The private airport operators ? GMR-led Delhi International Airports Ltd and GVK-backed Mumbai International Airports Ltd ? are getting jittery over the sector regulator?s approach to fix airport tariff. The Airport Economic Regulatory Authority?s (AERA) wants undermine the state-support agreement between the Airport Authority of India (AAI) and the developers and wants to evaluate the issue afresh. AERA says it is created by an Act of Parliament and sees the agreements as pact between two parties.
The AERA approach would allow it to set new service and operation standards and fix airport charges accordingly. The private airport operators have vehemently opposed the regulator?s intent and have challenged the move in the Appellate Tribunal, apprehending financial losses in future.
The government had in 2006 awarded the concession to operate, manage and develop the Capital?s Indira Gandhi International airport (IGI) to a GMR-led consortium for 30 years with the option of extending it to another 30 years. The Bangalore-headquartered GMR holds the maximum 54% in the joint venture followed by government-controlled AAI. Fraport AG and Eraman Malaysia hold 10% each in the airport company.
?The authority has separately initiated a process to analyse and assess the implications of the principles and mechanics relating to tariff fixation contained in the state-support agreement (SSA). The authority would thereafter separately determine the extent to which the covenants of the SSA would impact the general framework being laid down,? AERA has said in its order in respect to Delhi and Mumbai airports.
A senior DIAL official said the entire foundation of the airport had been laid on SSA and any midway change in the regulatory regime would be disastrous for the investors.
?Under the OMDA (operation, management and development agreement) there are a lot of performance standards. Any move to change those parameters would affect the commercial viability of the project,? the official said.
An MIAL spokesperson said AERA was questioning the validity of agreement between the government and the company.
?We have filed an appeal against the decision,? he said. An industry analyst said any existing agreements between the state and private operators were subservient to AERA.
?But airport operators are entitled as per the concession agreement to seek compensation from the government if any change in law results into fundamental change in operator?s financial viability,? the executive said.
DIAL has invested over Rs 12,000 crore in modernising the Delhi airport and would soon submit a proposal to the airport regulator for fixing a fair rate of return on the capital employed. The total capital is a combination of debt, equity and grants. The private airport operator of the Mumbai airport is estimated to have invested about Rs 12,000 crore to upgrade the infrastructure.