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India: Government to fix rates first before inviting airport bids

Contractors of new airports can be assured of the landing and parking fees they levy after the government made the call to fix the rates before inviting bids.

The decision would pave the way for potential entry of foreign investment as it removes regulatory uncertainty from the equation. This usually deterred investors from vying for airport projects in the country, says aviation industry analysts.

Airline executives also lauded the decision, saying that they would have more visibility on a key recurring cost.

At the moment, the Airports Economic Regulatory Authority (AERA) has the authority to decide on the fees at privately run airports. Airport operators and airlines have often bemoaned about tariffs. In fact, on one occasion, the Supreme Court had to step in to implement a rate revision.

“We have the approval from the Union Cabinet to amend the AERA Act, which will allow us to decide charges prior to the bidding of the airport project,” said a senior aviation ministry official who asked for anonymity.

The Ministry is still developing the procedures to fix the fees during the pre-bid stage, he added.

The official explained that AERA would continue to decide tariffs at airports that are in operation or where the projects have already been awarded.

New airports at Jewar in Greater Noida and Pune would most likely be among the first to be bid out under the proposal.

The decision is expected to make the airport sector even more attractive to foreign investors, explained Satyan Nayar, the Secretary-General of the Association of Private Airport Operators.

Foreign investors often see regulatory uncertainty as the biggest roadblock in the Indian market, he said, saying:

“Fixing tariff prior to bids would take care of regulatory uncertainty and help give a boost to foreign investments in the airports sector in India.”

An estimated $45 billion is said to be needed to develop airport infrastructure in the country, Nayar claimed.

“A substantial percentage (of this) will come through foreign investments,” he said.

Carriers remarked that bidding for airports on tariffs would provide relief for both passengers and airlines.

“This would be a good move as it would bring respite from sudden increase in charges at private airports. However, the government should ensure that the charges keep falling every year,” said an airline representative who asked not to be named.

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