Why airport user fees are illegal

The Airports Economic Regulatory Authority (AERA) recently approved an increase of 346 per cent in airport charges. The decision was taken to please the Delhi International Airport Limited (DIAL), which has been lobbying for an increase in the user development fee (UDF).

The DIAL is still disappointed, as it was expecting a much higher increase in the UDF.

The decision will adversely impact thousands of passengers. The United Progressive Alliance government, setting aside objections raised in Parliament against the decision to allow a private airport to collect UDF, supported the cause of DIAL.

COURTS DISAPPROVE

The Delhi and Mumbai Airports were developed through the PPP model. The developers were selected through a process of competitive bidding.

After some years of operation, the private developer demanded the introduction of UDF, and the Government readily agreed. During the tendering stage or inking of the contract, there was neither any provision to collect UDF, nor were any rules laid down to empower the airports to do so.

The airports were allowed to collect a fee of Rs 1,300 for an international passenger and Rs 200 for a domestic passenger from Delhi Airport. Mumbai airport also started collecting a similar amount. Aggrieved by the decision of the Government to allow UDF collection, some consumer organisations approached the courts.

Initially, the Delhi High Court upheld the decision of the Government. But the Supreme Court ruled that UDF collection was illegal.

Without going into the technicalities of the contract and fee collection, the Supreme Court said that the collection was ab-initio void because there were no enabling ‘Rules' to empower fee collection.

The Court said that even if collection were to be done, the matter should be decided by a regulator (Airport Economic Regulatory Authority). The order made it clear that the Government's arbitrary decision to support the private developer was illegal.

By this time, the Delhi Airport alone had collected more than Rs 1,481 crore from passengers. A demand was made that the money illegally collected by the Airport developers should be recovered.

PROPOSED CHANGES

Instead, the Government immediately came with Rules enabling the collection of UDF.

The Government tabled the Airport of India (Major Airport Development Fee) Rules, 2011, in Parliament, which enabled the private airports to levy UDF on passengers.

The government's sly move was, however, checked by the Opposition in Parliament. Deploying a rarely used Parliamentary tool, MPs submitted their proposed amendments to the Rules, asking the government to correct itself.

A discussion on amendments to Rules was, in fact, taken up in Rajya Sabha 11 years ago, in May, 2000. After a long period, the business advisory committee of Parliament approved a statutory motion to amend the biased Rules. The motion could come up for discussion during the Budget session of Parliament.

The proposed amendments to the major airport Rules pertained to four issues. First, UDF collection in PPP airports cannot be accepted, as there was no provision to collect user fee at the time of bidding and awarding contracts for upgrading these airports.

The lowest bidder would have been finalised without considering this income. If the government allows collection of user fee, it would amount to a major scam involving thousands of crores.

Second, the amendments call for bringing PPP airports and collection and spending of UDF under the Comptroller and Auditor General's scanner.

Third, the amendment proposes to hand over the money illegally collected by two private airport developers to the Airport Authority of India. This money amounts to about Rs 2500 crore in the two airports.

Fourth, it entrusts the Airports Authority of India with the task of collecting and managing UDF, as against the private agencies.

BYPASSING PARLIAMENT

The government should not have allowed the DIAL to collect higher UDF, even as Parliament is yet to discuss amendments to the Rules. Also, there are Supreme Court verdicts to press home the point that money collected by private parties as tax or levy could be considered bona-vaccantia, and should be made the property of the Government.

The issue of whether private parties have the right to levy or collect tax has wide ramifications. Article 265 of the Constitution clearly says that private parties are ineligible to collect and levy taxes.

A provision to tax the public cannot be implemented through a Rule made by the Executive without the approval of Parliament. The present government seems to be very eager to allow its PPP partners and corporates to levy tax, bypassing Parliament. The sovereign function of the Legislature is put under question.

The power with the Executive to make rules, regulations, by-laws, schemes or other statutory instruments is delegated by Parliament. The committee on Subordinate Legislation considers whether the rules tabled in Parliament by the subordinate authority are “in accord with the objects of the Constitution or the Act pursuant to which it is made”.

The committee also looks at whether the rules directly or indirectly bar the jurisdiction of the courts, and whether it involves expenditure from the Consolidated Fund of India or the Public Revenues. Even though the concepts of administrative law provide for enough safeguards against arbitrariness by the executive, the practical experience is far from satisfactory.

(The author is Rajya Sabha MP from Kerala.)

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