Supreme Court quashes Airport Development Fee at Delhi and Mumbai airports

The Supreme Court of India has ruled that the private consortia running the Delhi and Mumbai airports will not be allowed to charge an airport development fee (ADF) on passengers.

The stock prices of both the GMR group which leads Delhi International Airport Ltd. (DIAL) and GVK Group which leads Mumbai International Airport Ltd. (MIAL) were hammered on the stock exchanges. The New Indian Express reports

At 12.30 p.m., shares of GVK was down 3.62 per cent to Rs 25.60 and GMR was down 3.29 per cent to Rs 38.25

DIAL charges an ADF of Rs. 200 from domestic and Rs. 1300 from international passengers embarking from its airport, while MIAL charges Rs. 100 and Rs. 600 respectively.

A bench comprising justices R. V. Raveendran and A. K. Patnaik ruled in favour of Consumer Online Foundation, a non-governmental organization which had filed a public interest case against the levy of the fee on passengers.

The court is reasoning that only the Airports Authority of India (AAI), not private companies, has the rights under the law to levy a fee payable in advance of an airport construction.

Under the OMDA agreement with AAI, in order to compensate the private companies for their expenses and investments in the development of the airports, the AAI allotted them land in the vicinity of the airport.

However, passengers should not expect this as a relaxation of the User Development Fee or UDF which is currently charged at the Bangalore and Hyderabad airports. UDF is levied after an airport has been constructed and is based on the paid project cost and incomes.

Since the airport project at Delhi is completed, DIAL will be able to move from an ADF to a UDF regime very quickly. However, GVK will be impacted since the project at Mumbai is expected to complete only in 2012.

GVK has also gained control of Bengaluru International Airport Ltd., and has announced an expansion of Terminal 1. While this expansion is not expected to be impacted, today’s ruling of the Supreme Court is bound to impact the financial flows and planning of the GVK group and this raises the question — will the long term expansion of the airport i.e. Terminal 2 and the second runway (27L/09R) be impacted?

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