Policy Update
Aditya Sharma
Background
The National Civil Aviation Policy (NCAP) 2016, which the Union Cabinet approved on June 15, 2016, was India’s first-ever integrated aviation policy since Independence. At that time, the aviation sector was not performing to its full potential. It was only the tenth-largest market globally, despite India having several advantages. These included a rising middle class of about 30 crore people, a favourable location between major air corridors, and strong economic growth.
The policy was developed after wide consultation. More than 450 submissions were received from stakeholders. NCAP has an ambitious goal of reaching 30 crore domestic air tickets by 2022 and 50 crore by 2027. It also aimed for 20 crore international tickets and 10 million tonnes of cargo movement. The policy was built on three pillars:
- improving connectivity
- enhancing the affordability of air travel
- making it easier to do business.
It addressed 22 areas such as safety regulations, regional air routes, airport development and aerospace manufacturing. One of its major initiatives was the UDAN scheme, which was launched in October 2016. Under UDAN, flights under one hour had a price cap of ₹2,500. The scheme promoted the idea that the common man should be able to fly.
Functioning
NCAP 2016 helped to build a stronger structure for implementation. The Directorate General of Civil Aviation (DGCA) was given more authority for safety oversight and implementation of the State Safety Programme. The eGCA portal was launched before the end of 2016 and was used for streamlining approvals and digitalising procedures. UDAN was run by the Airports Authority of India (AAI). They were responsible for choosing routes, managing bidding, and disbursing funds. The funding model involved an 80:20 split between the central and state governments (90:10 for northeastern states).
To support this, a Regional Connectivity Fund was created by collecting a levy on other air tickets. The policy also changed the old 5/20 rule. Airlines no longer had to complete five years of domestic operations. Instead, they could start international routes if they had 20 aircraft or if they deployed 20 percent of their capacity for international operations. A new category called Scheduled Commuter Operator was also introduced. This allowed smaller aircraft up to 40 tons to serve regional areas. Airport development was opened up to private and state participation. Under UDAN, low-cost and no-frills airports were funded, while other projects were overseen by AAI.
Performance
India’s aviation sector experienced remarkable growth due to NCAP. By 2024, India had become the world’s third-largest domestic aviation market, growing at nearly 7 percent annually. The number of operational airports almost doubled, going from 74 in 2014 to 149 in 2024. Projections now suggest there could be 350 to 400 airports by 2047.
In FY2024, India handled 37.41 crore domestic passengers, with a record 5.05 lakh passengers flying in a single day on November 17. UDAN helped 1.49 crore passengers travel across India. Out of 774 routes sanctioned, 371 were operational. However, only 112 completed their full term, and just 54 remained viable after subsidies were removed. That said, the scheme still made 88 airports functional, including 13 heliports and 2 water aerodromes.
According to ICAO estimates, aviation has high economic multipliers. Each rupee spent generated 3.25 rupees in output and 6.10 rupees in jobs. The aviation market is expected to reach USD 26.08 billion by 2030 from USD 14.78 billion in 2025. By March 2025, India had 941 aircraft, and 15 percent of its pilots were women, which is three times the global average. Safety improved as well. India maintained FAA Category 1 status and reached an ICAO score of 85.65 percent.
Impact
The NCAP policy led to many positive outcomes. UDAN has connected 34 states and union territories and helped bridge the regional gap, especially in the northeast. New airports and improved terminals in regional areas have led to increased growth. Cities like Ahmedabad, Guwahati, and Lucknow are becoming aviation hubs. The aviation sector has added nearly USD 54 billion to the circular economy and contributed USD 6 billion to GDP. Around 3.7 lakh direct jobs and more than 77 lakh indirect jobs were created.
The Make in India campaign also got a boost. Joint ventures like the Tata-Airbus aircraft and helicopter manufacturing projects are moving forward. A 5 percent GST on MRO parts improved competitiveness. Between 2021 and 2024, foreign investment in aviation and aerospace reached ₹951.84 crore. More than 70 airports now run fully on green energy. Another standout achievement is women pilots. India now has one of the highest female pilot ratios in the world.
Emerging Issues
Still, the aviation transformation has some big challenges. Only 7 percent of UDAN routes stay viable after subsidies stop. The CAG report from 2023 found that 52 percent of approved routes never began operations. Land acquisition delays and terminal congestion also affect infrastructure. About 12 percent of aircraft are grounded due to engine problems, and global delays in supply chains have slowed deliveries.
Financial health is a concern, with projected losses of ₹20–30 billion. Aviation fuel taxes are high, ranging from 40 to 50 percent, which cuts into profits. Market competition is limited. IndiGo controls 60 percent of the market, and Tata Group airlines have another 20 percent. There is still limited connectivity for Tier-II and Tier-III cities. Smaller operators face tough entry conditions. Security concerns are rising. Over 1,100 bomb hoax alerts were reported in the past two years. Fog and extreme weather conditions also affect on-time performance.
Way Forward
To meet the full potential of NCAP, several reforms are needed. Route sustainability must improve with better forecasting and more flexible subsidy models. Coordination between central and state governments is needed to speed up land and infrastructure development. Advanced technologies like biometric boarding and AI-assisted traffic management can increase efficiency. More secondary airports in big cities can reduce pressure on major hubs. Fuel taxes must be reduced. There should be more public-private partnership models for funding. Aircraft maintenance and domestic aerospace capability must be expanded.
Regulatory processes should be fully digital and safety audits strengthened. More training institutions and aviation universities will be needed to address crew shortages. India should promote sustainable fuels, promote green airport construction, and plan for future transport modes like urban air mobility. If these steps are taken, NCAP 2016 can truly become a model for a safe, inclusive, and globally respected aviation system, helping India meet its long-term economic and sustainability goals.
References:
- Cabinet Secretariat. (2016, June 15). National Civil Aviation Policy 2016 [Policy document]. Press Information Bureau, Government of India. https://www.pib.gov.in/PressReleasePage.aspx?PRID=1434990
- Directorate General of Civil Aviation. (2024). Annual Report 2023-24. Ministry of Civil Aviation, Government of India. https://www.dgca.gov.in/annual-reports
- Directorate General of Civil Aviation. (2025). Civil Aviation Requirements – Safety Management System. DGCA India. https://www.dgca.gov.in/cars/
- Ministry of Civil Aviation. (2016). National Civil Aviation Policy 2016. Government of India. https://www.civilaviation.gov.in/sites/default/files/Final_NCAP_2016_15-06-2016-2_1.pdf
- Ministry of Civil Aviation. (2024). Annual Report 2023-24. Government of India. https://www.civilaviation.gov.in/annual-reports
- Parliament of India. (2024, March 18). Regional Connectivity Scheme (UDAN) – Performance and challenges [Lok Sabha Unstarred Question No. 2847]. https://sansad.in/getFile/loksabhaquestions/
- The Economic Times. (2024, November 18). India achieves single-day record of 5.05 lakh domestic passengers. https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/
About the contributor: Aditya Sharma is a Research Intern at the Impact and Policy Research Institute (IMPRI) and is in the first year of his Master’s degree in Environmental Economics from Madras School of Economics.
Acknowledgement: The author extends his sincere gratitude to the IMPRI team and Ms. Aasthaba Jadeja for her invaluable guidance throughout the process.
Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.
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