September 22, 2008

Not Another Levy! ; How Much Should Domestic Flyers Pay for Using New Airports?

By E. Kumar Sharma

Want a world-class facility? Well, then pay for it. That simply is the logic behind a user development fee (UDF) that every departing passenger from one of the new airports being built has to fork out. For the moment, the airports in question are the recently- built ones in Hyderabad and Bangalore. These new airports charge Rs 1,000 (Hyderabad) and Rs 1,070 (Bangalore) from every departing international passenger.But international passengers are just 20 per cent of those flying out of Hyderabad, and 15 per cent out of Bangalore. The bulk of the flyers are domestic, and they do not pay any fee. The developers in both the cases GMR Hyderabad International Airport Limited in Hyderabad and Bangalore International Airport Limited (BIAL) in Bangalore have proposed a fee, of around Rs 600 in both cases. While the Bengaluru International Airport is still awaiting an approval to levy a fee on domestic passengers, the one in Hyderabad has received an approval from the Union Ministry of Civil Aviation (MoCA). However, MoCA says it can collect not Rs 600 but Rs 375 starting August 22. No one seems sure but one view is that the government has indicated that this is more of an ad hoc amount decided upon, and the respective developers could take up the matter with a new regulatory authority, once it comes into existence. Till then, what does a UDF of Rs 375 per outbound domestic passenger mean?Evidently, it is not quite viable or adequate. Take the case of GMR, which has built the Hyderabad airport the Rajiv Gandhi International Airport (RGIA) and is its developer and operator. According to A. Viswanath, Chief Commercial Officer, RGIA, this broadly means a setback of between six months and a year in achieving breakeven, or a loss of around Rs 100 crore . RGIA expects 6 million passengers to travel each year from this airport.If half of these passengers were expected to pay Rs 600, RGIA would have netted Rs 180 crore. But at Rs 375 it can collect only Rs 113 crore. Worse, for the past five months it has not collected a UDF from domestic passengers. So RGIA has only seven months, which means that it would get close to Rs 70 crore from the 2.5 lakh-odd domestic passengers expected to leave every month. For passengers who are already reeling under rising fuel charges, this may not be the right time for another levy. But they can take comfort: The fee could have been much higher! E. Kumar Sharma

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