Penalty likely on airlines for defaulting on ADF payment

New Delhi: The government plans to impose penalty interest on airlines defaulting on payment of airport development fees. The move aims at easing the cash crunch of airport developers , at least two of whom had approached the ministry recently over delay in payments. The proposal features in the new draft rules framed by the ministry of civil aviation and reviewed by ET. "In the event of any delay by the airline to deposit any development fee by the due date....the airline shall, in addition , deposit interest at the rate of State Bank of India Prime Lending Rate plus 300 basis points per annum ," the draft says. The interest "would be calculated proportionately on the period of delay," it says.
This means airlines will have to pay 3% more than the prevailing rate of interest as penalty in case of delay in payments, a senior civil aviation ministry official said on condition of anonymity . The ministry plans to release the new rules in a month from now. GMR and GVK groups, developers of Delhi and Mumbai airports, respectively , had recently sought the ministry's intervention in expediting payment of airport development fees.
GVK says Kingfisher Airlines owes it Rs 105 crore in development fees, while GMR says Air India has to pay Rs 100 crore and Kingfisher Rs 48 crore. Airport developers are allowed to charge user development fee (UDF) from airlines, which contribute to an airport's revenue, and airport development fee (ADF) that contributes to the funding of the project.
01/06/11 Anindya Upadhyay/Economic Times

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Categories: Airports Jun 2011, Indian Aviation- In General Jun 2011