Govt set to reform tariff structure for future airports

SEVERAL AIRPORT DEVELOPERS HAVE RUN UP COSTS IN EXCESS OF ESTIMATES, AND THEN HAD TARIFFS CHANGED UPWARDS TO COMPENSATE

NEWDELHI: The civil aviation ministry is considering mentioning how much airport operators could earn through so-called aeronautical revenue from airports whose development contracts are being bid out in an attempt to end regulatory uncertainty over tariffs, and reduce tariffs for both passengers and airlines.

The revenue of airport operators includes those related to flight operations (aeronautical revenue) and from operations at the airport such as retail. Currently, bidders develop the airport and then seek permission to levy a certain tariff from the ministry or the Airports Economic Regulatory Authority (AERA).

Under the new plan the aviation ministry plans to change the Airports Authority of India (AAI) act and AERA rules to ensure that all airports whose development contracts are being bid out have a pre-determined tariff.

“If aeronautical tariff is pre-determined in the bid document then AERA’s determination will not be necessary,” said a aviation ministry official who did not wished to be named said. “It will remove regulatory uncertainty.”

Airport investors will not have to come and “beg AERA or the aviation ministry” for a certain tariff, this person added. Nor will they have to put up with discretionary changes that accompany any change in government.

The move will apply only to new airport development contracts, which means it will not affect AAI, which runs most of the civilian airports; the GMR Infrastructure Ltd-led Delhi, Hyderabad airports, and the new Goa airport; the GVK Power & Infrastructure Ltd led Mumbai or Navi Mumbai airport; and the Fairfaxled Bangalore airport.

Both GMR and GVK declined to comment.

The aviation ministry is expected to move a Cabinet note on this shortly.

For passengers and airlines this could mean cheaper airfares and aeronautical charges.

“The bid documents will say what building we want, the service delivery required, and the aeronautical revenue we will give; the bidder will bid based on all this. It will make the project viable,” the official cited in the first instance said.