New aviation policy to usher in no frills airports

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New Delhi | Published: June 16, 2016 6:36:08 AM

New policy allows development of greenfield airports within 150 km radius of an existing AAI airport

The cabinet on Wednesday approved the civil aviation policy that allows development of greenfield airports within 150 km radius of an existing Airport Authority of India (AAI) airport.

However, the policy provides for ‘suitable compensation’ to the state-run airport operator if its airport is not fully saturated.

“Airport Authority of India (AAI) will continue to develop and modernise its airports and upgrade quality of services. AAI will be suitably compensated in case a new greenfield airport is approved in future within 150 km radius of an existing operational AAI airport which is not yet saturated,” the government said in a statement.

Out of 125 airports belonging to AAI, about 95 are operational and 71 had scheduled operations as of July 2015. The policy paves the way for AAI to take up no-frills airports, which will be done at a cost not exceeding Rs 50 crore. For such airports, the requirement for 12% internal rate of return (IRR) on the project will be relaxed for revival of these airports. Additionally, If such airports fall under the regional connectivity scheme, it will be made operational only in those states that reduce value added tax (VAT) on aviation fuel to 1% or less.

“The ministry will continue to encourage development of airports by the state government or the private sector or in PPP mode and endeavour to provide regulatory certainty. Future greenfield and brownfield airports will have cost efficient functionality with no compromise on safety and security,” the government said.

The policy has also settled the debate on the method of calculating airport tariff. Tariff at all future airports will be calculated on a ‘hybrid-till’ basis.

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