Good news for Delhi airport passengers as fare regulator seeks steep cut

Good news for passengers flying out of the Delhi airport, as the air fare regulator is looking to steeply reduce airport charges.

The Airports Economic Regulatory Authority (Aera) will soon move the high court here to seek permission for a further cut in aeronautical charges to be charged by Delhi International Airport (DIAL) till 2018-2019, senior government sources said.

However, the task might not be easy for the regulator, as DIAL has already challenged the increase in previous years in various courts. Also, Aera will have to take the permission of the high court in order to pass an order related to airport rates for 2014-19.

In January this year, Aera, a statutory body which sets the tariff for major airports across the country, had proposed a reduction in aeronautical charges for Delhi's Indira Gandhi International airport by 78 per cent for 2014-19. This was against DIAL's demand for a rise in the airport costs by 42.6 per cent.

Sources said Aera now feels that a case is made out for a further reduction in airport costs than its earlier proposal of 78 per cent, as the revenues earned by Dial has exceeded its targets due to an extended "steep hike" charged by DIAL. At present, the Delhi airport levies Rs 275-550 as user development fee on each passenger departing and Rs 233-466 on each passenger arriving on domestic flights. Passengers on international flights are charged higher.

"The Delhi airport has enjoyed high tarrif (rate) for quite some time because of a stay order from the Delhi High Court. We are in the final stages of determining the exact proportion by which the tariff is set to reduce. But it will certainly be a very steep reduction than 78 per cent proposed earlier…It may go above 85 per cent, too," said a top government official, on condition of anonymity.

"The said matter is sub judice and hence we would not like to comment," said a DIAL spokesperson.

The move might come as a relief to passengers, as Delhi's share in the domestic air traffic is more than 20 per cent but at the same time, it will likely irk DIAL which has been demanding more hikes in the airport tariff. Airport charges are fixed for a five-year duration, known as the control period. During the first control period (2009-2014), the tariff regulator had allowed Dial to increase aeronautical charges by 346 per cent effective 15 May 2012. This was also against DIAL's demand for a 775 per cent hike.

DIAL had challenged "an inadequate increase" in the airport fees, which is passed on to the airlines and in turn to the passengers, in the Aera appellate authority. Meanwhile, Aera started the process of price fixation for the airport for the period between 2014 and 2019. It extended the 346 per cent hike charged by the Delhi airport up to May 2014 then October 2014 and finally January 2015 and said this shall be "adjusted from the aggregate revenue requirement" for the coming five-year period.

DIAL had realised Rs 188 crore in excess of its revenue target for 2014-19 as on April 1, 2014, according to a consultation paper on Delhi airport charges released by Aera in January this year. The figures showed incidentally as the 346 per cent hike in the airport charges came into effect from May 2012, DIAL had collected almost double the revenue than the targets in 2012-13 and 2013-14.

"We had determined the revenue for the first control period. The reduction in the tariff for the second control period will be much higher, as the Delhi airport has collected revenue at a higher rate for an extended period and eventually that will get adjusted," said the source quoted above.

Aera fixes a target for the airport's revenue for five years based on various parameters, including operating costs, depreciation, non-aero revenues and taxes. DIAL raises this revenue through various means such as user development fees, parking and landing charges, among others.

However, as the term of the members of the appellate authority had expired in August last year, DIAL then moved the high court seeking an extension to the price charged in the first control period till the pending cases are cleared in the tribunal. It also sought a stay in the new tariff proposed by Aera in January 2015, which had asked for a 78 per cent hike.

The high court passed an order in January this year directing the Union government to appoint the appellate tribunal, putting a status quo on the airport charges till appeals are disposed against the tariff order cases.

"We will submit an affidavit in the court to inform about a reduction in tariff charges and come out with an order in the next two weeks. Once the court allows us to notify, we will pass the order," said the source.

The Union government appointed the chairperson and members of Aera appellate tribunal this week and a copy of the order has been uploaded over the civil aviation ministry's website.

Subsequently, Aera has also filed a special leave petition in the Supreme Court in April this year, seeking a stay to the high court's January order and to pass orders related to airport charges for 2014-19.

In the petition, reviewed by Business Standard, Aera questioned the "rationale of linking of future tariff orders to the pendency of the statutory appeals against previous tariff orders, especially when each of such tariff orders create a new and separate right to appeal" under the existing rules. It even said the high court order "imposes an embargo" on Aera's statutory mandate and duty under the Aera Act 2008.

DIAL is a joint venture company, led by GMR Group. Other partners are AAI and Fraport. The AAI holds a 26 per cent stake in DIAL and receives 46 per cent of the airport's revenue. The airport handled 41 million passengers in 2014-15, of which 26 million were handled at T3 and 15 million were handled at T1D and T1C (which is used for arrivals). While T3 is designed to handle 34 million, T1D and T1C can handle 16 million.