Flip flop model

Flip flop model

Udan could have India flying in circles.
This Thursday, Prime Minister Narendra Modi inaugurated a new regional air connectivity scheme which aims to put smaller cities on the aviation map. Enhanced connectivity results in economic benefits and should be welcomed. But in India, passengers flying popular routes have already partially subsidised others for over two decades. Now the new regional connectivity scheme, or Udan, adds another layer of cross-subsidies to connect small towns. This overly complicated maze doesn't necessarily make Udan commercially sustainable, nor does it yield very many other benefits.
Indian economic policy since Independence has reveled in complicated cross-subsidy schemes which shave some money from Peter's pocket to transfer randomly to Paul, while the overall effect is to make doing business more difficult. Udan doesn't appear to depart from this hallowed tradition. For example, the Udan flight between Shimla and Delhi has ticket prices that range between the subsidised Rs 2,500 to the steep Rs 19,000 for similar seats. The PM has stated he would like to see people wearing hawai chappals (flip flops) stepping on to hawai jahaz (planes). But in this case ¬ to turn the metaphor ¬ some seats, at least, can go only to the really suited-booted.
Since the Udan subsidy will be paid for by boosting fares on popular metro routes flip flop wearers in metro cities, it appears, are out of luck. In this context, Indian aviation may be better off if both Centre and states work on lowering overall taxes in the sector. On busy routes, fees and cess can be as high as 35% of the fare. Instead of sweating the small stuff what government needs to do is to get some big things right. India could, for instance, leverage favourable geographical location to turn some of its airports into global air traffic hubs, competitive with Dubai and Singapore.