Relief for passengers as AERA rejects Mumbai airport’s tariff hike proposal

In a relief for passengers, the Airports Economic Regulatory Authority (AERA) has turned down Mumbai International Airport Ltd’s (MIAL) demand for a 675 per cent increase in user fees for a five year period between 2024-2029.  Instead the airport sector regulator has proposed only 18 per cent rise in fees, rationalising certain planned capital expenditure for an airside tunnel, corporate office building among others. AERA has also cited ongoing litigation in the Supreme Court for rejecting MIAL’s tariff demand.

The authority’s proposals are contained in a consultation paper which was released on Monday.(10 Mar ’25) It will be put up for stakeholder consultation and public comments. AERA determines aeronautical charges at airports including charges for aircraft parking and a user development fee. This is calculated by taking into account capex, return on investment, operating expenses, depreciation, tax, etc.

At present, MIAL collects ₹187 as user development fee (UDF) from international passengers. Currently, there is no UDF for domestic passengers. The Adani group run MIAL has proposed ₹17,439 crore capex for the five period covering airside improvement works, reconstruction of terminal T1, expansion of terminal T2 among others. These works are a part of airport master plan which hopes to achieve passenger and cargo handling capacity of 65 million passengers and one million tonnes of cargo per annum.

The actual passenger traffic, however, is projected to reduce from 52 million in FY24 to 48 million in FY29 due to closure of terminal T1 for redevelopment.

Based on an examination of MIAL’s proposal, AERA has considered capex of ₹7,651 crore for purpose of tariff calculation. Adjustments have also been made in operating expenses proposed by the airport operator. AERA has also said there was an over recovery of ₹934 crore by the airport operator and has rejected it’s plea for a true up of ₹13,665 crore from previous tariff orders. The airport’s plea was based on appellate tribunal’s ruling on the treatment of tax and annual fee payable to Airport Authority of India for purpose of cross subsidising of charges.

AERA has appealed against the tribunal order in the Supreme Court. “Public interest would be better served if authority takes the decisions on the basis of final decision of Supreme Court of India on these issues,” AERA noted in the consultation paper.