In a move that will make air fares cheaper for passengers flying out of Delhi and Mumbai, Civil Aviation Minister Ajit Singh, on Tuesday, directed Delhi International Airport Ltd. (DIAL) and Mumbai International Airport Ltd. (MIAL) to abolish airport development fee (ADF) at these two airports from January 1, 2013.

At present, the ADF at Delhi airport is Rs.200 per domestic passenger and Rs.1,300 per international passenger, and at Mumbai airport Rs. 100 and Rs. 600, respectively.

DIAL and MIAL have been asked to submit proposals to the Airports Economic Regulatory Authority (AERA), an official statement issued here said.

The move comes close on the heels of the decision by the Civil Aviation Ministry directing the AAI not to pursue its proposal to levy ADF at Chennai and Kolkata airports, which are being modernised now.

While ADF is levied to meet the cash flow requirements during upgradation of an airport project, user development fee (UDF) is charged for using the completed facility. Once the ADF is abolished, the expected financing gap for MIAL and DIAL would be about Rs.4,200 crore and Rs.1,175 crore, respectively.

Mr. Singh asked the Airports Authority of India (AAI) to infuse additional equity of about Rs.288 crore in MIAL and Rs.102 crore in DIAL against its 26 per cent share in the equity of both joint ventures. The balance gap would have to be met by the airport operators through infusion of their share of equity, the statement adds.

AERA, which is in the process of determining ADF and aeronautical tariff for the Mumbai airport, has asked the AAI to what extent it could inject additional equity into the project. It would now determine only the UDF and other tariffs such as landing, parking and navigation charges.

When the ADF was levied at the Mumbai and Delhi airports, the AAI had said it was not in a position to contribute more equity in view of its critical financial condition. The public sector airports body had, last year, sought government’s permission to raise resources through the issuance of infrastructure bonds to modernise 35 non-metro airports, but the government did not allow it.

The modernisation and expansion of Kolkata and Chennai airports cost the AAI Rs.2,325 crore and Rs. 2,015 crore, respectively.

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