Tuesday, May 15, 2012

Taking-off on Development Fees

Starting today passengers at Delhi airport will see a  346% rise in 'tax' in the form of User Development Fees (UDF). Who exactly is the 'user' here? How did we come to have such a huge hike?

The story starts in 2003 when the Airports Authority of India (AAI) was permitted to levy a 'Development Fee' under the AAI Act 2003 (Sec.22a). The funds thus collected were to be used for creating newer airports and developing facilities at existing ones under AAI. Three years later, in 2006, AAI signed an agreement with GMR for renovation of the international airports at Delhi and Mumbai by DIAL and MIAL respectively. Under this agreement, revenue was to be shared on a 46:54 basis between AAI and DIAL/MIAL.

Then came the Airports Authority Regulatory Act (AERA) in 2008. Even while AERA was finding its feet, the private developers complained that they were unable to make ends meet with the 54% revenue-share. The Ministry of Civil Aviation sympathized with this view and decided to permit DIAL and MIAL to collect a fee from passengers to make up for the alleged shortage of revenue.

In the two years that followed (2009-2011), DIAL and MIAL collected Rs.1481 cr and Rs.800 cr respectively. This move was opposed recently through a public interest litigation (PIL) was filed by two NGOs challenging this 'tax collection' by private companies and the Supreme Court responded with a ban on the collection of DF. The judgement clarified that the DF could be collected only a a rate decided by the regulatory authority (AERA). Also the DF could be used only for upgrading existing facilities.

In response, the civil aviation ministry has brought out an amendment in the subordinate legislation, authorizing AERA to collect and deposit the money into an escrow account.

So, the 'use' who needs to be 'developed' in this case is the private company which has managed to extract favorable terms from the government. The government, in turn, has passed on the burden to all passengers landing or taking-off from Delhi.

But what exactly is AAI doing with its 46% share of revenues?....This continues to be a mystery for now.


Balagopal KN (2012): UPA Subverting Role of Parliament (India Current Affairs, 8 May 2012) - http://indiacurrentaffairs.org/upa-subverting-role-of-parliament-k-n-balagopal/

Rajya Sabha Opposes Hike in Delhi Airport User Charges (First Post, 18 May 2012) - http://www.firstpost.com/politics/rajya-sabha-opposes-hike-in-delhi-airport-user-charges-313958.html

Jigeesh AM( 2012): Government wants Rs 1481 cr airport development fee back from DIAL, India Today 5 Jan. 2012, URL - http://businesstoday.intoday.in/story/govt-wants-airport-fee-back-from-dial/1/21417.html

AERA raised airport charges by 346 per cent, airlines protest (Economic Times, 25 April 2012) - http://articles.economictimes.indiatimes.com/2012-04-25/news/31399066_1_airport-charges-gmr-led-joint-venture-aera

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