How does the shift from route-subsidy to infrastructure-and-partnership in Modified UDAN reflect the principles of competitive and cooperative federalism?

UDAN (Ude Desh ka Aam Nagrik) came out of the National Civil Aviation Policy 2016. For its first decade it mostly subsidised airline routes through Viability Gap Funding (VGF). Modified UDAN runs from FY 2026-27 to FY 2035-36 with ₹28,840 crore, and it shifts the focus to aerodromes, helipads and Centre–State partnership [2]. A subsidy paid out by the Centre becomes a project the Centre and States share, mixing cooperation with competition.

The Shift in Design

• VGF gets only ₹10,043 crore, about 35% of the outlay. ₹12,159 crore goes to building 100 airports from unserved airstrips, and ₹3,661 crore to 200 helipads [2].
• The new phase rests on three prongs: Centre–State/UT partnership, infrastructure creation and wider connectivity [1].

Reflection of Cooperative Federalism

• Shared ownership: the Centre has signed 21 MoUs with States and UTs, so aerodrome development becomes a joint commitment [1].
• Pooling assets: in 2021 a Parliamentary Standing Committee asked for inactive AAI and State-owned airstrips to be revived and for States to build low-cost "no-frill" airports [4]. Turning unserved airstrips into airports does exactly that.
• Burden-sharing: the Centre funds O&M support for about 441 aerodromes for three years [2]. After that, the host States carry the running costs: the Centre seeds the airport and the State sustains it.

Reflection of Competitive Federalism

• Challenge Mode Portal: States compete for aerodrome projects based on how ready they are [3].
• Reform incentive: States that offer land, cost-sharing and concessions win projects sooner, so good governance is rewarded.
• Market discipline: VGF lasts at most five years and starts tapering from year 3 [1]. Routes, and the States that host them, have to build real demand.

Limits to the Balance

• Competition can favour States that are already fiscally strong. In the North-East, only 12 of 52 identified aerodromes are operational [1].
• O&M support (three years) ends before VGF (five years) [1]. This risks leaving States with running costs no one has funded.

Modified UDAN combines central money and State co-ownership (cooperative federalism) with project allocation based on readiness (competitive federalism). Two fixes would stop competition from widening regional gaps: a reserved share for North-East and hill States, and MoU clauses that say who pays O&M after central support ends. With these, UDAN could become a working model of "Team India" federalism and advance SDG 9 on resilient infrastructure.