved Airports / Airstrips in the country.................................... 53 
Annexure – 1C: List of Water Aerodromes ......................................................................... 58 
Annexure  –  1D:  List  of  airports  in  areas  other  than  Priority  Area(s)  that  would  support 
operation of Category 1A aircraft ........................................................................................ 59 
Annexure – 2: Airfare Cap under RCS ................................................................................ 63 
Annexure – 3: VGF Cap under RCS .................................................................................... 65 
Annexure – 4: Airfare Cap Indexation Formula ................................................................... 68 
Annexure – 5: VGF Cap Indexation Formula ...................................................................... 71 
Annexure – 6A: List of airports under prioritization framework .......................................... 72 
Annexure – 6B: List of select routes received under previous rounds of UDAN connecting 
airports mentioned in Annexure 6A ..................................................................................... 73 
Annexure  –  7  List  of  routes  proposed  to  be  connected  by  State  Governments  or  other 
agencies .............................................................................................................................. 75 
Annexure – 8: List of North Eastern Region (NER) Routes ................................................. 82 
 
   
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List of Abbreviations

i. AAI: ....................................................................................... Airports Authority of India

ii. AOP: ................................................................................................ Air Operator Permit

iii. ASF: ............................................................................................... Aviation Security Fee

iv. ATF: .............................................................................................. Aviation Turbine Fuel

v. CPI: ................................................................................................ Consumer Price Index

vi. DF: ....................................................................................................... Development Fee

vii. DGCA: .................................................................... Directorate General of Civil Aviation

viii. GDP: .......................................................................................... Gross Domestic Product

ix. GST .............................................................................................. Goods and Service Tax

x. ICAO: .............................................................. International Civil Aviation Organization

xi. INR: ........................................................................................................... Indian Rupees

xii. IT: .............................................................................................. Information Technology

xiii. MoCA: .................................................................................... Ministry of Civil Aviation

xiv. NCAP: .............................................................................. National Civil Aviation Policy

xv. PLF: ............................................................................................. Passenger Load Factor

xvi. PSU: ........................................................................................ Public Sector Undertaking

xvii. RCF: ..................................................................................... Regional Connectivity Fund

xviii. RCS: ................................................................................. Regional Connectivity Scheme

xix. RDG: ..................................................................................... Route Dispersal Guidelines

xx. RNFC: ........................................................................ Route Navigation Facility Charges

xxi. RTM: ....................................................................................................... Right To Match

xxii. TNLC: .................................................................. Terminal Navigation Landing Charges

xxiii. UDF: ............................................................................................ User Development Fee

xxiv. VAT: .................................................................................................... Value Added Tax

xxv. VGF: ............................................................................................. Viability Gap Funding

xxvi. SAO ……………………………………………………..Selected Airline

Operator

xxvii. CAR……………………………………………….………Civil Aviation Requirement

xxviii. NEC…………………………………………………….…….North Eastern Council

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1 Scheme Objectives and Guiding Principles

1.1 Background

1.1.1 The Ministry of Civil Aviation (MoCA), Government of India released the

National Civil Aviation Policy 2016 (NCAP 2016). One of the objectives of

NCAP 2016 is to “enhance regional connectivity through fiscal support and

infrastructure development”.

1.1.2 As per an ICAO study - “Economic benefits of civil aviation: ripples of

prosperity”, the output and employment multipliers of aviation are 3.25 and

6.10 respectively. This implies that every 100 Rupees spent on air transport

contributes to 325 Rupees worth of benefits, and every 100 direct jobs in air

transport result in 610 jobs in the economy as a whole. In fact, the study

attributes over 4.5% of the global Gross Domestic Product (GDP) to civil air

transport.

1.1.3 As the Indian economy grows, consumption-led growth in populated metros

is expected to spill over to hinterland areas. This is also expected to be on

account of factors of production (land, labor, etc.) becoming costlier in the

densely populated metro cities. In this scenario, air connectivity can provide

required impetus to the economic growth of regional centers (towns / cities).

1.1.4 In this context, one of the key objectives of NCAP 2016 is to “establish an

integrated eco-system which will lead to significant growth of civil aviation

sector, which in turn would promote tourism, increase employment and lead

to a balanced regional growth”.

1.1.5 NCAP 2016 also seeks to sustain and nurture a competitive market

environment in the civil aviation sector. While it would be best for growth in

the sector and establishment of regional air connectivity to materialize

through open market mechanisms in terms of airlines assessing demand on

various routes, developing networks through deployment of appropriate

capacities & technologies, infrastructure developing in sync with demand,

etc. it was felt that facilitating / stimulating regional air connectivity would

be desirable from a public policy perspective and may need financial

support, at least in the initial period, to trigger participation of players. It is

in this context that NCAP 2016 provides for a Regional Air Connectivity

Scheme (RCS or the Scheme).

1.1.6 The operation of the Scheme is proposed to be through a market mechanism

where operators will assess demand on routes; submit proposals for

operating / providing connectivity on such route(s); seek VGF, if any, while

committing to certain minimum operating conditions; and the same shall be

This document is not a contract and does not create any enforceable rights and obligations. Terms and conditions of

operations under the scheme would be contained in a suitable contract to be signed between the Implementing Agency and the

Selected Airline Operator.

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finalized in interaction with other market participants as provided for in this

Scheme.

1.1.7 MoCA acknowledges that different / same aircraft operated by different

operators for the same stage lengths can have different cost of operations

because of differences in inherent economics of aircraft types for various

stage lengths, cost of operations specific to operators in terms of various

business parameters such as business models, fleet utilization, scale of

operations, etc. Specification of (normative) VGF Caps upfront has,

therefore been considered important to ensure transparent operation of a

market based mechanism under this Scheme rather than through

determination subsequent to receipt of varied proposals.

1.1.8 While, it is the intent and focus of the Scheme that operation of a market

based mechanism facilitates discovery of the optimum VGF requirements

within specified VGF Caps, MoCA recognizes that in certain cases it is

possible that a market based discovery of optimum VGF requirements may

not happen due to lack of competition / uncertainty in market conditions and

ex-post, the specified (normative) VGF Caps may end up seeming to be

higher than the actual VGF requirement in future on account of factors like

higher airfares for Non-RCS Seats, higher load factors, etc. Given that the

focus of the Scheme is to provide air connectivity where it does not exist, the

quantum or probability of such eventualities / outcomes in future cannot be

ascertained by MoCA and potentially even the market ex-ante on account of

the multiplicity of unascertainable factors. Further, the Scheme is premised

on and continuing to encourage an open market mechanism where operators

will be assessing demand on routes, developing networks through

deployment of appropriate capacities & technologies, and take risks on

account of factors like marketing of capacities, realizable demand, effect of

ATF prices on costs / fares for Non-RCS Seats, etc. Accordingly, in

consultation with stakeholders, MoCA recognizes that the risks retained with

the operators have to be seen in their entirety.

1.1.9 MoCA had earlier released three versions of the Scheme, in December 2016

(“Version 1.0”), in September 2017 (“Version 2.0”), and in October 2018

(“Version 3.0”). Subsequently, MoCA and AAI conducted bidding processes

and awarded a number of RCS Routes to the Selected Airline Operators. It is

hereby clarified that the provisions contained under this Scheme document

shall be applicable to:

1.1.9.1 any bidding process which may be conducted by MoCA, the

Implementing Agency or the RCS Trust, as the case may be; and

1.1.9.2 any Selected Airline Operator Agreement and any other

agreement(s) which may be entered into by the Implementing

Agency or the RCS Trust, as the case may be, with any Selected

Airline Operator,

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1.1.9.3 on or after the date of notification of this Scheme for awarding the

concessions/support provided in this Scheme.

For the avoidance of any doubt, the bidding processes conducted, and the

Selected Airline Operator Agreements and any other agreements/documents

executed, pursuant to the Scheme Version 1.0, Scheme Version 2.0, or

Scheme Version 3.0 shall continue to be governed under and in accordance

with the provisions of the such Scheme Version 1.0, Scheme Version 2.0, or

Scheme Version 3.0 and any other document(s) issued by MoCA and/or the

Implementing Agency pursuant to the Scheme Version 1.0 or Scheme

Version 2.0 or Scheme Version 3.0.

1.2 Scheme Objective

1.2.1 The primary objective of RCS is to facilitate / stimulate regional air

connectivity by making it affordable.

1.2.1.1 Promoting affordability of regional air connectivity is envisioned

under RCS by supporting airline operators through (1) concessions

by Central Government, State Governments (reference deemed to

include Union Territories as well, unless explicitly specified

otherwise) and airport operators to reduce the cost of airline

operations on regional routes / other support measures and (2)

financial (viability gap funding or VGF) support to meet the gap, if

any, between the cost of airline operations and expected revenues

on such routes.

1.3 Guiding Principles of the Scheme

1.3.1 Given the focus and objectives of NCAP 2016, the key guiding principles

for RCS would be:

1.3.1.1 State Governments’ buy-in and support to determine

eligibility: In view of the fact that (1) NCAP 2016 is seeking to

make regional air connectivity affordable and (2) limited financial

(VGF) support is being generated from within the sector, it is

important that cost of operations are minimized for air transport

operators to the extent possible through concessions from State

Governments - especially in view of economic benefits (regional

development as well as output & employment related) to the local

catchments / economies through provision of such air transport

services.

1.3.1.2 RCS is accordingly to be made operational only in States and at

airports/ Water Aerodromes / Helipads (irrespective of ownership

by AAI / State Governments / private entities / Ministry of

Defence, Government of India) which demonstrate their

commitment and support to regional air transport operations by

providing concessions / support as required under the Scheme.

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1.3.1.3 Rationale of Regional Connectivity Fund (RCF): RCS is one of

the key elements of NCAP 2016, which envisions domestic

ticketing of 30 crores by 2022 and 50 crores by 2027. RCS as well

as NCAP 2016 would eventually promote growth of the entire civil

aviation sector.

1.3.1.4 RCS would lead to creation of regional air connectivity / services

that would have spin-off benefits within the sector in terms of

passengers taking other flights (not under RCS) and using airports /

airport services that are not at concessional rates under RCS.

Accordingly, the Regional Connectivity Fund (RCF) is to be

funded through application of a levy on scheduled flights being

operated within India or through any other sources, as per

notifications issued by the Ministry of Civil Aviation from time to

time. The RCF would thus channel funds generated from the sector

to stimulate further growth and development of the sector and the

operators (/ passengers) providing (/ using) services on domestic

routes where such fee per departure is levied would be eligible to

avail benefits under the Scheme for providing (/ using) services

pursuant to this Scheme.

1.3.1.5 Demand driven mechanism: The MoCA would like to see

airlines operating in a competitive environment and accordingly

development of regional air connectivity routes is proposed to be

left to market forces such that airlines undertake assessment of

demand and nature of supply required on particular routes and lead

the process under RCS.

1.3.1.6 Sustainability of operations: A key guiding principle would be to

encourage sustainability of operations under RCS in the long term

– such that the connectivity established is not dependent on VGF in

perpetuity. Accordingly, under RCS, VGF is proposed to be

provided for a limited period to facilitate / stimulate regional air

connectivity to un-served / under-served areas. However, it is

recognized that for select Priority Areas, funding may need to be

provided for longer periods of time to support provision of air

transport services to such areas.

1.3.1.7 Periodic review of RCS: Acknowledging the fact that market

dynamics will change over time, MoCA may amend various

Scheme provisions from time to time as and when necessary for

efficacy in accomplishment of objectives and undertake a review at

least once every 3 years.

1.4 Definitions

1.4.1 In line with NCAP 2016 and in order to operationalize the Scheme, unless

the context requires otherwise, following terms under the Scheme shall have

the meanings ascribed below:

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1.4.1.1 ‘Additional Performance Guarantee’ shall mean a security in the

form of an unconditional and irrevocable bank guarantee for an

amount of INR one (1) crore to be submitted by a Selected Airline

Operator to the Implementing Agency pursuant to Section 3.15.3

within 30 days from the date of issuance of Letter of Award (LOA)

to such Selected Airline Operator or as extended from time to time

by the Implementing Agency, provided that for operations through

seaplanes or helicopters under the Scheme, Additional Performance

Guarantee shall not be applicable.

1.4.1.2 ‘Airfare Cap’ shall mean the maximum permissible airfare for an

RCS Seat as specified under the Section 2.3.2 and 2.3.3 of the

Scheme and as published / updated on AAI / MoCA website from

time to time.

1.4.1.3 ‘Financial Quarter’ shall mean a continuous period of three (3)

calendar months ending on 30th June, 30th September, 31st

December and 31st March, as the case may be.

1.4.1.4 ‘Helipad’ shall mean a designated area for landing and take-off of

helicopter(s) where scheduled and/or non-scheduled commercial

helicopter operations can be permitted as per DGCA regulations.

1.4.1.5 ‘Implementing Agency’ shall be as defined under Section 2.1.1.

1.4.1.6 ‘Minimum Performance Specifications’ shall mean the service

conditions mentioned in Section 3.3 which must be met by a

Selected Airline Operator for operation of RCS Flights.

1.4.1.7 ‘Non-RCS Route’ shall mean a route, which is not an RCS Route.

1.4.1.8 ‘Non-RCS Seat(s)’ shall mean revenue passenger seat(s) on an

RCS Flight, which are not RCS Seats within the RCS Flight

Capacity. Further, such seats can be offered/ deployed as per the

commercial operations of the Selected Airline Operator.

1.4.1.9 “North Eastern Region Route” or “NER Route” shall mean the

routes listed in Annexure 8, as updated by the Implementing

Agency from time to time

1.4.1.10 ‘Lakshadweep Specific Route’ – The route of “Cochin - Agatti”

(to and fro) currently operating on nomination basis.

1.4.1.11 ‘Performance Guarantee’ shall mean performance security in the

form of an unconditional and irrevocable bank guarantee to be

submitted by a Selected Airline Operator to the Implementing

Agency pursuant to Section 3.15.2, within 30 days from the date of

issuance of Letter of Award (LOA) to such Selected Airline

Operator or as extended from time to time by the Implementing

Agency.

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1.4.1.12 ‘Priority Area(s)’ shall mean the States of Jammu and Kashmir,

Himachal Pradesh & Uttarakhand, North Eastern Region of India,

Andaman and Nicobar Islands and Lakshadweep Islands.

1.4.1.13 ‘Priority RCS Route’ shall mean an RCS Route in which, at least

one of the origin and destination airport is an RCS Concession

Airport located in Priority Area(s), provided that in case of

connection between two airports, at least one of the RCS

Concession Airport should satisfy the definition of Underserved

Airport or Unserved Airport.

1.4.1.14 ‘Regional Connectivity Fund (RCF)’ shall mean the fund /

corpus created through application of a levy on scheduled flights

being operated within India or through any other sources, as per the

notifications issued by the Ministry of Civil Aviation from time to

time.

1.4.1.15 ‘RCS Airport’ shall mean any airport licensed / approved by

DGCA or Water Aerodrome or Helipad, as the case may be

(whether under the ownership of the AAI, State Governments,

private entities or the Ministry of Defence, Government of India),

as notified by MoCA from time to time.

1.4.1.16 ‘RCS Concession Airport’ shall mean an RCS Airport, for which

the State Government and airport / Water Aerodrome / Helipad

owner / operator have extended concessions / support measures as

specified under NCAP 2016 and presented under Section 2.1.2 of

this Scheme.

1.4.1.17 ‘RCS Flight’ shall mean a domestic flight using a fixed wing

aircraft (including seaplanes) or a helicopter, operated by a

Selected Airline Operator pursuant to this Scheme on an RCS

Route and satisfying the conditions specified in Section 3.3.

1.4.1.18 ‘RCS Flight Capacity’ shall mean the maximum number of

passenger seats per RCS Flight offered on an RCS Route, provided

that such number of passenger seats offered cannot be less than

70% of aircraft’s passenger seating capacity, i.e., the total number

of passenger seats onboard for an aircraft. The remaining seats, i.e.,

aircraft passenger seating capacity other than RCS Flight Capacity,

if any, can be offered/ deployed as per the commercial operations

of the Selected Airline Operator.

1.4.1.19 ‘RCS Route’ shall mean:

1) a non-stop air service connection (also referred to as a

‘route’) between an identified pair of origin and destination

airports / Water Aerodromes / Helipads within India

proposed / operated pursuant to the Scheme, satisfying all of

the following conditions:

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a) at least one of the origin or destination points is an RCS

Concession Airport. Provided that in case of a non-stop air

service connection between two airports, at least one of the

RCS Concession Airport should satisfy the definition of

Underserved Airport or Unserved Airport, on the Scheme

release date (Scheme Version 4.0), in which an application

is made pursuant to this Scheme.

b) for fixed wing aircraft (excluding sea planes) there have

been no scheduled commercial flights on such a route for

the last two (2) flight schedules as published by the DGCA

on its website, OR in case of operations through seaplanes

/ helicopter, there have not been more than 50 commercial

operations, whether scheduled or otherwise, on such a

route for the last 1 year as certified by the Airports

Authority of India as provider of the Air Navigation

Services – such time periods to be reckoned with respect to

the Scheme release date (Scheme Version 4.0) in which an

application is made pursuant to this Scheme.

c) Provided that, for route(s) which have been awarded under

the Scheme as RCS Routes as part of an Individual Route

Proposal or a Network Proposal where (i) the Selected

Airline Operator has not yet commenced operations and /

or (ii) where the Letter of Award issued to the Selected

Airline Operator or the Selected Airline Operator

Agreement for such route(s) is in force, shall not be

considered for bidding under the Scheme.

d) for a route where the condition specified in Sub-Section b)

is satisfied on the Scheme release date (Scheme Version

4.0) and subsequently at any stage during the bidding

process, up to the date of signing of the Selected Airline

Operator Agreement, an airline / seaplane operator /

helicopter operator commences operation on such route

without any support/concession under the Scheme, such

route shall be treated as per the provisions of Section 3.2.2;

e) the stage length (in km as per the flight path declared by

AAI) between the origin and destination airports is not

more than 600 kms for operations through Category-2 and

Category–3 fixed wing aircraft and is not more than 500

kms for operations through Category-1 and Category–1A

fixed wing aircraft (including seaplanes).

2) any State RCS Routes, defined in 1.4.1.23

3) on and from April 01, 2020, any North Eastern Region Route

4) Lakshadweep Specific Routes, as defined in 1.4.1.9

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“Provided that State RCS Routes, NER Routes and Lakshadweep

Specific Route shall also be considered as RCS Routes even if they

do not satisfy the conditions listed at (a) and (b) and (c) above.

1.4.1.20 ‘RCS Seat(s)’ shall mean the number of passenger seats to be sold

at or below the applicable Airfare Cap by the Selected Airline

Operator within the RCS Flight Capacity and shall be subject to

Section 3.3 of the Scheme.

1.4.1.21 ‘Selected Airline Operator’ or “SAO” shall mean a fixed wing

aircraft or seaplane or helicopter operator selected pursuant to the

mechanism specified under the Scheme for providing air

connectivity on an RCS Route.

1.4.1.22 ‘Served Airport’ shall mean any airport, which is not an Unserved

Airport or an Underserved Airport.

1.4.1.23 ‘State RCS Routes’ or ‘SRCS’ shall mean the unconnected routes

connecting two Served Airports, suggested by the respective State

Governments.

1.4.1.24 ‘Underserved Airport’ shall mean any airport which is not an

Unserved Airport and at which, there are no more than seven (7)

scheduled commercial flight departures per week as per the latest

flight schedule published by the DGCA on its website.

Provided that, for airports in Priority Area(s), the above definition

shall read as:

1.4.1.25 ‘Underserved Airport’ shall mean any airport which is not an

Unserved Airport and at which, there are no more than fourteen

(14) scheduled commercial flight departures per week as per the

latest flight schedule published by the DGCA on its website.

Provided further that, for determination of number of scheduled

commercial flight departures per week from an airport, route(s)

which have been awarded under the Scheme as RCS Routes as part

of an Individual Route Proposal or a Network Proposal where (i) the

Selected Airline Operator has not yet commenced operations and /

or (ii) where the Letter of Award issued to the Selected Airline

Operator or the Selected Airline Operator Agreement for such

route(s) is in force, , shall also be considered.

1.4.1.26 ‘Unserved Airport’ shall mean any airport at which, there have

been no scheduled commercial flights during the last two (2) flight

schedules published by the DGCA on its website.

1.4.1.27 ‘Viability Gap Funding or VGF’ shall mean the financial support

provided to the Selected Airline Operator for operation of RCS

Flight(s) from the Regional Connectivity Fund pursuant to this

Scheme.

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1.4.1.28 ‘Tenure of VGF Support’ shall have the meaning as ascribed in

Section 2.1.5 of this Scheme.

1.4.1.29 ‘Water Aerodrome’ shall mean a designated area for landing and

take-off of seaplane(s) where scheduled and/or non-scheduled

commercial seaplane operations can be permitted as per DGCA

regulations and applicable law.

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2 Features of the Scheme

2.1 Key Constructs

2.1.1 Designation of Implementing Agency and its responsibilities

2.1.1.1 The Ministry of Civil Aviation may designate any entity as the

Implementing Agency under this Scheme and such entity shall be

responsible for undertaking tasks and activities for implementation

of the Scheme. As provided in NCAP 2016, the Implementation

Agency shall be provided appropriate administrative charges for

implementing the Scheme, as may be determined by MoCA from

time to time. The Implementing Agency has been permitted to

form a trust for performing its responsibilities under the Scheme

(hereinafter referred to as “Regional Air Connectivity Fund

(RACF) Trust”).

2.1.1.2 Responsibilities of the Implementing Agency shall include inter

alia:

1) Receiving proposals submitted by the Applicants and taking

necessary administrative actions for identification of Selected

Airline Operator pursuant to the Scheme;

2) Acting for and on behalf of MoCA for collection and

disbursement of funds - In order to facilitate the collection

and disbursement of funds under the Scheme, a bank account

shall be established for this purpose with an identified bank.

The Implementing Agency through the RACF Trust shall be

authorized to deposit funds into, and withdraw funds from,

the bank account for disbursement of VGF to Selected Airline

Operators in accordance with this Scheme;

3) As provided in NCAP 2016, payment of VGF will be made to

the Selected Airline Operator from the RCF and the State

Governments will be asked to reimburse the applicable share

(20% for states other than for North-Eastern States and Union

Territories of India, where the ratio will be 10%) towards

VGF for respective RCS Routes. However, for the routes

classified as State RCS Routes (as listed in Annexure 7) and

Lakshadweep Specific Route, the State Governments and

Ministry of Home Affairs respectively, shall be responsible

for reimbursing 100% of the VGF amount for such routes

which are awarded pursuant to the bidding process under the

Scheme. The Implementing Agency shall be responsible for

managing accounts / statements with respect to RCF

collections, payments to Selected Airline Operators and

reimbursements from State Governments including, inter alia,

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any required communications seeking payments,

reimbursements, reconciliation of accounts, etc.;

4) The Implementing Agency shall be responsible to compute

and notify revision of Airfare Caps and VGF Caps as well as

approved airfare and VGF as part of various Selected Airline

Operator Agreements in accordance with the Scheme on

quarterly basis; and

5) Any other tasks and activities required for implementation of

the Scheme.

2.1.1.3 The Airports Authority of India (AAI) is being designated as the

Implementing Agency under this Scheme.

2.1.2 Mechanism for Provision of Financial Support

2.1.2.1 Under this Scheme, support shall be provided to Selected Airline

Operator(s) in the form of VGF and other concessions / support

offered by the Central Government, State Governments and airport

/ Water Aerodrome / Helipad operators as detailed below.

2.1.2.2 Concessions offered by the Central Government are as follows:

1) Excise Duty at the rate of 2% shall be levied on Aviation

Turbine Fuel (ATF), drawn by Selected Airline Operators at

RCS Airport(s) for RCS Flights, for a period of three (3)

years from the date of notification of this Scheme. Upon

transition to GST, rates will be applicable as determined

under GST and exemptions/ concessions shall be given as

permissible so that such a reduced level of taxation could

ideally be continued.

2) Selected Airline Operators will have the freedom to enter into

code sharing arrangements with domestic as well as

international airlines pursuant to applicable regulations and

prevailing air service agreements. For avoidance of doubt, the

concessions and VGF under the Scheme shall be available

only to the Selected Airline Operator for the RCS Route and

shall continue as finalized pursuant to the mechanism

outlined under the Scheme.

2.1.2.3 Concessions / support offered by the respective State Governments

at RCS Concession Airports within their States are as follows. The

notification and MOUs with the State Governments are available at

https://www.aai.aero/en/rcs-udan:

1) Reduction of VAT to 1% or less on ATF at RCS Concession

Airports located within the State for a period of ten (10) years

from the date of notification of this Scheme. Upon transition

to GST, rates will be applicable as determined under GST and

exemptions/ concessions shall be given as permissible so that

such a reduced level of taxation could ideally be continued.

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2) Coordinating with oil marketing companies for provision of

fueling infrastructure on best effort basis.

3) Provision of minimum land, if required, free of cost and free

from all encumbrances for development of RCS Concession

Airports and also provide multi-modal hinterland

connectivity (road, rail, metro, waterways, etc.) as required;

4) Provision of security and fire services free of cost at RCS

Concession Airports through appropriately trained personnel

and appropriate equipment as per applicable standards and

guidelines by relevant agencies;

5) Provision of, directly or through appropriate means,

electricity, water and other utility services at substantially

concessional rates at RCS Concession Airports; and

6) Provision of a 20% share towards VGF for respective RCS

Routes pertaining to the State, provided the share of States in

the North-Eastern region of India and Union Territories

would be 10%. Similarly, provision of 100% share towards

VGF for respective State RCS Routes as proposed by the

State Government and awarded under the Scheme.

2.1.2.4 State Governments, at their discretion, may consider extending any

additional support (such as marketing support) for promotion of

RCS Flights.

2.1.2.5 Concessions offered by the airport / Water Aerodrome / Helipad

operators are as follows:

1) Airport / Water Aerodrome / Helipad operators (whether

under the ownership of the AAI, State Governments, private

entities or the Ministry of Defence, Government of India)

shall not levy Landing Charges and Parking Charges or any

other charge subsuming a charge for such aspects in future on

RCS Flights including ASF / UDF charges among others.

2) Selected Airline Operators shall be allowed to undertake

ground handling for their RCS Flights at all airports / Water

Aerodromes / Helipad.

3) AAI shall not levy any Terminal Navigation Landing Charges

(TNLC) on RCS Flights.

4) Route Navigation and Facilitation Charges (RNFC) will be

levied by AAI on a discounted basis @ 42.50% of Normal

Rates on RCS Flights. Normal Rates refer to applicable rates

specified by the AAI on its website from time to time without

any discounts or concessions.

Provided that the concessions offered by the airport operator, State

Government, and Central Government shall not be available for

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RCS Flights operating on State RCS Routes, providing

connectivity to areas other than Priority Area(s).

2.1.3 Incentives for Cargo Operations under this Scheme shall be as follows:

2.1.3.1 As provided for in NCAP 2016, air freighter operations at RCS

Airports are entitled to the following concession under the Scheme

for a period of up to 10 years from the date of notification of the

Scheme Version 1.0:

1) Excise Duty at the rate of 2% shall be levied on ATF drawn

for air freighter operations at RCS Airports for a period of

three (3) years from the date of notification of this Scheme.

Upon transition to GST, rates will be applicable as

determined under GST and exemptions/ concessions shall be

given as permissible so that such a reduced level of taxation

could ideally be continued.

2) Airport / Water Aerodrome / Helipad operators (whether

under the ownership of the AAI, State Governments, private

entities or the Ministry of Defence, Government of India)

shall not levy Landing Charges and Parking Charges or any

other charge subsuming a charge for such aspects in future;

3) AAI shall not levy any Terminal Navigation Landing Charges

(TNLC);

4) Route Navigation and Facilitation Charges (RNFC) will be

levied by AAI on a discounted basis @ 42.50% of Normal

Rates. Normal Rates refer to applicable rates specified by the

AAI on its website from time to time without any discounts

or concessions.

2.1.3.2 Under this Scheme, VGF support shall not be provided for cargo

operations.

2.1.4 Tenure of the Scheme

2.1.4.1 In line with NCAP 2016, the Scheme will be applicable, subject to

periodic review, for a period of 10 years from the date of

notification of Scheme Version 1.0 by the MoCA.

2.1.4.2 Consistent with the objectives of the Scheme, it is the intent of the

MoCA and the Implementing Agency to continue with the Scheme

for the period specified in 2.1.4.1 above unless unforeseen or

exceptional circumstances - such as a court order or other factors

beyond the control of the MoCA, constrain the ability of the MoCA

and/or the Implementing Agency to continue with the Scheme. In

the aforesaid circumstances, the Implementing Agency shall

endeavor to honor agreements already entered into with Selected

Airline Operators for the remaining term of such agreements.

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2.1.4.3 If however, the MoCA and / or the Implementing Agency is

required to immediately withdraw the Scheme and / or suspend or

cancel agreements entered into pursuant to the Scheme, in such an

event, notwithstanding anything mentioned in this Scheme, the

MoCA, the Implementing Agency, concerned State Governments,

concerned airport / Water Aerodrome / Helipad operators, or any

other agency supporting any of these entities shall not be liable for

any loss or damage suffered by the Selected Airline Operator, save

and except for the obligation of the Implementing Agency to

disburse the applicable VGF amount for RCS Flight operations

already undertaken prior to withdrawal / discontinuation of the

Scheme.

2.1.5 Tenure of VGF Support

2.1.5.1 Subject to Section 2.1.4.2 above, VGF will be provided for RCS

Flights for a period of three (3) years from the date of

commencement of RCS Flight operations on any RCS Route under

a Selected Airline Operator Agreement (Tenure of VGF Support).

2.1.5.2 Even if during such period of three (3) years, an RCS Route ceases

to satisfy any of the conditions for an RCS Route as specified

under this Scheme, payment of VGF, exclusivity of operations (as

mentioned in Section 2.8) and other concessions, as mentioned in

Section 2.1.2.2, Section 2.1.2.3 and Section 2.1.2.5 respectively, to

the Selected Airline Operator under an existing agreement shall

continue to be provided till the expiry of such period of three (3)

years. Subsequent to the completion of such period of three (3)

years, such benefits to the Selected Airline Operator shall be

discontinued.

2.1.6 Specific routes promoted under the Scheme

2.1.6.1 Given the availability of infrastructure, strategic considerations as

well as to ensure social and economic cohesion of certain regions

in the country, the Ministry of Civil Aviation, Government of India

intends to enhance air connectivity to specific regions in the

country. Accordingly, Annexure - 6 of the Scheme document

provides a list of routes comprising routes cancelled in the previous

rounds of RCS, routes proposed by NEC / State Governments /

ministry / department, and routes that did not receive any bid in the

past.

2.1.6.2 Similarly, certain routes in the North East Region of the country, as

listed in Annexure 8, are currently operated under an arrangement

with the Ministry of Development of North Eastern Region and the

Ministry of Civil Aviation. The said arrangement for such routes is

set to expire on 31

March 2020. The benefit available for the RCS

routes would be available for the given routes.

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2.1.6.3 Also, the route connecting “Cochin – Agatti” is currently operated

by Alliance Air. The Ministry of Home Affairs intends to promote

the route (to and fro) and invite more airlines to operate this route.

Accordingly, as an exception to the Scheme, the Cochin-Agatti

route has been incorporated under the current version of the

Scheme to provide additional connectivity to the island region. All

concessions available on an RCS Route or to an RCS Flight, except

for exclusivity of operations, shall be available for the given route

as well.

2.1.6.4 During the bidding process, the above mentioned routes shall be

given a priority as per the prioritization framework provided later

in the Scheme.

2.2 Airports / Water Aerodromes / Helipads to be covered under

the Scheme

2.2.1 The Scheme will be applicable with respect to RCS Concession Airports.

2.2.2 The list of RCS Concession Airports as finalized in consultation with the

State Governments, will be published for information of stakeholders from

time to time.

2.2.3 In case any airline operator wishes to connect an airport / Water Aerodrome

/ heliport that is not an RCS Concession Airport, it may approach the

Implementing Agency and submit an expression of interest based on which

the Implementing Agency will coordinate with the concerned agencies for

extending the relevant concessions specified under the Scheme. In case any

such airport is a defence airport, approval from the Ministry of Defence,

Government of India will need to be obtained for permitting joint use / civil

operations under the Scheme.

2.2.4 In case any rehabilitation / upgradation of infrastructure is required at

airports / Water Aerodromes / Helipad to make them operational / suitable

for proposed RCS Flight operations, the same can be undertaken by AAI

upon payment of appropriate costs of such rehabilitation / upgradation works

from respective State Government/airport/Water Aerodrome/Helipad

operator. In such cases, the ownership and operatorship of such airport(s) /

Water Aerodrome(s) / Helipad(s) will continue with the State Government /

existing airport / Water Aerodrome / Helipad operator. Such airports / Water

Aerodromes / Helipad shall be operationalized subject to extant laws and

after obtaining any No Objection Certificate, if required, from existing

airport operators pursuant to existing contracts awarded by Central

Government / State Government / PSUs or any other stipulations in this

regard.

2.2.5 An indicative list of Underserved Airports and Unserved Airports in India is

placed at Annexure – 1A and Annexure – 1B respectively. An indicative list

of Water Aerodromes in India is provided at Annexure – 1C.

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2.3 Airfare Caps

2.3.1 In line with NCAP 2016, Airfare Caps will be applicable for operations

under the Scheme.

2.3.2 The Selected Airline Operator shall not allowed to charge airfare more than

Maximum Airfare, except for GST as specified in Section 2.3.3 below. It is

hereby clarified that airfare for all passenger seats on an RCS Flight will not

be subject to any levies or charges imposed by the airport / Water

Aerodrome / Helipad operators (whether under the ownership of the AAI,

State Governments, private entities or the Ministry of Defence, Government

of India) including charges such as ASF, DF and UDF. However, for SRCS

Routes providing connectivity to areas other the Priority Areas(s), the SAO

shall be permitted to levy charges of ASF, DF and UDF as may be levied by

the respective airport / Water Aerodrome / heliport operators, over and

above the applicable Maximum Airfare for such route.

2.3.3 The Airfare Caps specified for various stage lengths / flight duration in this

Scheme, as may be indexed pursuant to provisions herein, would be

considered exclusive of applicable GST (both CGST and SGST) and the

SAO shall be permitted to charge applicable GST over and above the

Maximum Airfare.

2.3.4 Considering that operating costs for a flight vary with stage length / flight

duration, Airfare Caps have been specified for various stage lengths / flight

duration for fixed wing aircraft (including seaplanes) and helicopter, and

placed at Annexure-2 to this Scheme. As mentioned above, Airfare Caps

specified for various stage lengths / flight duration are exclusive of

applicable GST.

2.3.5 MoCA recognizes that changes in ATF prices, inflation, and exchange rate

of INR vis-à-vis United States Dollar, have a bearing on cost of operations

of airlines and in a market-based pricing scenario airlines can vary airfares

in response to changes in these parameters. In the context of RCS and

specification of Airfare Cap, it was considered important to the operation of

RCS that changes to Airfare Caps as well as Maximum Airfare in future are

also specified. Hence, the Airfare Caps as well as Maximum Airfare will be

indexed to inflation i.e. Consumer Price Index – Industrial Workers (CPI-

IW), ATF prices and exchange rate of INR vis-à-vis United States Dollar .

For operation through helicopter the airfare charged on RCS seats would be

indexed to inflation i.e. Consumer Price Index – Industrial Workers (CPI-

IW), only.

2.3.6 The indexation of Airfare Cap and Maximum Airfare to inflation, ATF

prices and exchange rate of INR vis-à-vis United States Dollar will be based

on the formula specified in Annexure - 4 and determined for every Financial

Quarter. The proportions in the formula have been determined with

reference to a broad representative data set / typical cost of operations for

airline operators.

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2.3.7 MoCA also recognizes that airlines will need advance notice for effecting

changes in their systems for revision in fares and has considered a one (1)

month notice period for revision of Airfare Caps and Maximum Airfare(s)

approved under the Scheme. The Airfare Caps and Maximum Airfare(s)

applicable for a Financial Quarter will be published by the Implementing

Agency one (1) month in advance (i.e. on 01st March for the Financial

Quarter starting 1st April).

2.3.8 It may be noted that currently CPI-IW data is released by the Government of

India with a lag of one (1) month (e.g. CPI-IW for the month of October is

released on 30th November), it being recognized that such lag period may

vary over time. Considering the notice period of one (1) month mentioned

above and lag of 1 month in publishing of CPI-IW data currently, it may be

noted that the three (3) month period for which CPI-IW data will be

considered for review of indexation will not correspond to the three (3)

months of that Financial Quarter. However, on account of the review being

undertaken every quarter, CPI-IW data for almost all months will eventually

get considered. Such revision will be applicable prospectively and no

adjustments will be made for the past period.

To illustrate, Airfare Cap for the Financial Quarter from 1

April to 30

June will be announced on 1

March. CPI-IW data, exchange rate data, and

ATF data to be considered for reviewing indexation of Airfare Cap will be

the CPI-IW, exchange rate, and ATF data for the months of November,

December and January.

2.3.9 Indexation of Airfare Cap(s) and Maximum Airfare(s) will be based on the

formula provided at Annexure – 4.

2.3.10 Airfare Cap(s) and Maximum Airfare(s) shall not include charges for

optional/unbundled services as listed by DGCA

from time to time.

2.4 Aircraft Categories

2.4.1 Different fixed wing aircraft (including seaplanes), based on their seating

capacity, have been classified into the following four (4) categories for the

purpose of this Scheme,

S.No.

Category

Passenger Seating Capacity

Category-1A

Category-1

9 – 20

Category-2

21 – 80

Category-3

> 80

2.5 VGF Cap

2.5.1 The MoCA acknowledges that different / same aircraft operated by different

operators for the same stage lengths can have different cost of operations on

account of differences in inherent economics of aircraft types for stage

http://dgca.nic.in/circular/ATC2_2015.pdf

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lengths, cost of operations specific to operators in terms of various business

parameters such as business models, fleet utilization, scale of operations, etc.

Specification of (normative) VGF Caps upfront has therefore been

considered important to ensure transparent operation of a market based

mechanism under this Scheme rather than through determination subsequent

to receipt of varied proposals.

2.5.2 Specifying VGF Caps that satisfy all players would inevitably end up being

high and therefore uneconomical from the perspective of Scheme outcome.

Accordingly, VGF Caps have been specified with reference to a broad

representative data set / typical cost of operations and estimated revenue

potential for operations on a typical RCS Route for a particular stage length.

2.5.3 VGF to be provided for each RCS Seat under the Scheme will be capped for

different stage lengths for fixed wing aircraft (including seaplanes) and

different flight duration for helicopters operation.

2.5.4 The applicable VGF caps for operations through Category-1A, Category-1,

Category-2 and Category-3 fixed wing aircraft for a particular stage length

(“VGF Cap”), and VGF Cap for helicopter operation for different flight

duration, have been specified at Annexure - 3 to this Scheme. As mentioned

in Section 1.4.1.19e), for operations through a Category-1 and Category-1A

fixed wing aircraft (including seaplanes), the stage length for an RCS Route

shall be limited to 500 km and for operations through a Category-2 and

Category-3 fixed wing aircraft (including seaplanes), the stage length for an

RCS Route shall be limited to 600 km.

2.5.5 Airline operators must refer to VGF Cap(s) before submitting proposals, as

support requirement in excess of such cap for a particular stage length will

not be considered under the Scheme. Any proposal not complying with this

aspect will be disqualified.

2.5.6 As mentioned earlier, VGF is proposed to be provided for a limited period to

facilitate / stimulate regional air connectivity to un-served / under-served

areas such that the connectivity established is not dependent on VGF in

perpetuity.

2.5.7 It is expected that competition between players and differences in

expectations on business parameters like airfares on Non-RCS Seats, load

factors, etc. could lead to variations in proposals by different players. While,

it is the intent and focus of the Scheme that operation of a market based

mechanism facilitates discovery of the optimum VGF requirements within

specified VGF Caps, MoCA recognizes that in certain cases it is possible

that a market based discovery of optimum VGF requirements may not

happen due to lack of competition / uncertainty in market conditions and ex-

post, the specified (normative) VGF Caps may end up seeming to be higher

than the actual VGF requirement in future on account of factors like higher

airfares for Non-RCS Seats, higher load factors etc. Given that the focus of

the Scheme is to provide air connectivity where it does not exist, the

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