February 23, 2017 TnH Global

Air India moves Supreme Court seeking cut in Delhi airport charges

Air India says GMR Infrastructure’s Delhi International Airport Ltd is recovering Rs. 300 crore every month through these charges!

State-owned Air India Ltd on 24 January moved the Supreme Court seeking reduction in charges at Delhi airport, court documents showed.

In its petition, Air India said Delhi International Airport Ltd (DIAL), run by GMR Infrastructure Ltd, is recovering Rs. 300 crore every month through these charges, and at this rate, by March 2019, it would have collected a total of Rs. 17,157.15 crore against the originally targeted Rs. 7,709.61 crore. This would be an excess collection of Rs. 9,447.54 crore over and above the target revenue, Air India said in its petition.

The Federation of Indian Airlines (FIA), which includes IndiGo, SpiceJet, GoAir and Jet Airways, and controls nearly 90% of the domestic market share may support Air India, a person aware of the matter said, asking not to be named.

“In a nutshell, the airlines as well as the users have been fastened with a massive liability which otherwise is unwarranted in law due to operating stay (by Delhi High Court), without being afforded even an opportunity to be heard,” the airline said.

Delhi airport, which was modernized for nearly Rs. 13,000 crore in 2010, recoups part of this amount by charging passengers and airlines. Domestic passengers departing from DIAL are charged about Rs. 564 while international passengers are charged Rs. 1,301. Airlines pay their share through higher landing, parking and aircraft housing charges. Airlines have frequently complained that DIAL is overcharging them, since the airport tariff regulator has ordered it to reduce these charges.

The money is recovered in so-called control periods. The first two-and-a-half-year control period ended in March 2014. The airport tariff regulator prescribed 96% lower charges for the second control period (2014-19) but the airport obtained a stay on the new tariff from the Delhi High Court, and continues to charge the old, higher rates. Airports Economic Regulatory Authority (Aera) then challenged it in Supreme Court which asked an appellate tribunal to look into it, where the case is pending.

Delhi International Airport (Pvt) Ltd spokesperson said, in response to a Mint query, that even in case of overcharging, the concept of truing-up will apply. Put plainly, the excess amount will be adjusted in the next control period so there won’t be any windfall benefits to the airport.

“Even in the unlikely case of any over-collection post AERAAT approvals, under the tariff determination principles of Airports Economic Regulatory Authority, any excess collection during a control period is automatically trued up in the tariff for the next control period, thus ensuring the airport operator finally retains only what it is entitled to,” DIAL said.

FIA did not respond to an email seeking comments. Charges at Delhi Airport are set by Aera based on the amount spent by the airport on development, its operational costs and fair rate of return.

“This was one thing where the government could have been passenger-friendly and said that while the legal battle can go on, lower charges need to be implemented rather than the other way around,” said a person aware of the economic formulation asking not to be named. A former government official, who also declined to be named, identified two key points to the narrative.

One, in the first control period, the charges were high because they had to be squeezed into two and half years instead of the typical five years. This means charges for the second control period would anyway have been lower, since they are spread over five years.

Two, capital expenditure at the airport will be negligible in the current control period as the modernization work has already been executed. Even if there was an increase in cost of operations, the traffic growth has been in double digits, and charges will drop whichever way one calculates.

News Source: www.livemint.com