Government's Clarification On User Development Fee (UDF), Other Airport Charges
The Indian government has provided a detailed clarification on the increase in User Development Fee (UDF) and other airport charges, asserting that these fees are strictly utilised for infrastructure expansion and operational enhancements rather than profit maximisation. Responding to concerns raised in the Lok Sabha by Maharashtra MPs Prof. Varsha Eknath Gaikwad and Supriya Sule, Minister of Civil Aviation Kinjarapu Rammohan Naidu outlined the regulatory framework that governs such charges, underscoring the role of the Airports Economic Regulatory Authority (AERA) in ensuring financial accountability and transparency.
According to the minister, UDF and other aeronautical charges are structured to recover operational costs and secure reasonable returns on capital investments made towards infrastructure upgrades. These fees, which are determined by AERA under the provisions of the AERA Act, 2008 and the Tariff Guidelines, 2011, enable airport operators to recover investments made for modernisation and expansion, without creating surplus funds for private entities. The regulatory framework is designed to maintain a balance between operator sustainability and passenger interests.
The government reiterated that AERA functions as an independent economic regulator, tasked with setting tariffs for aeronautical services, including UDF, landing fees, and parking charges. The determination process takes into account factors such as return on investment (RoI) for aeronautical assets, operating expenditure, depreciation, and taxes. Tariffs are set for a control period of five years, ensuring consistency and economic viability.
To promote transparency, AERA publishes draft consultation papers on its website, outlining its approach to tariff regulation and inviting stakeholder participation. This ensures that revenues generated from passenger fees are appropriately channelled into infrastructure development, sustaining the growth of the aviation sector while ensuring financial accountability.
Recent reports on UDF hikes, particularly at Mumbai International Airport, have drawn public and parliamentary attention. The Adani Group-operated Mumbai International Airport Limited (MIAL) has proposed a significant increase in UDF, introducing a charge of Rs 325 per domestic departure and raising the existing Rs 187 fee for international passengers to Rs 650. The proposal, currently under consultation with AERA, marks the first such revision since the Adani Group took over operations in 2021.
MIAL has justified the increase by citing a planned investment of Rs 10,000 crore towards redevelopment, including the modernisation of Terminal 1 and enhancements in aeronautical and non-aeronautical infrastructure. The company has also announced a 35% reduction in landing and parking charges for airlines to counterbalance the impact of the UDF hike on passenger fares. According to MIAL, this approach aims to maintain operational efficiency while enabling airlines to manage costs effectively.
The redevelopment of Terminal 1 is expected to commence in November 2025, with a complete overhaul aimed at increasing capacity and structural integrity. The project, projected to span three years, will see the terminal’s capacity rise by 42%, allowing it to handle 20 million passengers annually. Meanwhile, Terminal 2 will also undergo improvements, including the introduction of self-baggage drop systems, full-body scanners, and advanced baggage screening technologies to streamline security procedures.
Beyond terminal upgrades, the airport operator is implementing significant airside infrastructure improvements, including runway maintenance and taxiway enhancements. Sustainability measures are also being prioritised, with initiatives focused on transitioning to electric vehicles, boosting energy efficiency, strengthening water conservation efforts, and achieving net-zero emissions by 2029.
The government has reassured the public that these charges and investments are subject to strict regulatory oversight, ensuring that passenger fees directly contribute to infrastructure and service improvements. Over the past three years, major airports across India, including Chennai, Bengaluru, Port Blair, Lucknow, Jaipur, Tiruchirappalli, and Pune, have seen the inauguration of new terminal buildings. Delhi and Hyderabad airports have also undergone extensive expansions, featuring additional runways and enhanced passenger handling capacities. These developments have led to notable improvements in airport rankings in global service quality assessments such as the Airport Service Quality (ASQ) ratings by Airports Council International and the Skytrax Research Awards.
The government has also emphasised that financial accountability mechanisms are in place to monitor private airport operators, ensuring that revenues collected through UDF and other charges are reinvested in airport infrastructure rather than diverted for profit-making.
