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UDF norms to be decided soon – Bangalore Aviation

UDF norms to be decided soon

User-charges norms for airports soon
Sindhu Bhattacharya/ DNA MONEY

The user development fee (UDF) conundrum may finally get resolved next week when the Union civil aviation ministry holds a crucial meeting to frame a broad policy on this levy.

At present, only two new airports (Hyderabad and Bangalore) have been allowed to charge a specific amount as UDF and that too only from international passengers.

Many other airport developers have been clamouring for permission to also charge UDF in the absence of a policy. Then, the quantum of UDF each airport developer can charge is being decided by the ministry at present instead of there being a set formula for the purpose.

The meeting on July 11 is expected to frame broad guidelines for this levy. UDF is the additional levy (over and above the airline ticket price) the airport developers charge from each passenger to part finance modernisation and development of the airport.

It became relevant recently when developers of the two brand new airports-at Bangalore and Hyderabad-sought to levy it to recover costs. Now, not just Bangalore and Hyderabad but developers of airports at Delhi, Mumbai and Cochin are also keen to use UDF levy to part finance their project costs.

In a written reply to Rajya Sabha in this year’s Budget session, civil aviation minister Praful Patel had assured members that “actual quantum of UDF for domestic and international passengers as well as other regulated charges in respect of both Hyderabad and Bangalore airports would be fixed up only after the receipt of final audited project costs from them”.

The UDF may well be reduced going forward and an indication of this came from Patel himself. Pointing out that Bangalore International Airport (BIAL) had to make additional investments for increasing the capacity because of increase in traffic, the minister had said “the scope for cost recovery would also undergo a change”.

From 4.5 million passenger traffic projected earlier, BIAL is now expected to handle 9 million passengers; this increase in traffic has meant additional cost of about Rs 540 crore.

Senior civil aviation ministry officials have said earlier that additional cost for this project vis-a-vis traffic increase makes the case of lower UDF even stronger.

They said that the government could ask airport developers to recover UDF in a 15-year horizon against the 5-year period they want, thereby also bringing down the levy per passenger. UDF is a new levy for Indian passengers, since Hyderabad became the first airport modernised by a private developer (GMR Group)-to ask each passenger to pay for using “world class” facilities.

At present, Indian airport charges (which include parking and landing charges for aircraft and the passenger service fee which forms part of your fare each time you take a domestic flight) are low compared to many other countries in the world.

According to Patel’s answer to the Upper House, on a scale of 1-100 (1 denoting the lowest airport charge), India holds the 22nd position.

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About Devesh Agarwal

A electronics and automotive product management, marketing and branding expert, he was awarded a silver medal at the Lockheed Martin innovation competition 2010. He is ranked 6th on Mashable's list of aviation pros on Twitter and in addition to Bangalore Aviation, he has contributed to leading publications like Aviation Week, Conde Nast Traveller India, The Economic Times, and The Mint (a Wall Street Journal content partner). He remains a frequent flier and shares the good, the bad, and the ugly about the Indian aviation industry without fear or favour.

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