Delhi airport development fee halved, GMR welcomes move

The Airports Economic Regulatory Authority's (AERA) has decided to halve Airport Development Fee (ADF) for all passengers departing Delhi airport. This will be effective from January 1. The GMR-led consortium had levied the Development Fee to bridge a funding gap in the airport development project. The levy, now halved, will continue for two more years. Total ADF to be collected till 2016 stands at Rs 1,413 crore.

A similar reduction is now expected at the Mumbai airport which operates on a PPP model with GVK-led consortium.
Now, a domestic departing passenger will pay Rs 100 as development fee instead of Rs 200. Similarly, an international departing passenger's cost towards this fee has reduced from Rs 1300 to Rs 650. Speaking to CNBC-TV18, Sidharath Kapur, chief financial officer-airports, GMR Group said ADF revision will not impact their P&L accounts in the short term. Below is the edited transcript of Kapur’s interview to CNBC-TV18. Q: Take us through this decision. How does it tally in terms of your profit & loss (P&L) requirements? Will you get a longer timeline for raising this kind of money?
A: From our perspective, we welcome this decision. This decision of Airport Economic Regulatory Authority (AERA) was pursuant to a press note which was issued by the Ministry of Civil Aviation where they had expressed a wish and an intention, to bring down the cost of travel for Indian passengers.
They wanted AERA to look at the cost of airport development fee (ADF), which was being borne by both the international and domestic passengers on embarking basis.

AERA, after going through a consultation process had suggested that the ADF be reduced to half to Rs 100 in the case of domestic passengers and Rs 600 in the case of international passengers. This decision was finally approved by the regulator on December 28 and this will be effective from January 1.
In terms of P&L, ADF is the capital receipt. It is not the revenue receipt for Delhi Airport. This collection has already been securitised with various banks and it has been used for financing the cost of modernisation and expansion of Delhi Airport. Q: Will it have some P&L effect, atleast in terms of interest rate?

A: No, at this point of time, it does not have an impact at all, because the total period of collection has been extended by approximately two years. Even the interest, which is to be paid to the bank, is also a part of the collection of ADF. So, the total amount to be collected on net present value (NPV) base still remains the same. Q: Won’t there be some impact on the amounts you have securitised? You are going to get half of what you assumed you will get. So, would you be able to meet the securitised amounts?
A: Yes, we will have to go back to the bank. The collection which earlier was about two years is now going to be four years approximately, so we will have to securitise on a revised basis with a banking sector for a period of approximately four balanced years. So, it does not impact the total amount to be collected on NPV basis. It does not lead to any funding gap at all. Q: How much amount is securitised and how much do you expect to collect approximately in the next two years on the revised rates?
A: As of December 31, the total principle to be repaid to the banks was about Rs 998 crore. There is a balance of Rs 414 crore yet to be disbursed depending on the future spend. So the total ADF, which will be collected on NPV basis till 2016 will be Rs 1,413 crore. Q: What is the update with regards to the Male Airport etc?
A: There is no further update at this point of time on the Male Airport. The Maldives government had indicated their arbitrators. This will, ofcourse go through a litigation process and go through an arbitration process. We have indicated our own arbitrator. Q: How much are you asking for, in terms of compensation?
A: At this point of time, the numbers are yet to be worked out in detail. Our preliminary estimate was USD 800 million, which we had indicated to the government of Maldives and Maldives Airport Company through a communication. The communication was given to them almost two weeks back. Q: What is the notional loss in terms of revenues that you may have made in FY13 and FY14?
A: We will work out those numbers. They are all forward looking numbers, so probably we will work that out.