Aviation Ministry rejects inflation-indexed airport charges

Ministry it should be other way round with construction of an index that allows for progressively lower charges.

Written by Mihir Mishra | New Delhi | Published: October 21, 2013 3:04:12 am

The civil aviation ministry has rejected a Planning Commission model to link landing and parking charges at airports to inflation based on the wholesale price index (WPI).

The differences have surfaced in the discussions between the two for the award of Chennai,Lucknow,Kolkata,Ahmedabad,Jaipur and Guwahati airports to private parties for operations. loss making airports

“We have asked the Planning Commission to change the draft concession agreement accordingly,” said a senior government official in the know. The changes are significant for passengers as higher charges will translate into higher fares. He explained that linking the charges to a price index introduces an upward bias to them. “Linking them to WPI will ensure that the charges will only increase from here”.

According to the ministry it should be the other way round with the construction of an index that allows for progressively lower charges as the airports recoup their construction costs.

But speaking on the issue with The Indian Express Gajendra Haldea,advisor on infrastructure in the Planning Commission refuted the civil aviation ministry’s claim.

“As of now,we have no difference of opinion with the civil aviation ministry. The whole objective of public-private partnership is to improve efficiency and reduce user charges. This objective will also be pursued in the present cases too,” Haldea said.

Currently,charges at all major airports (that handle 1.5 million passengers and above) in the country are decided by the Airports Economic Regulatory Authority (AERA),which calculates it on the basis of operational expenditure. As the airports increase their investment it can be expected to rise but as those are amortised,the benefits will kick in.

AERA decides the landing and parking charges for a block of five years,which is called the control period. The present control period for all the airports that are to be privatised will end in 2016-17 and officials claimed that charges will go down in the next control period if the civil aviation ministry formula is accepted.

The two departments have also differed on the issue of including the revenues coming for development of hotels and conventions centres situated on airport premises.

AAI is interested in this issue as it has carry forward losses from all the airports that are being privatised. “As part of its social obligation,AAI is making losses from all airports in the current control period. Those losses ought to be made good once these airports gets new owners,” said the official.


Airport Carry forward losses*

Kolkata R600 crore

Jaipur R350 crore

Lucknow R150 crore

Chennai R100 crore

Guwahati R95 crore

Ahmedabad R47 crore

* Carry forward losses are for a five year period between 2011-12 and 2016-17

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