Airports in India were, for much of the country’s post-independence history, owned and operated almost exclusively by the State. Nearly all the civil airports of importance in the country were owned by and operated by the Airports Authority of India (“AAI”), which was established in 1995 by a merger between the erstwhile International Airports Authority of India and the National Airports Authority. This position began to change in the early 2000s, when the government felt that the magnitude of modernisation required for Indian aviation could only be achieved with public funding alone. The result is the Public-Private Partnership (“PPP”) framework that now governs most major Indian airports, and forming the subject of this article.
It is important to appreciate the legal significance of the term “privatisation” in the context of Indian airports, as the expression is frequently used imprecisely. The airport assets themselves have not been transferred to private ownership. Rather, the Airports Authority of India (“AAI”) continues to retain ownership of the underlying land and airport infrastructure, while granting to a private concessionaire the right to undertake the operation, management, development and maintenance of the airport for a specified concession period, typically ranging from thirty to fifty years. Such arrangements are structured as concession-based leasehold rights and do not involve any transfer of title to the airport assets. The distinction is of considerable legal significance, particularly in determining the allocation of statutory obligations, contractual responsibilities and liability between AAI and the private airport operator.
The Delhi and Mumbai Precedent
The first big privatisation traces back to 2006 when the AAI executed the Operation, Management and Development Agreements (“OMDA”) with GMR Group and GVK Group in the case of Delhi International Airport Private Limited (“DIAL”) and Mumbai International Airport Private Limited (“MIAL”) respectively. Each OMDA, dated 4 April 2006, was executed alongside a corresponding State Support Agreement through which the Government of India and AAI undertook certain obligations in support of the concession framework.
The concession award process was structured as a competitive bidding exercise based on revenue sharing, with the successful bidder being required to offer the highest share of gross revenue payable to AAI. The award of the concessions was challenged by an unsuccessful consortium led by Bharat Heavy Electricals Limited (“BHEL”), which questioned the validity of the selection process before various judicial forums, culminating in proceedings before the Supreme Court. The challenge was ultimately rejected by the Supreme Court in November 2006, thereby clearing the way for the implementation of the Delhi and Mumbai airport concession projects.
In November 2018, the Union Cabinet approved the privatisation of six more airports, Lucknow, Ahmedabad, Jaipur, Mangaluru, Thiruvananthapuram and Guwahati, again on a PPP basis, for thirty years, unlike Delhi and Mumbai concessions program, the concession contracts for these airports were based on a per-passenger fee bid rather than a straight revenue share. The initial concession period was contemplated as thirty years. Concession agreements for Ahmedabad, Lucknow and Mangaluru were executed in October 2020, while the agreements relating to Jaipur, Guwahati and Thiruvananthapuram were executed in January 2021, each providing for a concession period of fifty years.
From a regulatory perspective, however, the fundamental structure of the concession framework remained substantially unchanged. AAI continued to retain ownership of the airport assets while granting long-term rights of operation, management and development to private concessionaires. The principal distinction lay in the economic model adopted for bid evaluation, namely the replacement of the revenue-sharing mechanism utilised in the 2006 concessions with a per-passenger fee model, coupled with an extension of the concession tenure from thirty to fifty years.
The Economic Regulatory Framework: AERA
The introduction of private participation in airport infrastructure necessitated the establishment of an independent economic regulator to oversee tariff determination and regulate specified airport charges. That role is performed by the Airports Economic Regulatory Authority (“AERA”), constituted under the Airports Economic Regulatory Authority of India Act, 2008 (“AERA Act”), which came into force on 1 September 2009.
The principal regulatory functions of AERA are set out in Section 13 of the AERA Act. The amendment to the Act was intended to include a “group of airports” in the definition of “major airport” so that smaller airports would become commercially viable and thus be able to be included in a PPP program, while still being covered under the tariff control of AERA. To achieve this, the Central Government introduced the amendment in Parliament in 2021, and the Minister of Civil Aviation stated that the amendment would enable the smaller airports to be included in a PPP program, while still being regulated under the tariffs of AERA.
Structurally, AERA performs a function analogous to that discharged by sector-specific economic regulators such as the Telecom Regulatory Authority of India (“TRAI”) and the Central and State Electricity Regulatory Commissions. The rationale is straightforward that the infrastructure assets that possess characteristics of a natural monopoly require independent regulatory oversight to ensure that tariffs and user charges remain subject to statutory scrutiny rather than unilateral determination by the concessionaire.
Aeronautical Services and the Scope of AERA’s Tariff Jurisdiction
A recurring issue in airport regulation concerns the distinction between charges that constitute “aeronautical services” and charges that fall outside AERA’s tariff-setting jurisdiction. The classification is of considerable legal significance because tariffs relating to aeronautical services are subject to regulatory approval, whereas certain non-aeronautical or commercial charges may be determined by the airport operator in accordance with the applicable concession and regulatory framework. Section 2(a) of the AERA Act enumerates exhaustively the principal categories of service activities falling within AERA’s regulatory remit including landing, parking, housing of aircraft, ground handling, amongst others.
The significance of this distinction was considered extensively in the litigation concerning the Fuel Throughput Charge (“FTC”). In its judgment dated 11 July 2022, the Supreme Court held that FTC constituted an aeronautical service for the purposes of the AERA Act. The Court observed that excluding FTC from the scope of aeronautical services would place the charge beyond AERA’s tariff-regulatory framework, thereby enabling airport operators to recover such costs directly from airlines, with the potential for those costs ultimately to be passed on to passengers through increased aviation charges.
Appeals from orders passed by AERA lie before the Telecom Disputes Settlement and Appellate Tribunal (“TDSAT”), which was designated as the appellate authority under Section 31 of the AERA Act pursuant to a notification issued by the Central Government in 2010. Although originally established to adjudicate disputes in the telecommunications sector, TDSAT now exercises appellate jurisdiction over airport tariff determinations and other matters arising under the AERA Act.
The regulatory and financial implications of the FTC litigation continue to be the subject of dispute. As recently as December 2025, the Federation of Indian Airlines (“FIA”) challenged aspects of the regulatory treatment of the Hypothetical Regulatory Asset Base (“HRAB”) applicable to Delhi International Airport Limited (“DIAL”), contending that the Tribunal had revisited issues that had already been settled by the Supreme Court and that the revised computation methodology could ultimately result in increased airport charges being borne by airlines and, indirectly, by passengers. The dispute illustrates the broader significance of airport tariff regulation, where questions concerning the classification and recovery of costs frequently have direct commercial consequences for airlines and airport users alike.
User Development Fee: Statutory Character and Regulatory Oversight
Another significant area of litigation has concerned the User Development Fee (“UDF”), a charge levied upon departing passengers rather than airlines. The controversy originated in 2009 when the Central Government issued communications dated 9 February 2009 and 27 February 2009 authorising the introduction of UDF at the Delhi and Mumbai airports without the involvement of AERA.
In Consumer Online Foundation v. Union of India, the Supreme Court examined the legality of the levy and held, insofar as Mumbai Airport was concerned, that the imposition of UDF was ultra vires in the absence of compliance with the statutory requirements prescribed under Section 22A of the Airports Authority of India Act, 1994. The decision underscores the principle that the validity of a statutory levy is contingent not merely upon substantive authority but also upon strict adherence to the procedure prescribed by the governing statute.
The legal character of UDF arose for consideration once again in a different context in Central GST Delhi-III v. Delhi International Airport Ltd. The issue before the Supreme Court was whether UDF collected by Delhi International Airport Limited (“DIAL”), Mumbai International Airport Limited (“MIAL”) and the Hyderabad airport operator was liable to service tax under the Finance Act, 1994. The Supreme Court characterised UDF as a statutory levy rather than consideration for a commercial service rendered by the airport operator. The decision is significant because it reinforces the distinction between regulatory charges imposed pursuant to statutory authority and commercial charges levied in the ordinary course of business operations.
Passenger Rights at Privatised Airports
The privatisation of airport operations has not altered the fundamental allocation of responsibility for passenger welfare and compensation within the aviation sector. The principal source of passenger protection in India remains the Civil Aviation Requirements (“CAR”) issued by the Directorate General of Civil Aviation (“DGCA”), including the Civil Aviation Requirements dated 6 August 2010, as amended from time to time. These provisions impose obligations upon airlines to provide specified assistance and compensation in cases involving denied boarding, flight cancellations and delays.
In addition, India is a contracting state to the Montreal Convention, 1999, which governs certain aspects of carrier liability in relation to international carriage by air, including passenger injury, baggage loss and delay. The Convention operates alongside the domestic regulatory framework administered by the DGCA and the contractual obligations assumed by airlines under their respective conditions of carriage.
A notable feature of the regulatory framework is that the obligations relating to denied boarding, delays and cancellations are directed primarily at the operating air carrier rather than the airport operator. Consequently, most passenger claims arising from such events lie against the airline. This does not, however, preclude liability on the part of a privatised airport operator in appropriate circumstances. Airport operators may be subject to claims arising under consumer protection legislation, tort principles, contractual obligations, statutory duties, or regulatory requirements applicable to airport operations. Separate issues may also arise in relation to airport charges regulated by AERA, including User Development Fees and Development Fees, as well as service-quality standards prescribed under the relevant concession agreements.
Conclusion
Since the introduction of the public-private partnership model in 2006, airport privatisation in India has largely succeeded in attracting private investment and facilitating the modernisation of airport infrastructure. At the same time, the regulatory framework governing privatised airports has continued to evolve through legislative intervention, regulatory determinations and judicial scrutiny.
The framework today comprises multiple institutional layers, including AERA as the economic regulator, TDSAT as the appellate forum for regulatory disputes, and the DGCA as the primary authority responsible for passenger protection and operational oversight. Judicial review by the High Courts and the Supreme Court continues to play a significant role in shaping the contours of the regulatory regime.
The recurring theme across much of the litigation in this sector has been the legality and recoverability of airport charges. Whether the dispute concerns aeronautical services, fuel throughput charges, user development fees or other regulated tariffs, the central question invariably remains whether the levy in question is supported by a valid statutory or contractual foundation. The answer to that question continues to define the balance between private participation in airport infrastructure and the public interest considerations that accompany the operation of essential aviation assets.
Author: Shyamli Shukla, Senior Associate
Co- Author: Riya Mehra, Intern
- Airports Authority of India Act, 1994, § 3, No. 55, Acts of Parliament, 1994 (India).
- Operation, Management and Development Agreement between Airports Authority of India and Delhi International Airport Private Limited, dated 4 April 2006; Operation, Management and Development Agreement between Airports Authority of India and Mumbai International Airport Private Limited, dated 4 April 2006.
- V3S Infratech Ltd. v. Union of India, (2006) 8 SCC 233 (India).
- Press Information Bureau, Cabinet Approves In-Principle Privatisation of Six Airports, Government of India (Nov. 21, 2018), https://pib.gov.in/PressReleseDetailm.aspx?PRID=1553832 .
- Airports Economic Regulatory Authority of India Act, 2008, No. 27, Acts of Parliament, 2008 (India).
- Airports Economic Regulatory Authority of India Act, 2008, § 13, No. 27, Acts of Parliament, 2008 (India), amended by Airports Economic Regulatory Authority of India (Amendment) Act, 2021, No. 11, Acts of Parliament, 2021 (India).
- Airports Economic Regulatory Authority of India Act, 2008, § 2(a), No. 27, Acts of Parliament, 2008 (India).
- Civil Aviation Requirements, Section 3, Series M, Part IV (Directorate General of Civil Aviation, Aug. 6, 2010, as amended); see also Delhi International Airport (P) Ltd. v. Union of India.
- Ministry of Finance, Notification S.O. 1689(E), Gazette of India (July 9, 2010) (designating the Telecom Disputes Settlement and Appellate Tribunal as appellate authority for AERA orders under the Airports Economic Regulatory Authority of India Act, 2008, § 31).
- Federation of Indian Airlines v. Delhi International Airport (P) Ltd..
- Consumer Online Foundation v. Union of India, (2011) 5 SCC 360 (India).
- Airports Authority of India Act, 1994, § 22A, No. 55, Acts of Parliament, 1994 (India).
- Central GST Delhi-III v. Delhi International Airport Ltd., 2023 SCC OnLine SC 1306 (India).
- Finance Act, 1994, No. 32, Acts of Parliament, 1994 (India).
- Civil Aviation Requirements, Section 3, Series M, Part IV (Directorate General of Civil Aviation, Aug. 6, 2010, as amended 2024).
- Convention for the Unification of Certain Rules for International Carriage by Air arts. 17–22, May 28, 1999, 2242 U.N.T.S. 309 (Montreal Convention), ratified by India, S.O. 1229(E) (Aug. 11, 2009).
