Wednesday, June 13, 2018

Govt to curb airport land buy costs

At a time when delays in land acquisition for Navi Mumbai International Airport (NMIA) has escalated its cost to around Rs 17,000 crore- a whopping 250% increase, from an earlier projection of Rs 4,766 crore in 2006-07, the government it seems doesn’t want to see the repeat of situation again as it plans to increase the number of airports to around 200 from about 100 at present over the next two decades, costing around $60 billion.

Airports Economic Regulatory Authority of India (AERA), which is a tariff regulator for aeronautical services charged by the airports, has now asked all the stakeholders to offer their comments on a study which was done in order to ascertain a Fair Rate of Returns (FRoR) for upcoming airport projects. AERA had commissioned consultancy firm EY for conducting a comparative study of infrastructure projects in the country and outside for coming out with a suitable formula.

According to the industry experts, the adaptation of the right model for getting a FRoR will go a long way in making the airport projects viable for the operators without pinching the pockets of the fliers and cargos, as they are ultimately the ones to be affected.

The study has come out with two possibilities. In the first possibility, when land is introduced against equity for airport development, it may be prudent to amortize the cost of land for a reasonable time period at a rate of 3% of the cost of land for the first 10 years. 
13/06/18 Shahkar Abidi/DNA