Government proposes new financial model for building greenfield airports

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New Delhi | Published: August 15, 2018 3:23:45 AM

The civil aviation ministry on Tuesday proposed a new financial model for building greenfield airports aimed at making air travel more affordable and addressing concerns over disputes related to tariff.

Govt proposes new financial model for building greenfield airports

The civil aviation ministry on Tuesday proposed a new financial model for building greenfield airports aimed at making air travel more affordable and addressing concerns over disputes related to tariff.

Under the new model, the concession fee given by the airport operator to the concessioning authority will be based on a ‘per passenger aeronautical model’. “The passenger-based model will also be the base of the bidding process,” civil aviation minister Suresh Prabhu told reporters, while unveiling the transaction structure. The new model will encourage increased private investment, he said.

Currently, the transaction structure for airports, run under the joint venture route, is based on the revenue-sharing model.

The new model will be followed for building the Jewar airport in Uttar Pradesh.

The government announced a maximum blended aeronautical yield (MBAY) system which would be decided at the beginning of the concession period, thereby protecting the concessionaire from tariff uncertainty.

The ceiling amount has been set at `400 per passenger which would include all aeronautical charges like the user development fees for travellers, parking and landing charges for airlines. But the concession fee component, payable to the concessioning authority, will be bid out in terms of a per passenger sum.

In the new model, the government has increased the concession agreement period to 40 years from 30 years as per the released draft. Also, concessionaires will be allowed to develop up to 10% of the airport land for non-aeronautical purposes.

“The airports sector needs Rs 3-4 lakh crore of investment in the next 10-15 years. The goal is to bring in private-sector investment by making the tariff structure transparent and removing regulatory uncertainty. It will make the tariff affordable for flyers,” minister of state for civil aviation Jayant Sinha said. The ministry has invited public comments on the draft tariff structure till September 14.

The MBAY figure has been calculated on the basis of projected cash flow analysis for greenfield airports. “We studied tariff structure of five large airports for the last eight years and found out that the average aeronautical tariff ranged between Rs 410 and Rs 470. The average comes out to around Rs 440 per passenger. We have kept the ceiling at Rs 40 less than the average to keep the tariff affordable,” civil aviation secretary RN Choubey said.

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