GMR seeks nod to hike airport charges second time in a row

GMR Infrastructure , which runs the Delhi Airport has once again proposed to the Airport Economic Regulatory Authority (AERA) to allow them to hike airport charges in addition to the 346% increase in user development fee (UDF) which came into effect last month.

GMR spokesperson confirmed the development to moneycontrol.com, but did not give any further details.

Currently, UDF ranges from Rs 195.80 to Rs 1,068 for this financial year and will be anything between Rs 207.32 and Rs 1,130.85 in 2013-14. The company aims to collect Rs 3,400 crore from around 36 million passengers who pass through the Delhi airport.

A source from the civil aviation ministry told moneycontrol.com that GMR officials had visited the AERA office recently to apprise the regulator about the massive losses being incurred by the company. In FY12, the Delhi airport lost Rs 825 crore loss due to the pending tariff revision which was awaiting approval from the regulator since over a year.

With UDF coming into effect in the current quarter, GMR will be able to recoup some of its losses but is still concerned about the gap between the estimated cost of the project and the actual cost incurred on it. Due to the estimated cost for building T-3 terminal going up by  around Rs 4000 crore from  the earlier estimation of  Rs 8,975 crore, the company still needs Rs 600 crore to make up for the cost over-run, the company informed AERA recently.

However, AERA has still not taken any decision on this request because it is studying GVK‘s proposal on increasing airport charges because it too had a cost over run of Rs 4000 crore while developing the Mumbai airport in which domestic passengers pay Rs 100 as airport development fee and international fliers, Rs 600.

Says Girish Shirodkar, partner at consultancy firm Strategic Decision Group: "For any airport developer, high cost of funding has always been a challenge. Because of the capital-intensive nature of airports, the initial years are characterized by high levels of depreciation and interest payouts and cost over-runs, which hurt profitability; hence ADF and UDF are crucial in reducing the funding gap."

shaheen.mansuri@network18online.com