User fees from Feb 1 to raise cost of flights from Mumbai
AERA in its order dated January 15 noted that UDF has “sound legal basis”.
“It is observed that UDF is a revenue enhancing measure in order to allow a fair rate of return on the investments made in an airport,” the order stated. “UDF thus is not in the nature of tax/cess and hence is not a levy towards compulsory extraction of money. Hence, the proposal for levy of UDF has sound legal basis,” it said.
MIAL is operated by a GVK-led consortium. GVK Airport Holding, ACSA Global and Bid Services Division (Mauritius) hold 74% stake in MIAL while Airports Authority of India holds the remaining 26% stake.
MIAL took over the Mumbai airport from May 3, 2006 as per an Operation, Management and Development Agreement (OMDA) agreement for 30 years. The first regulatory period for levying of UDF began from fiscal year 2009-10 and was up to 2013-14. However, the airport till now was only charging ADF and not UDF.
Aviation sector experts had predicted that the benefits from scrapping and capping ADF will be negated by an increase in UDF.
“Removing ADF may actually make the cost of air travel higher for the passenger,” Amber Dubey, partner and head-aviation at global consultancy firm KPMG had said earlier. “As per the project agreements, the operator is allowed to recover the entire funding gap plus returns on the debt or equity plus additional taxes, if any from the passengers. That is what will make airport tariffs higher,” he had said.
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