Greenfield infrastructure: Centre proposes fixed tariff model for airport developers

For the investor community, the proposal is seen reducing regulatory uncertainty and disputes arising out of tariff determination and revenue sharing. “For global airport operators to come and invest in India, there have been two broad concerns — the Airports Economic Regulatory Authority (AERA) fixes the aeronautical tariffs once in five years and this leads to a degree of regulatory uncertainty, which could be daunting for an investor, including a foreign investor. The second challenge was from the concession granting authority. The biddable parameter, so far, was revenue share. If this can be disputed then it becomes an item that is difficult to administer,” civil aviation secretary RN Choubey said. He said by linking concession fee to number of passengers, the disagreement around gross revenue and the risk of revenue leakage will be reduced.

MoS for civil aviation Jayant Sinha said the new concession agreement is aimed at realising the government’s dream of achieving one billion passenger trips a year in the coming years. This necessitates massive investment in the sector and construction of more greenfield airports, Sinha said, adding that the new structure will make travel more affordable. Choubey pointed out that the first airport where the proposed model agreement would be put to test is the upcoming Jewar airport. Some other greenfield airports that are yet to have a concessionaire appointed include Purandar airport in Pune and Pakyong airport in Sikkim.

Under the proposal, the total aeronautical collections by concessionaire (airport operator) such as landing and parking charges will not exceed Rs 400 per passenger. From this, the concessionaire will pay Rs 20 per passenger as administrative charges and an additional concession fee – which the operator will bid for. The rest will be what the operator earns. There is also a provision for a negative quote, in case the stakeholders are of the view that aeronautical charges at some airports are expected to exceed Rs 400. In such cases, the airport operator will seek the additional amount from the concessioning authority and not passengers. However, both the concession fee and the total aeronautical charges of Rs 400 “will be escalated annually by half the inflation rate”. The remaining half, Choubey said, could be covered by way of efficiency improvements.

To empower the AERA to take up the additional roles, the civil aviation ministry introduced an amendment bill to the AERA Act in the Lok Sabha during the recently concluded monsoon session of the Parliament, the secretary said. He also said that based on the responses to the proposed agreement from different stakeholders – that has been invited till September 14 – and the results in practice, similar changes will be proposed to the agreements for brownfield airports as well.