India Plans End of Some Airport Fees to Lower Cost of Traveling

India plans to abolish some airport fees at Delhi and Mumbai as the nation’s Civil Aviation Ministry seeks to lower costs for airlines and boost demand for travel.

Delhi International Airport Ltd. and Mumbai International Airport Ltd. have been asked to provide additional equity to meet any funding shortfall following the proposed abolition of some fees, according to a statement from the ministry. State-owned Airports Authority of India, which holds a 26 percent stake in both the airports, will also inject additional capital.

The ministry’s move to end the airport development fee at Delhi and Mumbai follows abolition of a similar levy at facilities in the southern Indian city of Chennai and the eastern city of Kolkata this month. Delhi airport raised user charges fourfold starting May 15, prompting budget carrier SpiceJet Ltd. to cut plans to increase flights from the city.

The Airports Economic Regulatory Authority, the tariff regulator, allowed Delhi airport to collect a 200 rupee airport development fee from each outbound domestic traveler. This was in addition to 462.80 rupees, or a fixed $9.14, development fee from each departing domestic passenger on trips of more than 500 kilometers (210 miles) and 391.60 rupees from each arriving local passenger on trips of similar distance.

The charges in Delhi would boost airlines’ operating costs by $400 million, according to the International Air Transport Association. The increase in Delhi airport charges would affect travel demand by as much as 7 percent, IATA Director General Tony Tyler said in New Delhi on July 25.

Proposal Request

“IATA welcomes the announcement by the Ministry of Civil Aviation abolishing the airport development fee at Mumbai and Delhi airports from 1 Jan. 2013,” Albert Tjoeng, assistant director for corporate communications at the organization, said in a statement today. “The intervention by the ministry is a significant step towards reducing the cost for passengers at Delhi and Mumbai.”

Mumbai airport collects 100 rupees as an airport development fee from each domestic passenger and 600 rupees from each outbound international traveler, according to the ministry.

GMR Group-controlled Delhi airport, issued a statement saying it would respond to today’s proposal. Vaibhav Tiwari, a spokesman at GVK Power & Infrastructure-controlled Mumbai airport, declined to comment.

Mumbai airport may face a funding shortfall of 42 billion rupees if the fee is abolished from Jan. 1, and Delhi may face a deficit of 11.8 billion rupees, according to the statement from the ministry. The operators have been asked to submit a proposal on equity infusion to the tariff regulator.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE