Hyderabad: Reeling under rising airfares, passengers flying out of Hyderabad’s Rajiv Gandhi International Airport (RGIA) can at least stop fretting over a further jump in the User Development Fee (UDF), which is already the highest in the country at Rs 700 for domestic flyers and Rs 1,500 for international travellers.The relief comes as the Airports Economic Regulatory Authority (AERA) has proposed a new tariff framework that prevents the cost of major expansion projects from being passed on to passengers before the facilities become operational. The proposal assumes significance as RGIA is set to invest over Rs 9,000 crore in two key expansion projects, a northern passenger terminal with an annual capacity of 20 million passengers and a northern precinct airside development, including a new runway, taxiways and aprons. Both projects are expected to be commissioned only in 2029-30.Under the existing tariff mechanism, airports can factor in projected capital expenditure while determining tariffs for a five-year control period, allowing user charges to increase years before passengers can actually use the new facilities. To address this, AERA has proposed adopting the ‘User Pay Principle’, under which passengers, airlines and other airport users will pay for major infrastructure only after it is completed, commissioned and made available for use.According to AERA, charging users for infrastructure that is yet to become operational raises concerns over fairness and cost allocation. The regulator noted that the International Civil Aviation Organization (ICAO) also advocates that airport charges should bear a reasonable relationship to the facilities and services actually provided.Concerns over delaysThe authority has actually observed that, in several instances, major capital expenditure projects projected for commissioning within a control period were subsequently delayed, rescheduled, phased differently, or, in some cases, not executed at all. “Such deviations between projected and actual capitalisation can lead to a mismatch between tariff recovery and asset availability. As a result, airport users may bear charges based on investments that have not yet materialised, while the airport operator may receive revenue recovery in advance of the corresponding asset being put into use,” AERA stated.Why did AERA propose ARR?To address this, AERA has proposed a new regulatory mechanism called the Incremental Annual Revenue Requirement (ARR) approach for large airport expansion projects. Under this system, the cost of major future infrastructure projects will not be included while fixing airport tariffs at the beginning of a five-year control period. Instead, the regulator will separately assess each high-value project based on its estimated cost, financing plan and construction schedule. Airport charges will be revised only after a particular project is completed, commissioned and opened for use, allowing the airport operator to recover the investment only when passengers begin benefiting from the new infrastructure.Hyd now connected to 100 destinationsRGIA’s connectivity has expanded to 100 destinations, marking another milestone in its journey towards becoming one of India’s fastest-growing aviation hubs. The network now comprising 74 domestic and 26 international destinations. The milestone comes at a time when passenger traffic at RGIA has witnessed a sharp growth over the past five years. The airport handled 30.48 million passengers during FY 2025-26, averaging more than 83,500 passengers and 569 aircraft movements every day.
