AAI still awaits PIB nod on cost rise at Kolkata Airport, a year after completion

Private airports at Delhi and Mumbai are collecting Airport Development Fee to meet their cost escalations

The Airport Authority of India (AAI) is still awaiting the approval for cost escalation of Rs 382 crore from the Public Investment Board (PIB), a year after building the Kolkata airport.

“The contract was awarded at a higher cost at the time of the tender process itself. Moreover, there was a slight change in the scope of the project also. The delay was on part of the ministry of external affairs as there were Chinese bidders for passenger boarding bridges,” a senior-level AAI official told Business Standard.

The decision on Kolkata airport was taken in 2007-08. The inter-ministerial group agreed the project would be financed from internal resources in August 2008. The expected completion for the project was in 2011. However, AAI finally commissioned it in March 2012.

The Cabinet Committee of Economic Affairs (CCEA) approved the project cost of Kolkata airport at Rs 1,942 crore whereas the revised cost shot up to Rs 2,325 crore.

For approval of any amount above Rs 250 crore, it is sought first from the ministry and then the PIB (Public Investment Board).

Even as AAI awaits PIB approval for the Kolkata Airport, private airports Delhi and Mumbai are collecting Airport Development Fee (ADF) to meet their cost escalations. ADF is meant to fill the gap between actual investment and the earlier estimate. The fee is levied on all customers who fly out from the airport.

Presently, both Delhi and Mumbai airports are charging Rs 100 per domestic passenger and Rs 600 per international passenger. The expected financing gap in the case of Mumbai International Airport Ltd. (MIAL) is approximately Rs 4,200 crore while in the case of Delhi International Airport Ltd. (DIAL), it is approximately Rs 1,175 crore, with effect from January 1, according to the civil aviation ministry.

Some officials of the civil aviation ministry believe that there are double standards in the government’s dealing with private players and the government arm, as approval of ADF for private airports took less than an year.

The concession agreement for airport privatisation did not include charging of ADF in case of deficit of funding in airport projects.

Only when AAI could not infuse equity to match up the escalated costs of Delhi and Mumbai airports, was there an alternative option of charging ADF from the passengers. It was approved by the civil aviation ministry. Though this decision was challenged in the court yet finally Supreme Court ruled in favour of this.

Civil aviation minister Ajit Singh had announced in October that ADF in Delhi and Mumbai airports would be scrapped. Singh directed AAI to infuse equity of around Rs 100 crore in Delhi airport and around Rs 300 crore in Mumbai airport. However, as the airport operators of Delhi and Mumbai could not bring in proportional equity and debt, Delhi airport ADF was almost halved by extending the recovery period by two years till 2015. The ADF for Mumbai airport stays intact with the time period of recovery till 2021.