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New Delhi, Oct. 16: Passengers flying out of Delhi and Mumbai airports will get to pay lower fares from January 1 as the government has decided to scrap the airport development fee (ADF) that the private operators of the two airports have been collecting since 2009.
At present, the ADF is charged at the rate of Rs 200 per domestic passenger and Rs 1,300 per international passenger embarking on flights leaving the Delhi airport. The fee at Mumbai’s airport is Rs 100 and Rs 600, respectively.
Civil aviation minister Ajit Singh has directed the Airports Authority of India (AAI), which holds a 26 per cent stake in the two airport entities – Delhi International Airport Private Ltd (DIAL) and Mumbai International Airport Private Ltd (MIAL) – to pump in more money by way of equity so that the ADF can be scrapped.
The Delhi and Mumbai airport entities were permitted to levy an airport development fee as AAI had failed to infuse additional equity to meet development costs at the airports.
The expected financing gap in the case of MIAL will be approximately Rs 4,200 crore. In the case of DIAL, it will be approximately Rs 1,175 crore if ADF is abolished with effect from the beginning of next year.
AAI will infuse additional equity of approximately Rs 288 crore in the case of MIAL. It is expected to raise its contribution to DIAL’s equity by approximately Rs 102 crore.
The airport operators — the GMR group and its partners in Delhi, and the GVK group and its foreign associates in Mumbai— will have to put up more money to increase their share of the equity capital, the spokesperson said.
As of now, ADF is levied on passengers only at Delhi and Mumbai airports and is different from the user development fees (UDF) which is charged from passengers at a few other airports in the country.
According to Indian aviation authorities, the levy of ADF is for “financing the costs of upgradation, expansion or development of the airport at which the fee is collected”.
On the other hand, UDF is “levied to ensure fair return to the airport operators on the investments made for providing airport services” and is “intended to cover any deficit in revenues so as to ensure fair return on investment”.
The move comes days after the civil aviation ministry directed AAI not to pursue its proposal to levy ADF at Chennai and Calcutta Airports, which are being modernised now.
In August, the Comptroller and Auditor General (CAG) had attacked the civil aviation ministry for allowing the Delhi airport consortium to charge passengers a development fee to help raise funds for the project.
The auditor had said this was not part of the original contract. The CAG said the Delhi International Airport Limited would get an undue benefit of over Rs. 3,400 crore from the development fee.
The civil aviation ministry’s latest order will pose problems for both GMR and the GVK groups. On July 25, Airports Economic Regulatory Authority of India Ltd had assessed DIAL’s project cost at Rs 12,502.86 crore. However, DIAL’s application had put the final project cost slightly higher at Rs 12,857 crore. The regulator excluded certain costs amounting to Rs 354.14 crore.
DIAL has an equity capital of Rs 2,300 crore. Its means of finance was calculated at Rs 9,087.51 crore including rupee term loans of Rs 3,650 crore and foreign currency loans worth Rs 1,616 crore.
The ministry’s latest order is certain to draw howls of criticism from the two private players who have been insisting that they don’t have access to funds to bridge the widening gap as project costs escalate.
MIAL has an equity capital of Rs 1,200 crore. It has internal accruals of Rs 1,021 crore and said it could raise debt worth Rs 4,231 crore and another Rs 1,000 crore in the form of deposits from real estate development. This would add up to Rs 7,452 crore. The initial project cost was estimated at Rs 9,802 crore, leaving a funding gap of Rs 2,350 crore.
An independent auditor had estimated that the cost of the Mumbai project had escalated to Rs 10,453 crore from Rs 9,802 crore because of certain mandated costs that included a new air traffic control tower, which is currently under construction, elevated access roads, widening of the Mithi river and the relocation of a statue of Shivaji Maharaj.
Both MIAL and AAI had said they were in no position to raise the equity capital for the project above Rs 1,200 crore.
The regulator permitted MIAL to collect the ADF for a period of 23 months up to May 2014 to realise an uncovered gap of Rs 876.27 crore.
However, the airport entity has been claiming that project costs have ballooned since then to Rs 12,380 crore because of the relocation of the statue and certain other costs. In its April order, the regulator had said that it would consider this aspect after a proper audit of the costs that it commissioned.
The ministry’s sudden order will either send the promoters of the two airports scrambling to raise funds or prompt them to go to courts challenging the ministry’s order. In April 2011, the Supreme Court had stopped the two entities from levying the ADF on the ground that the levy was ultra vires of the AAI Act of 1994. However, it had also said that the levy could be collected if it was authorised by the regulator and not the government. This order now provides the scope for the two airport entities to mount a legal challenge.
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