In a bid to make the upcoming greenfield airport projects attractive for global players, the Civil Aviation Ministry may amend its regulatory law to fix airport charges in advance, ensuring assured returns to investors at time of participating in the bidding process.
“We are examining how to amend the Airports Economic Regulatory Authority of India (AERA) Act 2008 so that the aeronautical charges are determined upfront or disclosed in the bid document itself for upcoming greenfield airport projects,” Civil Aviation Secretary R.N. Choubey told The Hindu in an interview.
“If aeronautical charges are captured in the bid document of the greenfield airport project itself, there would not be any need for fresh determination of such charges by the regulator (AERA).,” Mr. Choubey said,. He said the proposed law would not impact the regulatory regime at existing airports.
Airport tariff
In addition to land, service standards and airport design, the bidding document for greenfield airport projects will specify the airport tariff which will be indexed “appropriately” to factor in inflation, foreign exchange and interest rates.
AERA is a statutory body established in 2009 to determine tariff in respect of airport services provided at major airports across the country. The charges allow operators to get adequate rate of return on the investments incurred on developing and providing services at major airports.
The AERA revises tariff every five years, known as a control period, considering the investment and expenditure incurred by the airport operator. “This leads to regulatory uncertainty and difficulty in inviting participation (from investors),” Mr. Choubey said.
‘Welcome move’
“This is indeed a welcome move and will bring in certainty to the contract. Significant emphasis has to be given to the Scope of the Developer to avoid any scope creep and the bidding documents has to specifically spell out the outcomes for any cost or time overruns,” said Jagannarayan Padmanabhan, Director – Transport and Logistics at CRISIL Infrastructure Advisory.
The AERA, while determining tariff, keeps into account capital expenditure, service provided, cost of improving efficiency, economic and viable operations of major airports, revenue received from services such as food and beverages, duty-free shops, advertising and car parking, among others.
“Every major airport would entail investments in the range of ₹2,000-₹10,000 crore. It becomes a problem when the investor, who is pumping huge money into the project, is uncertain about the view that regulator will take over 60 years of concession period,” the Aviation Secretary said.
The move comes at a time when the Centre has given its in-principle approval to build a second airport for the National Capital Region (NCR) in Greater Noida’s Jewar region in Uttar Pradesh expecting an investment of ₹15,000-₹20,000 crore. It has also begun work on developing three greenfield airports.
