Development fee and a User development fee

The Ministry of Civil Aviation is considering abolishing the development fee being levied at the Delhi and Mumbai airports. According to the Ministry, this is being done to make air travel more affordable. What is a development fee and a user development fee Development Fee (DF) is primarily intended to fund the establishment or upgradation of an airport.   It is intended to bridge the gap between the cost of the project and the finance available with the airport operator. Currently only the Mumbai and Delhi Airports levy a DF. User development fee (UDF), which may be levied by the airports. UDF is generally regarded as a revenue enhancing measure.   It is levied by the airport operators to meet operational expenditure. Section 22 A of the Airports Authority Act, 1994 (amended in 2003) gives the Airport Authority of India (AAI) the power to levy and collect a development fee on embarking passengers.  The Act provides that the development fee can be utilised only for:  (a) funding or financing the upgradation of the airport;  (b) establishing a new airport in lieu of the airport at which is levied; and  (c) investing in shares of a private airport in lieu of an existing airport . UDF is not levied and collected under the Airport Authority of India Act but under Rule 89 of the Aircraft Rules, 1937. Under the Aircraft Rules, UDF may be levied and collected by either the AAI or the private operator. According to the Airport Economic Regulatory Authority, UDF is levied to ensure that the airport operators can get a fair return on their investments. What is the role of the Airport Economic Regulatory Authority was established to regulate aeronautical tariffs. determining the amount of DF and UDF for major airports. In case of non-major airports, the UDF shall be determined by the central government. RECENT :----- What has been the role of the Supreme Court? In 2009, the central government permitted the Mumbai and Delhi Airports to levy a DF. The rate of was prescribed by the central government and not by AERA. In 2011, the Supreme Court held that this levy of DF was illegal.   The Court based its decision on two grounds. Firstly, the court held that the rate of DF has to be determined by the AERA and not the central government.  Secondly, the Court held that the power to levy the fee lies with the Airport Authority as the development fee can only be utilised  for the performance of the purpose specified in the Act. Can private operators collect a development fee and a user development fee? In 2003, the government amended the Airport Authority of India Act to allow the AAI with the prior permission of the central government to:  (i) to lease the premises of airports to private entities to undertake some of the functions of the AAI;  (ii) levy and collect a development fee on the embarking passengers at a rate that may be prescribed.

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