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HC nixes legal challenge on airport levies

HC nixes legal challenge on airport levies
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First Published: Wed, Aug 26 2009. 10 47 PM IST

Extra burden: Passengers at the Indira Gandhi International Airport that is operated by DIAL. The special levies were imposed to part-finance the cost of modernizing airports and raise funds for devel
Extra burden: Passengers at the Indira Gandhi International Airport that is operated by DIAL. The special levies were imposed to part-finance the cost of modernizing airports and raise funds for devel
Updated: Wed, Aug 26 2009. 10 47 PM IST
New Delhi: In a potentially trend-setting ruling, the Delhi high court on Wednesday dismissed a petition challenging the right of the two private operators managing airports in Mumbai and Delhi to impose special levies on departing passengers.
A division bench comprising chief justice A.P. Shah and justice Manmohan, who uses one name, held that allowing the petition would frustrate the government policy of involving the private sector in developing infrastructure through public-private partnerships (PPP).
Extra burden: Passengers at the Indira Gandhi International Airport that is operated by DIAL. The special levies were imposed to part-finance the cost of modernizing airports and raise funds for development. S Burmaula / Hindustan Times
The decision reaffirmed the rights of the private operators to recover part of their costs through special levies.
The petition was filed by Resources of Aviation Redressal Association, a non-governmental organization, and challenged the imposition of an airport development fee (ADF) by Delhi International Airport Pvt. Ltd (DIAL) and Mumbai International Airport Pvt. Ltd (Mial).
The Delhi and Mumbai airports are run by consortiums headed by infrastructure companies GMR Infrastructure Ltd and GVK Power and Infrastructure Ltd, respectively. The special levies were imposed to part-finance the cost of modernizing the airports and raise funds for future development.
Mint could not immediately ascertain whether the petitioner intends to challenge the ruling in the Supreme Court.
The public interest litigation challenged the fee—a Rs200 cess on domestic passengers and Rs1,300 on international travellers levied since 1 March this year—saying it placed an “undue burden on travelling public”. It also argued that in return for the payment, the passengers were not being offered any extra facility or value by the concessionaires.
It also challenged the government’s decision to delegate the power of collecting the fee to private operators.
However, the court said that because both DIAL and Mial managed the airport under a statutory lease from the government, both have the same right as state-run Airports Authority of India (AAI) to levy such a fee.
According to the court, the Airports Authority of India Act, 1994, vests AAI with the powers to devolve its rights to impose and collect special levies to private operators. This, the bench said, was made possible through an amendment effected in the Act in 2003.
On 20 August, the division bench had reserved the order for 25 August after hearing arguments by the government and the two airport operators. The order was eventually delivered on Wednesday.
Analysts said that a decision upholding the petition could potentially have raised questions on the PPP model of financing infrastructure. “The issue should have been, what is the level of such charges. After all, just because they can charge does not mean they can charge what they want,” said Amrit Pandurangi, an executive director at audit and consulting firm PricewaterhouseCoopers.
DIAL welcomed the ruling. “The ADF is levied for a limited period to modernize and develop the airport and provide modern, passenger-friendly facilities. DIAL remains committed to transform IGI Airport into a transport hub that India will be proud of,” DIAL spokesman Aniruddha Chatterjee said in an emailed statement.
Mial has no immediate comment to offer, a spokesman said.
A senior official at a low-cost airline, who asked not to be named because he is not authorized to speak to the media, said the ruling may embolden airport operators to increase charges.
“It would become a precedent now. In the wake of this, the airports can now say they can increase the charge (development fee) further because they are already empowered,” this official said.
Passenger traffic has already declined because of the impact of an economic slowdown, and the special charges levied by airports may be an additional disincentive for passengers to travel by air. “Naturally there is an effect on demand because it’s going to go from the consumer’s pocket. So it affects passenger demand,” said the airline official.
Rahul Chandran and Tarun Shukla contributed to this story.
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First Published: Wed, Aug 26 2009. 10 47 PM IST