Govt moots new model concession agreement for greenfield airports

New Delhi: The Centre on Tuesday proposed a new financial model for building greenfield airports aimed at making air travel more affordable and addressing concern of disputes related to tariff.

Under the new financial model, the concession fee given by the airport operator to the concessioning authority will be based on a 'per passenger aeronautical model'.

"The passenger-based model will also be the base of the bidding process," Civil Aviation Minister Suresh Prabhu told reporters here while unveiling the transaction structure.

The new model will encourage increased private investment, the minister outlined.

Currently, the transaction structure for airports, run under joint venture route, is based on revenue sharing model.

Minister of State for Civil Aviation Jayant Sinha said the new concession agreement is aimed at realising the government's dream of achieving one billion passenger trips a year in the coming years.

This necessitates massive investment in the aviation space and construction of more greenfield airports. The new structure will make travel more affordable as the yield per passenger will be pre-determined by the concessioning authority, he said.

"Its guiding principles are affordability, sustainability and predictability," he added.

Under the proposed model concession agreement, the total aeronautical collections by concessionaire (airport operator) like landing and parking charges when measured per passenger basis will not exceed Rs 400.

The concessionaire has to give Rs 20 per passenger per year to the concessioning authority plus an additional amount as the concession fee.

"It is this additional amount of concession fee which will be the biddable parameter," Civil Aviation Secretary R N Choubey explained.

The additional amount could range from Rs 10 to Rs 50 depending on how attractive the concession is. The concession period will be 40 years, he said. There would be a moratorium on the concession fee for three years from the commercial operation date.

Both the concession fee and the total aeronautical charges of Rs 400 "will be escalated annually by half the inflation rate". "It will be half of inflation utilisation". The remaining half could be covered by way of efficiency improvements, he said.

The immediate project that will determine the success of this model will the upcoming greenfield airport at Jewar in Greater Noida, the secretary said. The proposed model will be placed in public domain for feedback till September 14.