Sindhu Bhattacharya

New Delhi: The traditional revenue model for airport development may be tweaked for new airports, especially the ones expected to come up in 35 non-metros over the next few years.

Till now, aeronautical charges, or levies airlines and passengers pay for landing and parking of aircraft, ground handling and other services, have formed the bulk of revenues for airport developers.

Since a majority of the country’s airports are still owned and operated by the government through the Airports Authority of India (AAI), this model hasn’t really changed in years.

But it’s about to change now.

Speaking to DNA Money, a senior ministry official indicated that the government may soon come out with a policy on crosssubsidisation of aeronautical charges at non-metro airports.

“We are going to make a policy that at least 30% of non-aeronautical revenues should be ploughed back to the aeronautical side,” he said.

Simply put, this allows private developers of non-metro airports to offer some of the unused land for development of hotels, conference halls, shopping malls etc and use the revenue so generated for cross-subsidising aeronautical charges airlines pay at present.

Not only would such a model help the development of more profitable airport ventures, it would also ultimately lower user development fee (UDF) for passengers - an issue new airports at Hyderabad and Bangalore are already grappling with.

In fact, the UDF issue has snowballed into a major controversy just ahead of the opening of the new Bangalore International Airport since differences have cropped up between the developer and the government over how much UDF should be levied per passenger.

Even in Delhi, where the airport is being modernised by a consortium led by the GMR group, the process of commercial development of land for nonaeronautical revenue generation has been mired in controversies because of a lack of clarity on a cross-subsidisation model.

The official said that, for the first time, such a model would be implemented in Amritsar and Udaipur.

Of the 35 identified non-metro airports, at least 24 have portions of land currently not being used for aeronautical purposes at all, and, therefore, the new revenue model should work well for these airports.

Late last week, AAI began the process of legal due diligence for non-metro airports with the appointment of a legal advisor MV Kini & Co, Mumbai. This firm will provide advisory services for the city-side development of four non-metro airports at Amritsar, Udaipur, Trichi and Vizag.

The AAI is currently in the process of finalising the other transaction documents for the projects.

Source : DNA