Rs 50,000-crore under-recovery may trigger massive UDF hike at Delhi, Mumbai Airports: Report

Delhi airport's user development fee (UDF) on domestic flyers could jump from Rs 129 to Rs 1,261, and from Rs 650 to Rs 6,356 for international passengers. At Mumbai airport, domestic passengers may see UDF soar from Rs 175 to Rs 3,856, while international flyers could face an increase from Rs 615 to Rs 13,495

A massive escalation in user fees at Delhi and Mumbai airports could soon hit passengers, with charges potentially rising by as much as 22 times, The Economic Times reported. The steep hike stems from a ruling by the Telecom Disputes Settlement and Appellate Tribunal (TDSAT), which recalculated tariffs for FY09-14 and created a situation where the two airports are now deemed to have under-recovered more than Rs 50,000 crore during that period.

As detailed by The Economic Times, this amount is expected to be recovered through sharply higher passenger fees as well as landing and parking charges - a development that could push up ticket prices and slow down air-travel demand.

The Airports Economic Regulatory Authority (AERA), along with Indian carriers and international airlines including Lufthansa, Air France and Gulf Air, has challenged the tribunal's order in the Supreme Court. A bench led by Justices Aravind Kumar and Nilay Vipinchandra Anjaria is scheduled to hear the matter on Wednesday, the paper noted.

People familiar with the situation told The Economic Times that Delhi airport's user development fee (UDF) on domestic flyers could jump from Rs 129 to Rs 1,261, and from Rs 650 to Rs 6,356 for international passengers. At Mumbai airport, domestic passengers may see UDF soar from Rs 175 to Rs 3,856, while international flyers could face an increase from Rs 615 to Rs 13,495.

TDSAT, which also handles airport-tariff disputes, has taken the position that its revised interpretation aligns with how tariffs were originally calculated during the period in question. Government officials, however, expressed concern to The Economic Times, warning that such a sudden rise would be a heavy blow to passengers. One official said the public should not suffer due to prolonged legal disputes between airports and airlines, pointing out that airports function as natural monopolies - leaving carriers with no option but to pass the cost on.

The root of the dispute goes back to the 2006 privatisation of major airports. When AERA - the body responsible for setting five-year tariff cycles - was established in 2009, it adopted the Hypothetical Regulatory Asset Base (HRAB) model to determine asset values for FY08-09 because earlier data for DIAL and MIAL (then under GMR and GVK, respectively) was considered unreliable. The Economic Times explained that HRAB was meant to apply only to aeronautical assets such as runways, terminals and operational facilities.

AERA used this approach when fixing charges for FY09-14, but the airport operators argued before TDSAT that non-aeronautical assets - including parking, lounges and duty-free areas - should also count. Although both TDSAT (in 2018) and the Supreme Court (in 2022) upheld AERA's methodology, the operators returned to the apex court with fresh material, citing a 2011 civil aviation ministry letter. The matter was then remanded to the tribunal, which reversed its earlier stance in July and held that the non-aero asset base should indeed have been included.

Under this revised calculation, The Economic Times reported that Delhi and Mumbai airports should have been allowed to collect Rs 50,000 crore more over the disputed period - a gap the tribunal says must now be recovered through higher UDF.

Lawmakers have repeatedly questioned rising airport charges following privatisation, and a parliamentary panel earlier this year summoned the civil aviation ministry on the issue, noting that fees have increased several times over the original levels, The Economic Times added.