Flying out of Delhi may become more expensive

It is the result of a 42% increase in the cost of modernizing the airport before the Commonwealth Games in October

Passengers will have to pay steeper fees when flying from the Capital’s Indira Gandhi International Airport (IGIA) after June—the result of a 42% increase in the cost of modernizing the airport before the Commonwealth Games in October.

The board of Delhi International Airport (Pvt.) Ltd (DIAL) on Thursday set the final cost of the project at Rs12,700 crore, up from the Rs8,975 crore estimated earlier, according to a company official who asked not to be named. The revision was adopted at a board meeting.

The increase clears the way for raising existing charges and possibly levying new ones on passengers using IGIA. It would also mean higher charges such as landing, parking and navigation fees for airlines.

IGIA, being modernized by a consortium led by GMR Infrastructure Ltd, will be the biggest and most expensive airport in India when the under-construction Terminal T3 is commissioned in June, offering passengers a world-class, integrated domestic-and-international facility with the latest in equipment.

For passengers and airlines, it will come at a price because the developer would have to pass on the increased project cost to end users.

Passengers are already being charged to help the developer recover Rs1,827 crore, or 20% of the earlier project estimate of Rs8,975 crore. They are paying Rs200 for taking domestic flights out of IGIA and Rs1,300 for flying abroad until 1 March 2012, as an airport development fee.

“We have to audit the cost given by them (DIAL), which will take six-eight weeks after which a final tariff would be arrived at,” Airports Economic Regulatory Authority (Aera) chairman Yashwant S. Bhave had said earlier this week.

Aera is the new airport regulator and approval of the new fees at IGIA is likely to be its first big decision, posing a potential test of its ability to protect consumer interests.

DIAL is expected to submit the final cost estimate to Aera for clearance by the end of this month or early next month after which the regulator will appoint an external auditor to vet costs and then decide on the new airport charges.

The new charges could either be an extension of the duration of the existing airport development fee, an increase in the amount charged, or an additional passenger charge such as a user development fee, or a combination of such measures, said the DIAL official quoted above.

The method of arriving at these charges is likely to be finalized by next month, Bhave had said.

India’s airlines are laden with losses and debt, and there are concerns about the impact of increased tariffs on air traffic growth, which has started to pick up after a two-year downturn.

“Rules should be made for the customer and not just the rich customer,” said G.R. Gopinath, who pioneered low-cost aviation in India with the erstwhile Air Deccan and recently launched the cargo carrier Deccan 360. “The fundamental problem is there must be competition in all sectors. Competition will bring down cost for the consumer, which I think is not there in some airports.”

Gopinath said the regulator should strike a balance between the interests of consumers and the airport operator when setting tariffs.

“Airport cannot be allowed to lose, but they cannot exploit (consumers),” he said. Airports are built on public land given at concessional rates by the government, and “this concession has to be shared with the public”.

In October 2006, the cost estimated for the first phase of IGIA modernization by DIAL was Rs5,900 crore. The cost estimated for the Mumbai airport modernization has risen from Rs5,826 crore to Rs9,802 crore.

“A regulator is always supposed to regulate competition and not monopoly,” Gopinath said, recommending the government be more flexible in allowing competing airports to come up.

Return on investment alone does not justify what an airport operator can be allowed to charge passengers, he added.