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SUDHIR KRISHNASWAMY
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Dr Sudhir Krishnaswamy is Professor of Law, West Bengal National University of ­Juridical Sciences

Someone must pay for infrastructure

Air India pilots participate in a protest demonstration against corruption in Mumbai on 1 May. PTI

vents this April hint of a summer of discontent in the travel and transportation sector. Air India pilots went on strike regarding pay and benefits. The Karnataka Rakshana Vedike, Bharatiya Janata Party Yuva Morcha and Taxi Driver Unions protested against the collection of highway tolls at the entrance to the Bangalore Airport. The Supreme Court has struck down the levy of User Development Fees at the Mumbai and Delhi International Airports. While the problems at Air India arise out of the shocking failure of the government to address labour policy in the merger of Air India and Indian Airlines, the toll protests and user fees decision suggest more enduring problems in the strategy to create infrastructure through public private partnerships and the levy of user fees. In this column I argue that unless the courts and various public organisations understand and appreciate the legal and commercial justification for user fees the ambitious public private partnership infrastructure policy of government is bound to unravel in a spectacular fashion with taxpayer funded bailouts of private contractors.

The protests against the tollbooths in Bangalore took the form of silent sit-ins, violent trashing of the tollbooths and BJP morchas and yet it is difficult to discern the legal or moral objection to the tollbooths. The protesters do not oppose the collection of tolls per se but only the location of the booths. They suggest that it should be located after the airport so that airport users do not have to pay for the road. There is a general consensus that the existing four lanes National Highway has made the commute to the airport a viable and sometimes pleasurable experience. Taxi drivers have become the targets of political mobilisation because they have benefited significantly from the 35 kilometres commute to the airport. The state Transport Minister, R. Ashoka has weighed in on the issue by suggesting that the toll is illegal as the state government was not consulted on the location of the tollbooths. Notably, the four-lane road is now being converted into a six-lane road with flyovers ensuring a signal free access to the airport.

While these expensive improvements will further ease travel to the airport for all users they will result in enhanced benefits for repeat users like taxi drivers. Nevertheless, the protests mobilise around the principle that users should not be asked to pay for these infrastructure services with no articulation of who must pay.

In Consumer Online Foundation v Airports Authority of India the Supreme Court dealt with a challenge to the levy of user development fees on the embarking passengers by the Mumbai and Delhi International Airport operators. Consumer associations filed public interest litigations that challenged the levy of such fees on the grounds that this was without the authority of law. The petitioners argued that the private "lessees" of the airport could not levy such a fee even where government authorised it unless the Airport Economic Regulatory Authority had conducted proceedings to determine the appropriate fee. The government and the private airport operators responded that a public private partnership envisaged the contractual transfer of assets by the government Airport Authority to the private partner with the obligation to develop and maintain the airport facility.

The government transfers the regulatory power to collect fees in a quid pro quo for the private operators' discharge of its obligations. Further, they suggested that even where the government had failed to make rules or follow the elaborate process set out in the legislation it could nevertheless levy such a fee.

Justice Patnaik agreed with the petitioners that the statutory power to levy a fee was not delegated to the private operator under its agreements with the Airport Authority. Further, he held that the operator had no contractual right with the passengers to collect a fee for services rendered. He concluded that user development fees are in the nature of a tax for specific services and hence, must be backed by the express authority of law. This conclusion has a significant bearing on the design and implementation of public private partnerships. By treating such contracts as mere leases with no further delegation of legal or commercial authority the court has circumscribed the scope and effect of these contracts. Such an interpretation will allow the courts to subject such contractual arrangements to intensive judicial review and thereby impose significant fetters on the private operators' freedom to operate. The Supreme Court's decision can be narrowly construed to merely insist that the Airport Economic Regulatory Authority must exercise its regulatory power following due statutory process. However, by situating the power to levy and collect user fees on narrow grounds and subjecting it to intensive review, the court has opened the door to repeated judicial challenges to user fees.

he Government of India has announced ambitions plans to develop infrastructure by private participation in the 12th Plan period. There are two essential ingredients for such a proposal to succeed. First, the government must develop a sophisticated and adequate legal framework for these projects through statutory and contractual arrangements. Secondly, it must establish the political, moral and commercial legitimacy for the collection of user fees for the use of public infrastructure.

Any further indifference to these concerns will derail public private partnerships as an institutional device for the provision of public infrastructure.

 
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