Hyderabad: Passengers flying out of Rajiv Gandhi International Airport (RGIA) in Hyderabad already pay the highest User Development Fee (UDF) in the country, Rs 700 for domestic travellers and Rs 1,500 for international flyers, but a proposed change in how airport tariffs are calculated could mean that fee does not climb further any time soon.
The Airports Economic Regulatory Authority (AERA) has floated a new tariff framework built around what it calls the User Pay Principle, under which passengers, airlines and other airport users would only be charged for infrastructure once it is completed, commissioned and actually in use. This marks a shift from the existing system, which allows airports to factor in projected capital expenditure across an entire five-year control period, often pushing up charges years before new facilities are ready for passengers.
The proposal carries particular weight for the Hyderabad airport, which is set to spend more than Rs 9,000 crore on two major expansion projects: a northern passenger terminal with capacity of 20 million passengers a year, and a northern precinct airside development that includes a new runway, taxiways and aprons. Neither project is expected to be commissioned before 2029-30, which under the old tariff mechanism could have meant passengers paying for them well in advance.
Explaining the rationale, AERA said billing passengers for facilities that are not yet operational raises fairness and cost allocation concerns, and pointed to the International Civil Aviation Organization’s own position that airport charges should correspond to services actually being provided.
The regulator also flagged a pattern across past projects: several large capital works were delayed, rescheduled, restructured or never completed at all, despite being built into tariff calculations at the outset. That mismatch, AERA noted, has meant passengers sometimes paying for investments that never materialised, while operators collected revenue ahead of the infrastructure being ready.
To close that gap, AERA has proposed a new mechanism called the Incremental Annual Revenue Requirement (ARR) approach for large airport expansion projects. Rather than folding future project costs into tariffs at the start of a control period, each high-value project would be evaluated separately on its cost, financing plan and construction timeline, with charges revised only after the project is actually completed and opened to passengers.
The tariff proposal comes even as RGIA’s own growth continues apace. The airport’s network has expanded to 100 destinations, 74 domestic and 26 international, and it handled 30.48 million passengers in FY 2025-26, averaging more than 83,500 passengers and 569 aircraft movements a day.
