Evolve a fixed formula for assessment of internal accrual for

Urging the Civil Aviation Ministry and airports tariff regulator AERA to evolve a "fixed formula/process" for assessment of internal accrual for determination of development fee (DF) in future, a key parliamentary panel today said the variation in the assessment led to levying of higher DF on the fliers at Mumbai airport.
Currently, Mumbai International Airport Limited (MIAL), the joint venture company operating the Mumbai airport, levy's a development fee of Rs 100 on passengers flying domestic and Rs 600 on passengers flying international routes from its airport.
DF is levied on embarking passengers at an airport for funding or financing the costs of upgradation, expansion or development of that particular airport or for establishment or development of a new airport, among others.

"The committee feels that in the absence of a fixed formula/process to assess the 'internal accrual', the difference in assessment of 'internal accrual' between MIAL and MOCA surfaced.
"The committee, therefore, desire that the Ministry/AERA should evolve a fixed formula/process for assessment of internal accrual so that such difference in calculation is avoided in future," Public Accounts Committee (2015-16), headed by Congress Party MP K V Thomas said in its 46th report.
The report titled "Implementation of Public Private Partnership Project at Chhatrpati Shivaji International Airport, Mumbai," Ministry of Civil Aviation, was presented to Lok Sabha today.

"The committee is perplexed to note that during the process of finalisation of levy of DF, AERA (Airports Economic Regulatory Authority) and MIAL both arrived at different figures for actual funding gap," it said.

Noting that this was stated to be due to difference in assessment of estimates of internal accrual, the Committee in its report said," MIAL assumed internal accrual of Rs 2,464 crore. The financial auditor estimated it at Rs 4,021 crore after depreciation and deferred tax liability to profit after tax."
According to the PAC report, AERA pointed out that accruals estimated by MIAL were based on their tariff expectations which were uncertain.
"Audit, therefore, observed that lower estimation of
internal accrual resulted in a higher funding gap which in turn led to levy of a larger DF on passengers," it said.

"MOCA while giving reasons for lower estimation of internal accrual stated that AERA is the authority to determine the DF as per the observation of the Supreme Court. Further, AERA has determined the DF in respect of Mumbai Airport after considering all the factors and after due diligence of the relevant provisions of AAI Act," the report observed.
AERA has given detailed reasoning for approval of DF in their order, it said adding, "the internal accruals calculation by MIAL and independent auditor was based upon increased tariff sought by MIAL while filing its Multi Year Tariff Proposal (MYTP) to AERA."

"Since AERA has allowed much lower tariff (164.29 per cent) compared to 881.29 per cent asked by MIAL, projected internal accruals had to be reduced correspondingly and AERA has considered the same while finalising means of finance after taking into account actual funds that would be available for project funding after netting of funds utilised for operations capex, disallowed project cost and other current assets," the PAC report said.
MIAL, which is a joint venture between GVK Group-led consortium and Airports Authority of India had been a go ahead by the AERA for a 164 per cent increase in revenue from aeronautical charges from February 2013 against a demand for an increase of 881 per cent.