Airport bids to get attractive
Developers of new airports will have certainty on the aircraft landing and parking fees they can levy, as the government has decided to fix the rates before inviting bids.
The decision will help attract foreign investment as it will eliminate a major regulatory uncertainty that discouraged investors to vie for airport projects in India, aviation industry experts said. Airline executives also welcomed it, saying they will have more visibility on a key recurring cost.
Currently, the Airports Economic Regulatory Authority (AERA) decides the fees at privately run airports. Airport operators and airlines often have complained about tariffs and at least in one instance the Supreme Court had to intervene to implement a rate revision.
“We have the approval from the Union Cabinet to amend the AERA Act, which will allow us to decide charges prior to the bidding of the airport project,” said a senior aviation ministry official.
The ministry is still working on the procedures to fix the fees in the pre-bid stage, he said.
The proposed rule will be prospective in nature, and AERA will continue to decide tariffs at airports that are currently in operation or where the projects have already been awarded, the official said.
New airports at Jewar in Greater Noida and Pune are likely to be among the first to be bid out under the proposed rule.
The decision will make the airports sector attractive to foreign investors, said Satyan Nayar, secretary-general of the Association of Private Airport Operators.
Foreign investors see regulatory uncertainty as the biggest challenge in the Indian market, he said, adding: “Fixing tariff prior to bids would take care of regulatory uncertainty and help give a boost to foreign investments in the airports sector in India.”
About $45 billion is estimated to be required to develop airport infrastructure in the country, Nayar said. “A substantial percentage (of this) will come through foreign investments.”
Airlines said bidding for airports on tariffs would bring relief for passengers and airlines. “This would be a good move as it would bring respite from sudden increase in charges at private airports. However, the government should ensure that the charges keep falling every year,” said an airline representative.