AERA unlikely to allow Mumbai international airport's legal cost claim

The Airports Economic Regulatory Authority (AERA) is unlikely to allow legal expenses to be included under “operating costs” while calculating aeronautical tariffs for Mumbai International Airport Limited (MIAL) during the fourth control period, which runs until FY29, sources told Business Standard.

 

Once aeronautical tariffs — such as landing charges, parking charges, and user development fee (UDF) — are set by AERA, the airport operator is permitted to collect them from the aviation sector stakeholders such as airlines and passengers.

 

Adani Group-led MIAL, which operates the Mumbai airport, has requested AERA to include legal expenses under operating costs, as this would result in higher tariffs being approved by the regulator, they said.

 

However, AERA believes that including legal expenses could lead to a duplication of costs—since the privatised airport already maintains an internal legal team. Such expenses should be rationalised rather than passed on through higher tariffs, sources said.

 

According to MIAL’s document submitted to AERA, its legal expenses in the third control period (FY20–FY24) were ₹90.5 crore. The document further projects that legal expenses will almost double to ₹167.5 crore in the fourth control period (FY25 – FY29).

 

A meeting was organised by AERA last month to discuss MIAL’s tariff proposal. During this meeting, an MIAL executive argued that there is no clause in the existing agreements — signed with government entities — that disallows legal expenses.

 

The operator pointed out that such costs had been allowed by AERA in the tariff determinations of the previous three control periods.

 

According to MIAL, legal expenses are a routine part of airport operations, arising from matters such as height restrictions, land disputes, slum rehabilitation, and issues related to aeronautical charges and payments to the Airports Authority of India (AAI).

 

The operator noted that AERA had allowed similar legal costs in tariff orders for six AAI airports that were privatised following concession agreements signed in February 2020. These orders were issued between 2021 and 2023.

 

The MIAL executive then requested the regulator to maintain consistency with its past practice and allow legal expenses to be included under “operating costs” in the current control period as well.

 

During the meeting, Delhi International Airport Limited (DIAL)—which operates the Delhi airport—echoed MIAL’s stance, saying that legal costs are an integral part of any business and necessary to protect the rights granted to airport operators. A DIAL executive requested AERA to revisit its proposal and consider the inclusion of legal expenses.

 

However, an AERA official said the issue was examined in depth, and since most airports have internal legal divisions, hiring external consultants in addition to the in-house staff constitutes a duplication of expenses. Therefore, the regulator reckoned that there was a need to rationalise these costs.