The ministry of civil aviation has sought to bring in an element of standardisation into the way state governments develop airports. It is currently formulating a new model framework that will chalk out the broad guidelines on how contracts should be drawn up. The ministry says it is likely to be ready in the next two months and will be advisory in nature.The new model will outline basic guidelines such as the nature and quantum of tariffs to be charged at airports, as determined by an airport regulator that is likely to be formed soon. It will also look into aspects like the degree of cross-subsidisation and tariffs to be charged at smaller airports. The nature of Joint Venture Companies (JVCs), revenue models and revenue-share agreements are also likely to be addressed in the new framework.“Currently, there is no uniformity in the way airports are being developed by state governments, leading to a lot of time-wastage and confusion,” said a senior official from the ministry of civil aviation. “So we have decided to formulate a model framework which states can use as a ready guide for airport development.”The decision to form a model framework has been applauded by experts, who say that standardised documents would go a long way in sorting out many of the grey-areas that have cropped up in the wake of rapid airport development. “Several litigious areas need to be addressed urgently— like the treatment of non-aeronautical services. At Mumbai and Delhi, 30 per cent of non-aeronautical revenues will be ploughed back to the state government but there is no clarity on what the model should be like at other airports,” says Kuljit Singh, partner at Ernst&Young (Transaction Advisory Services).According to Singh, the basic aspects that need to be addressed clearly in such a model framework are the nature of the concession agreement and revenue models. “The framework should clearly state who will be responsible for taking major consents and clearances like land acquisition, environmental clearances and Airport Authority of India clearances. Ideally, it the state government who should be made responsible for all of this,” he says. Analysts also feel that the entire revenue model should be pre-specified. Since many new airports operate on a cost-plus basis (that is, cost of production plus a fixed profit), there is a need to have a framework that determines how this cost is calculated and what is an acceptable rate of return on capital. Aspects like the consequences of terminating an agreement also need to be specified in any new model document.
