ADF withdrawn for Airports Proposed to be Privatized

The  Airport Development Fee (ADF) that was imposed at major airports like Delhi and Mumbai has been scrapped by the government for the six Airport Authority of India (AAI) airports that it plans to privatise. In the pre-election year, the UPA is planning to go ahead with the privatisation of six airports that include those at Chennai, Ahmedabad, Kolkata, Jodhpur, Lucknow and Guwahati. Fearing that these airports may also levy exorbitant user charges on flyers, the government has decided to do away with the ADF, while retaining the User Development Fee (UDF).

Aviation ministry proposes new plan outlay:

As revealed by the Aviation minister, even after privatisation is brought about at these airports, the private players can levy only UDF. An exception to this rule will be allowed only in case any additional capital expenditure is incurred due to increase in capacity. It was also emphasised that flyers from these airports should not be burdened by any further increase in charges. As per the plan outlay put forward by the ministry, private bidders will have to operate, maintain and develop  these six airports on a revenue sharing basis with AAI, with a concession period of 30 years. The aeronautical tariff structure of the entire 30 years will be decided by the aviation authorities. Moreover, the ministry will also provide provisions in regard to inbuilt clauses for cost escalations, considering that costs are likely to increase in future. This will provide bidders with a clear picture regarding revenue generation. This will safeguard passengers and airlines from escalating costs as was the case in Delhi.

Govt move after much deliberation:

The move by the government to allow private bidders of the six airports to charge only UDF was well measured and had come after much deliberation. In this context, it has to be noted that the government had earlier failed in its bid to convince the private developers of the Delhi and Mumbai airports to refrain from charging ADF, and resort to levying only one charge on flyers. However, they relented to a certain extend so as to reduce the amount of ADF charged and at the same time increase the duration for which it is charged, with effect from January 1, 2013. There have been widespread complaints from passengers that besides levying high user charges, Delhi is one of the most expensive airports.

Aviation ministry allows 100% stake to private players:

The decision by the aviation ministry to privatise these six airports has led to speculations that they are also likely to become more expensive like their metro counterparts. However, what is notable is that the aviation ministry has allowed the private players bidding for the six airports to have 100% stake in their operations. This is contrary to the case of airports like Delhi, Mumbai, Bangalore and Hyderabad, where AAI was requested to invest in the private companies that had bid for these airports. Incidentally, AAI has 26% stake in the Delhi and Mumbai airports and 13% stake in the Bangalore and Hyderabad airports. However, the existing staff who are employed at these six airports will have to be retained. This is contrary to the deal that was struck during the privatisation of the Delhi and Mumbai airports, where AAI had to shift some of their existing staff to other units.