NEW DELHI:
An inter-ministerial panel has called for a fresh approach to setting airport
tariffs after three major domestic airports proposed a steep hike in user
charges that threaten to push up airfares further.
The airport financing task force, chaired by Planning Commission member BK Chaturvedi, has recommended that user charges for airports be fixed "upfront" at a reasonable level. "This will not only protect user interests, but also eliminate regulatory uncertainty over tariff fixation as also the potential for gold-plating of costs," the panel said in its report.
The panel's view assumes significance as the Airports Economic Regulatory Authority (AERA) is considering the proposals of the airports at Kolkata, Chennai and Mumbai. Earlier this year, the regulator had approved a 340 per cent increase in user charges at the New Delhi airport. People with knowledge of the matter said that while Mumbai International Airport Ltd (MIAL) has proposed a 660 per cent increase in user charges, the airports at Kolkata and Chennai, which are operated by the Airports Authority of India (AAI), have sought the introduction of a steep user development fee (UDF) on passengers besides a significant increase in user charges paid by airlines.
The panel said, "In case of Delhi, Mumbai, Bengaluru and Hyderabad airports, passenger tariffs have risen significantly mainly because of a cost plus tariff structure, as well as a very high revenue share to be paid to AAI in the case of Delhi and Mumbai airports. Experience from these projects suggests that 'cost plus tariffs' should be avoided in future."
Suggesting that airport projects be structured in the same way as sectors such as power, roads and ports, where the tariff is pre-determined at the time of bidding, the panel has stressed that such an arrangement "would be welcome for all airlines and passengers".
As a case study, the panel examined AAI's tariff filings with the airports regulator for Chennai airport. The airport has sought to raise landing charges for international flights by at least 118 per cent and parking charges by 83 per cent. The Kolkata airport has proposed the same hikes, with a 6 per cent annual increase in rates thereafter. While airlines are expected to pass on these costs to passengers, the Chennai airport has also sought to impose a user development fee of Rs 667 each on passengers departing on international flights and Rs 165 on domestic passengers.
The UDF proposed by the Kolkata airport is Rs 1,000 for international flights and Rs 400 for domestic flights.
The airport financing task force, chaired by Planning Commission member BK Chaturvedi, has recommended that user charges for airports be fixed "upfront" at a reasonable level. "This will not only protect user interests, but also eliminate regulatory uncertainty over tariff fixation as also the potential for gold-plating of costs," the panel said in its report.
The panel's view assumes significance as the Airports Economic Regulatory Authority (AERA) is considering the proposals of the airports at Kolkata, Chennai and Mumbai. Earlier this year, the regulator had approved a 340 per cent increase in user charges at the New Delhi airport. People with knowledge of the matter said that while Mumbai International Airport Ltd (MIAL) has proposed a 660 per cent increase in user charges, the airports at Kolkata and Chennai, which are operated by the Airports Authority of India (AAI), have sought the introduction of a steep user development fee (UDF) on passengers besides a significant increase in user charges paid by airlines.
The panel said, "In case of Delhi, Mumbai, Bengaluru and Hyderabad airports, passenger tariffs have risen significantly mainly because of a cost plus tariff structure, as well as a very high revenue share to be paid to AAI in the case of Delhi and Mumbai airports. Experience from these projects suggests that 'cost plus tariffs' should be avoided in future."
Suggesting that airport projects be structured in the same way as sectors such as power, roads and ports, where the tariff is pre-determined at the time of bidding, the panel has stressed that such an arrangement "would be welcome for all airlines and passengers".
As a case study, the panel examined AAI's tariff filings with the airports regulator for Chennai airport. The airport has sought to raise landing charges for international flights by at least 118 per cent and parking charges by 83 per cent. The Kolkata airport has proposed the same hikes, with a 6 per cent annual increase in rates thereafter. While airlines are expected to pass on these costs to passengers, the Chennai airport has also sought to impose a user development fee of Rs 667 each on passengers departing on international flights and Rs 165 on domestic passengers.
The UDF proposed by the Kolkata airport is Rs 1,000 for international flights and Rs 400 for domestic flights.
http://economictimes.indiatimes.com/news/news-by-industry/transportation/airlines-/-aviation/inter-ministerial-panel-calls-for-fresh-approach-in-setting-airport-tariffs/articleshow/16565315.cms
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