India’s airports regulator is off to a bad start. In its very first order, the Airports Economic Regulatory Authority (Aera) has let Delhi International Airport Pvt. Ltd (DIAL) off the hook. DIAL was levying so-called development charges on a captive market of fliers who had nowhere else to go.
DIAL imposes a development fee of Rs200 on domestic passengers and Rs1,300 on international travellers. It was allowed to impose these charges by the Union civil aviation ministry in February. This fee will allow DIAL to garner roughly Rs1,827 crore, the funding gap in the project.
In its order, the regulator was supposed to review this situation. Instead, it has created more problems. DIAL’s resort to this fee was ad hoc, and its arguments that adverse financial conditions forced its hands don’t wash. There are two issues at hand. DIAL has not given Aera its final project costs. It demanded an extension, and got it—for a second time; the ministry had given it one earlier—until end-January to declare these costs. The new airport is expected to be operational by March.
In essence, the time between the opening of the airport and the firm being able to estimate its final?costs is no more than two months. This speaks poorly of DIAL’s financial management practices and nothing else. Why should consumers be penalized for this?
More serious is the absence of any reasoning in the order of the regulator: The order did not give any reasons for acceding to DIAL’s request. It simply noted the facts of the case and gave an extension to DIAL. For a quasi-judicial body, this is poor?performance close to abdication of duty.
The bigger danger lies in the circumstances surrounding the liberalization of the aviation sector. Much of the discretionary power continues to rest with the ministry that can, and has, behaved erratically in handling such issues. Unless the right precedents are set now, there is a danger that governmental inefficiency may be traded for crony behaviour by the private sector. Today, airlines and airport developers are allowed to do what they please. Aera will simply be unable to do its job if it does not get its act right, quickly.
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