The Thiruvananthapuram Kerala International Airport Ltd (TKIAL) is a wholly-owned subsidiary of Adani Enterprises Ltd, which signed a concession settlement with the Airports Authority of India in January 2021. Photo: Special Arrangement
The Adani-controlled Thiruvananthapuram Airport’s projection of revenue from non-aeronautical providers such because the sale of meals and drinks — used to subsidise prices levied on airways and passengers — is only a “miniscule” 12% of the norm, in line with the nation’s airport tariff regulator. In truth, it’s only a 3rd of what the airport earned earlier than privatisation.
The Airports Economic Regulatory Authority (AERA) has really helpful that this revenue projection must be hiked fourfold, from the ₹103 crore proposed by the airport to ₹395 crore, over a interval of 5 years. The Adani-run airport has dismissed the AERA’s projection as “notional revenue”.
Low revenue sharing
The AERA has additionally questioned the style wherein the grasp contract for non-aeronautical providers was awarded to an Adani group subsidiary, with restrictive bid standards and “a low revenue share of 10%”.
This construction led to the airport operator decreasing the obligatory 30% of non-aero revenue — which have to be funnelled again for cross subsidising the prices borne by airways and passengers — to 30% of solely the ten% of revenue shared, that’s, a mere 3% of the entire. This association will impression airport customers, the AERA has stated. The international airways physique, the International Air Transport Association, has additionally stated that this formulation is “not justified”.
Revising tariffs
These observations had been made in a session paper floated by the AERA on February 12 to find out the revised tariff for the five-year management interval, from April 2022 to March 2027. It invited numerous stakeholders, equivalent to airways, airports, and floor dealing with businesses, to submit their feedback by March 15, after which it would problem a tariff order.
The Thiruvananthapuram Kerala International Airport Ltd (TKIAL) is a wholly-owned subsidiary of Adani Enterprises Ltd, which signed a concession settlement with the Airports Authority of India in January 2021 after a privatisation course of to function, handle, and develop the airport for a interval of fifty years. Adani Airport Holdings Limited (AAHL), included in 2019 as a 100% subsidiary of Adani Enterprises Ltd, holds eight airports in its portfolio, together with TKIAL.
‘Miniscule’
The AERA famous that the non-aeronautical revenue (NAR) projected by TKIAL for the five-year interval was “significantly lower” as in comparison with that of different public-private partnership airports equivalent to these in Delhi, Mumbai, Bengaluru, Hyderabad, and Cochin, the place it’s at least 50% of the entire operation and administration (O&M) bills.
While Thiruvananthapuram airport’s O&M bills are at ₹1,752.25 crore, its non-aero revenue for the five-year interval was solely ₹102.76 crore, or simply 12% of the norm. The AERA known as this sum “miniscule”. Instead, it has really helpful a sum of ₹395 crore from 2022-2027.
“This will impact the interest of the airport users, as 30% of the non-aeronautical revenue is used for cross-subsidization,” the AERA stated.
Below pre-privatisation norm
Under the hybrid until mechanism for figuring out airport tariffs, 30% of the non-aero revenue is for use to offset aeronautical prices equivalent to plane touchdown and parking costs, that are paid by airways, and passenger safety charges and person growth charges, levied on air travellers.
The sum of ₹102.76 crore can be a few third of what the Airports Authority of India earned as non-aeronautical revenue earlier than Thiruvananthapuram airport was privatised; regardless of the impact of the COVID-19 pandemic, the airport earned a non-aeronautical revenue of ₹285.86 crore from the monetary 12 months 2016-2017 to 2020-2021.
The regulator additionally identified that whereas the airport operator deliberate to develop the passenger terminal constructing, in addition to undertake re-alignment to create more room, “however, the airport has not proposed any incremental revenues from non-aeronautical services that may be earned from increase in space.”
Excluding competitors
It has additionally questioned the style wherein a grasp concessionaire for non-aeronautical actions equivalent to meals, drinks, and retail merchandise was awarded to the holding firm, Adani Airport Holding Limited (AAHL), by means of exaggerated bid standards to exclude competitors, equivalent to a steep annual turnover of ₹750 crore. This was “25 times” of the determine in public procurement tips that require a median monetary turnover to be 30% of the estimated value.
The internet price standards of ₹250 crore for bidders was additionally discovered to be “very restrictive” for a piece worth of ₹100 crore. It additionally discovered that the technical eligibility standards in search of expertise of leasing out or growth of actual property with a built-up space of 1 lakh sq. metres was “too high”.
Cannot be justified: IATA
IATA, in its response, has additionally questioned how the Thiruvananthapuram airport has tweaked its tariff calculations to scale back the proportion of earnings from F&B and retail gross sales that’s funnelled again to cross-subsidise different bills. “The current arrangement significantly reduces the level of effective NAR for the tariff determination by AERA and cannot be justified,” IATA has stated in its response to the session paper, submitted on March 12.
The TKIAL has responded to AERA’s remarks in a submission on March 13, and stated that the ten% revenue share was “price discovered through open bidding” which needs to be taken at face worth. It has additionally known as AERA’s proposed determine of ₹395 crore as non-aeronautical revenue as a “notional revenue” not supported below the AERA Act 2008.
