Flying Could Get Much Costlier: Inside the Rs 50,000-Crore Airport Tariff Dispute
A tribunal ruling has reopened tariff calculations from 2009-14, triggering a push by airport operators for steep UDF hikes — now headed to the Supreme Court.
The Gist
The recent ruling by TDSAT could lead to significant increases in airport fees for Indian travellers, potentially raising ticket prices dramatically.
- TDSAT recalculated airport tariffs for Delhi and Mumbai, concluding operators under-recovered revenue from 2009 to 2014.
- Delhi and Mumbai airport operators seek to recover a shortfall of Rs 50,000 crore through increased User Development Fees (UDF).
- Proposed UDF hikes could see fees rise by up to 22 times, impacting both domestic and international travellers.
For Indian travellers, airport fees may have been visible on the ticket but not big enough for them to take notice. Now these charges could make air travel more expensive.
Earlier last week, a ruling by the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) recalculated tariffs for airport charges at Delhi and Mumbai airports between 2009 and 2014, and concluded that the operators significantly under-recovered their allowed revenue during that period.
Now, the two private airport operators, Delhi International Airport Ltd (DIAL) and Mumbai International Airport Ltd (MIAL), are seeking permission to recover that shortfall: a whopping Rs 50,000 crore.
If approved, the extra burden won’t fall on airlines or the government but on passengers, through steep increases in the User Development Fee (UDF). Early estimates by media reports suggest domestic and international UDF could rise 10x to as high as 22x at India’s busiest airports, potentially pushing ticket prices up overnight.
The matter, where the government is backing air passengers, is now headed to the Supreme Court, making this far more than a technical tariff revision as it could reshape how flying is priced in India, and signal whether private operators or the public ultimately bear the cost of infrastructure financing.
How We Got Here: A Long Dispute Over Tariffs
The roots of this dispute go back nearly two decades. In 2006, Delhi and Mumbai airports were privatised, moving from state-run management to private consortia. But there was a major gap as there was no regulator for airport tariffs at the time.
It wasn’t until 2009 that the Airport Economic Regulatory Authority (AERA) was created.
“Earlier, there were terminal and airport charges, including navigation fees, but none of these were under the purview of any regulatory authority. Once privatisation happened, AERA was formed, and it became responsible for determining these charges,” CK Govil, former president of The Air Cargo Agents Association of India (ACAAI), told The Core.
Because pre-privatisation financial records were incomplete, a new system, the Hypothetical Regulatory Asset Base (HRAB), was introduced to estimate how much the assets were worth, and therefore, how much UDF airports could charge.
A Tribunal Ruling Opens the Floodgates
In the recent ruling, the TDSAT revisited tariff calculations for the 2009–2014 period because it disagreed with how AERA interpreted and applied the HRAB.
HRAB was originally meant to act as a proxy valuation for airport assets because the actual pre-privatisation cost records for Delhi and Mumbai were incomplete or inconsistent. Instead of using book value or audited capital expenditure, the HRAB system allowed a notional asset base to be used for tariff-setting, recognising the strategic value of the airports and projected investment needs.
TDSAT concluded that AERA undervalued this asset base and, as a result, underestimated what the airports were allowed to recover under the regulatory framework.
Using HRAB, TDSAT recalculated permissible Return on the Asset Base, depreciation allowances, pass-through charges (borrowings, concession fees, etc.) and future capital expenditure projections
Key difference between AERA and TDSAT’s calculations
The disagreement between AERA and TDSAT mainly comes down to how each side interpreted the value of airport assets and what operators were entitled to recover. AERA took a cautious approach, basing its tariff calculations largely on actual spending and audited figures. It also expected airports to use the money they earn from commercial sources, such as shops, parking, and duty-free stores, to keep passenger charges lower. AERA believed private operators should share some financial risk since they were running public infrastructure under a partnership model.
TDSAT viewed the situation differently. It treated the hypothetical asset value (HRAB) as something operators were fully entitled to recover, regardless of whether it matched actual investments in the early years. The Tribunal also accepted that operators should earn a higher financial return than AERA allowed and shouldn’t rely heavily on commercial revenue to subsidise passenger fees.
In short, AERA focused on protecting passengers from high charges, while TDSAT prioritised the operators’ right to recover what they believed was promised under the privatisation agreements.
Now DIAL and MIAL argue that they must be allowed to recover this shortfall, albeit years later, by increasing UDF.
If accepted, flying will immediately become more expensive. According to Business Today, the proposed UDF revisions are drastic:
If the claims are allowed, domestic flyers out of major hubs could see their UDF skyrocket from a few hundred rupees to thousands, potentially jacking up tickets overnight.
“I support improvement in services—but if they want to charge premium fees, then look at Changi Airport in Singapore. Learn from them. Only then ask for a UDF increase—and certainly not one running into thousands of rupees. A small hike may be understandable, but this scale must be justified,” Dr Vandana Singh, Chairperson of Federation of Aviation Industry in India (FAII) told The Core.
Critics warn this could hit air travel demand and burden ordinary passengers, while airlines and operators insist the move only recovers overdue dues.
“This goes against the Prime Minister’s vision of making air travel affordable. UDF and other charges could rise significantly — yet passengers already pay extremely high prices at airport terminals for basic items like water or tea. Who can afford that?” Govil said.
What Are Passengers Getting in Return?
Industry voices are divided—but many argue the operators haven’t justified the claim.
“I am very happy the government is backing passengers. We must support travellers because this money ultimately comes from our pockets. The question is: what additional services are airport operators providing to justify charging us more?” Singh said.
For others, the issue is less about the number and more about transparency.
“What is included in UDF? Why are there separate terminal usage charges if passengers already pay UDF? If operators are claiming Rs 50,000 crore, they must explain what exactly passengers are paying for,” Govil said.
Govil questions whether the revenue projections submitted by private operators are fully disclosed.
“If everything was above board, would they be aggressively bidding for multiple airports across India?”
MIAL did not respond to requests for comment.
A Larger Debate: Privatisation vs Public Access
The controversy forces India to confront a larger question:
When critical public infrastructure is privatised, who bears long-term financial risk—the operator or the user?
Air travel in India is no longer the preserve of the elite. It is aspirational; middle-class mobility has exploded post-pandemic. A fee hike of this magnitude could push many travellers back to trains and buses.
Airlines, too, are nervous. Higher airport charges make tickets less competitive, affecting demand. And with ATF prices already volatile, additional passenger charges could destabilise the ecosystem.
