AAI to spread wings with R10k-cr via tax-free bonds

Written by Shaheen Mansuri | Mumbai | Updated: Mar 12 2011, 03:16am hrs
The Airports Authority of India (AAI), which runs 125 airports across the country, is optimistic about raising around R10,000 crore via issuing tax-free bonds in financial year 2011-12, sources said. The proceeds will be used to upgrade 35 non-metro airports, whose development has been shelved in the past due to unavailability of funds. Finance minister Pranab Mukherjee had announced in the Budget 2011-12 that issuance of tax-free infrastructure bonds worth R30,000 crore will be allowed in the ensuing financial year.

Ajay Prasad, former secretary of civil aviation, told FE, AAI is AAA rated and there should not be any problem for it to raise funds via tax-free bonds.

In this case, tax-free bonds will be offered by AAI to encourage public investment in government-based projects. These bonds will be low-risk in nature and unlike other investments, the interest earned is exempted from taxes. Also, these bonds will create a good opportunity for investors in the high tax band. These are government-guaranteed bonds, so there is no chance of default. In fact, in certain terms, it is safer than bank deposits.

SC Chatwal, (member) finance, AAI, said, AAI will consider raising funds via issuing tax-free bonds as they are low interest in nature. It has been speculated that the authority is set to spend over $1.02 billion (R4,590 crore) towards modernisation of non-metro airports in the years to come. AAI is also planning a city-side development of 24 airports across the country. Additionally 11 new green-field airports have been identified to reduce passenger load on existing airports.

The authority manages a total of 125 airports, which includes 11 international, 8 customs airports, 81 domestic airports and 25 civil enclaves at defense airfields. AAI also provides air traffic management services (ATMS) over entire Indian air space and adjoining oceanic areas with ground installations at all airports and 25 other locations to ensure safety of aircraft operations. The airports authority has entered into a joint venture at Mumbai, Delhi, Hyderabad, Bangalore and Nagpur airports to upgrade them and match with international standards.

Hemant BhattBhatt, senior director, Deloitte, said, NHAI and Indian Railway Finance Corporation have already said they will raise funds via tax-free bonds. AAI too has the option. However, AAI will have to acquire a company status to raise funds by this route, which can be done by fulfilling certain legal and regulatory procedures, he said.