To make air travel more accessible, the central government on Thursday launched UDAN (Ude Desh Ka Aam Naagrik) scheme under which fares will be capped at Rs 2,500 for one-hour flights.
The government expects that the first flight under this scheme to take off in January.
A "first of its kind" in the world, UDAN will be based on market mechanism as well as bidding for a minimum of 9 seats and a maximum of 40 seats in a fixed wing aircraft.
For 50 per cent of the seats of flights under UDAN, the fare cap will be Rs 2,500, and the rest will be market-based pricing.
Civil Aviation Minister Ashok Gajapathi Raju said that the purpose of formulation of such a scheme is that regional carriers get the support they need both in terms of reducing their cost as well as in terms of viability gap funding so that they can serve tier-II and tier III cities.
"We are cautiously optimistic about it (UDAN)," Raju said.
The scheme seeks to provide air services between unserved and under-served areas as well as extending viability gap funding (VGF) through a regional connectivity fund.
There are 394 unserved and 16 under-served airports.
MoS for Civil Aviation Jayant Sinha said that the government was very hopeful of a positive response from the industry.
The comments come against the backdrop of some airlines being unhappy with the proposal to charge a levy for funding the scheme. The draft scheme was unveiled in July.
Civil Aviation Secretary RN Choubey said the rules related to the levy will be "printed in the gazette in two days" while the executive order in this regard will be ready by month-end.
The levy will be "very small", he added.
Charging a levy on profitable routes is likely to push the air fare for fliers.
"This is first of its kind globally... We are doing something not done anywhere else," Minister of State Jayant Sinha said.
The fares will be capped at Rs 2,500 for one-hour flights on unserved and under-served routes.