Getting the fee right

The Supreme Court's order in the Airport Development Fee (ADF) case once again underlines a problem that has become endemic in the Government: When it suits, it does not follow the law and the proper procedure. The Supreme Court's order in the ADF case shows how. The Act lays down two requirements. One, the fee cannot be collected by Delhi International Airport Limited (DIAL) and Mumbai International Airport Limited (MIAL) “unless the Airports Economic Regulatory Authority determines the rates of such development fee”. Second, the fee can be collected only after “an appropriate order is passed by the Airports Economic Regulatory Authority” (AERA). The law also lays down the purposes for which the fee can be collected. So the Court has asked DIAL and MIAL to “account to the Airports Authority the development fees collected” so far. It has also told the Central Government and the Airports Authority “to ensure that the development fees levied and collected by DIAL and MIAL have been utilised for the purposes mentioned in clause (a) of Section 22A of the 1994 Act.” Most importantly, it has directed that “henceforth, any development fees that may be levied and collected by DIAL and MIAL…shall be credited to the Airports Authority and will be utilised for the purposes mentioned.” Net-net, Court has ruled that the fees can indeed be collected but only after the proper procedure is followed. It has also said that that the proceeds should be used for the purposes intended by the law. It can be safely concluded, therefore, that it is only a matter of time before the fee is restored.

It follows from this that the fee cannot be used for meeting costs already incurred. To see why, it is important to keep the legislative intent in mind. These have been spelt out as follows: (a) funding or financing the costs of upgradation, expansion or development of the airports at which the fees are collected; (b) establishment or development of a new airport in lieu of the existing airport; or (c) investment in the equity in respect of shares to be subscribed by the Airports Authority in companies engaged in establishing, owning, developing, operating or maintaining a private airport in lieu of the existing airport or advancement of loans to such companies or other persons engaged in such activities. It would seem that DIAL and MIAL cannot use the fees they collect for meeting past costs. If these went over the budget, as indeed they have, the travellers cannot be charged for that.

Another problem relates to the term fee. Is the amount charged to travellers a fee or a tax? If it is mandated by the Government, regardless of who collects it, AERA or the concessionaire, it is a tax. Elsewhere in the world, such taxes accrue to the general revenues of the Government. But in India the concessionaire has been taking it all. This is what the Court has rectified.