Air travel into and from new airports in the country is going to be costly, with the government finally giving the go ahead to new airports to charge passengers fees for using these airports.
More than six months after the issue of charging passengers user development fee (UDF) at the new Greenfield airports (Bangalore and Hyderabad) in the country was first raised, the GMR controlled Hyderabad International airport has been given permission by the ministry of civil aviation to charge domestic passengers UDF. This will make the airport the first in the country to charge domestic passengers UDF.
The GMR Hyderabad International Airport Limited (GHIAL) has been given permission to charge domestic passengers Rs 375 and international passengers Rs 1,000 for using the services of the airport.
The Siemens consortium controlled Bangalore International airport is expected to get permission to start charging UDF from next week, ministry sources said.
The amount to be charged by the airport has been decided based on the draft guidelines formulated by the civil aviation ministry for charging UDF.
According to the guidelines, UDF has been calculated as the fee to be levied at the airport on departing passengers to enable the company to bridge the gap between the admissible expenditure and admissible revenue.
The guidelines have said that the level of project cost will determined after considering issues like total cost of the project on accepted norms considering only aviation related costs. Other factors include whether transparent competitive bidding has been followed when awarding construction contracts, whether costs are in line with target capacity creation and approvals granted by the Central Government in past provided the actual implementation is in line with the earlier approved costs.
According to the UDF guidelines, factors that can be included in the UDF to be charged include cost of capital employed, depreciation, operation and maintenance costs and taxes.
To estimate cost of capital employed, the guidelines have said that the cost of debt on actual basis and 14% return on equity should be considered.
?Since expenditure items like personnel costs, Operations and Maintenance and pre-operative expenditure have not been verified, a cap was proposed for these items,? the guidelines said.
?Depreciation was proposed to be taken on the rates provided under the Companies Act,? it added.
To estimate revenue of the company, the sum of the total aeronautical revenue and a portion of non-aeronautical revenue was considered, the guidelines said.
In order to estimate UDF, the guidelines have suggested that a block of 4 years should be taken and estimated revenue and costs are to be given by the company based on their projections.
?For such projections a traffic growth of CAGR of past five years was proposed. A review after two years period has also been provided in the guidelines, wherein changes, if any on account of assumption would be considered to revise UDF,? the guidelines said.
These guidelines will be finalized soon after due diligence and discussions with the stakeholders is complete.