AAI set to receive Rs 2,800 crore from Adani group towards payments linked to privatised airports

The Adani group paid a sum of Rs 2,440 crore to the AAI for the takeover of six airports - Ahmedabad, Jaipur, Guwahati, Thiruvananthapuram, Lucknow, Mangalore - in November 2021.

Adani Airports Holdings Ltd, the airports arm of the Adani group, must pay nearly Rs 2,800 crore to the Airports Authority of India (AAI) towards the acquisition of three airports it bagged as part of a privatisation process in 2021, people aware of the development said.

The payments are related to under-recovery of revenue from the Jaipur, Thiruvananthapuram and Guwahati airports when AAI was operating them during the coronavirus pandemic. Operators face under-recovery when actual revenue falls short of guaranteed returns over a five-year period. To compensate, operators can adjust tariffs in the next five-year cycle to meet guaranteed returns.

Adani Group's payment obligations to AAI also include reimbursing investments made by the authority between 2019 and 2021, covering airport development spending made from the time the privatisation bids were called and the handover to the Adani Group was made, the people cited above said, requesting anonymity.

In November 2021, the Adani group paid Rs 2,440 crore to the AAI for the takeover of Ahmedabad, Jaipur, Guwahati, Thiruvananthapuram, Lucknow and Mangalore airports.

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Emails sent to spokespeople for Adani group and Airports Authority of India did not elicit a response.

Earnings of airport operators (tariffs that airports can charge) in India are capped at a predetermined rate of return, which is fixed for a period of five years, called a control period. These tariffs are approved by the Airport Economic Regulatory Authority (AERA).

Airports can charge various tariffs such as landing charges, parking charges and user development fee among others.

If an airport operator does not achieve the earnings for a certain control period, then the tariffs for the next cycle are revised upwards to account for the under-recovery in the previous period.

The regulator can also adjust tariffs for an over-recovery in the previous five-year period.

In the FY17-FY21 period, AAI was operating these airports and saw a huge under-recovery due to massive disruptions brought by the covid outbreak.

If the airports were not privatised, AAI would have been entitled to recover the revenue lost in the previous five years with tariff hikes in the next five-year period.

Since Adani is operating the airports now, it needs to pay the authority an amount approved by AERA to compensate for this revenue under-recovery, sources said.

Adani, however, is allowed by the regulator to charge commensurate tariff hikes to airport users (passengers, airlines and others) to recover these costs. Adani will be able to recover these costs with additional tariffs over the next three to six years.

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According to consultation papers published by AERA in June, when analysing tariffs for these airports for the FY22-FY27 (first control period for Adani), AERA approved AAI under-recovery of Rs 172.8 crore for the Guwahati airport, Rs 644.17 crore for Jaipur and Rs 789.29 crore for the Thiruvananthapuram airport.

The total amount of payments linked to the pre-privatisation period stands at close to Rs 2,800 crore, including the under-recovery component and other payments as approved by AERA, a source cited above said.

The people cited added that Adani Airport Holdings will raise as much as Rs 2,000 crore through debt from financial institutions to make the payment, while the rest will come from fund infusion by the group.