A major legal dispute that could significantly increase charges for air travellers at the Delhi and Mumbai airports has reached the Supreme Court. The Centre has decided to support passengers and the Airports Economic Regulatory Authority of India in this long running case, which will be heard on December 3.
The dispute centres on the concept of hypothetical regulatory asset base. This is the capital value of assets used to calculate the cost of regulated services at the two airports during their initial years under the public private partnership model nearly twenty years ago. The operators of the Delhi and Mumbai airports have claimed that they are owed about fifty thousand crore rupees on this basis.
After years of litigation and a recent order by the Telecom Disputes Settlement and Appellate Tribunal, the airport operators have challenged the tribunal’s decision striking down their claim. Officials say the Centre is backing the regulator because the financial impact on passengers could be severe if the operators win.
According to estimates from the civil aviation ministry, user development fees could rise sharply. At the Delhi airport, domestic UDF could increase from one hundred twenty nine rupees to around one thousand two hundred sixty one rupees. At the Mumbai airport, it could rise from one hundred seventy five rupees to nearly three thousand eight hundred fifty six rupees. Airline landing and parking charges would also increase, which could push airfares higher for all passengers.
The dispute dates back to 2006, when the Delhi and Mumbai airports were handed over to private developers under the public private partnership model. At the time, the airports had old and worn out terminals valued at only a few hundred crore rupees. The regulatory authority that now sets tariffs was established in 2009. The developers are seeking to include a higher valuation of assets from the early period and want non aeronautical assets such as hotels, malls and commercial developments to be counted in the regulatory asset base.
Officials say accepting this demand would make the entire model of brownfield airport development too expensive for users. They argue that if the fifty thousand crore rupees becomes payable to the developers, the amount will ultimately be recovered from passengers. The ministry believes the claim must be contested strongly to avoid large increases in charges for travellers.
The Supreme Court hearing will determine the next steps in what has become one of the most significant regulatory disputes in the aviation sector.
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