Bailout funded by passengers

Bailout funded by passengers
Comment E-mail Print Share
First Published: Tue, Feb 10 2009. 10 16 PM IST

Illustration: Jayachandran / Mint
Illustration: Jayachandran / Mint
Updated: Tue, Feb 10 2009. 10 16 PM IST
Frequent fliers beware: Airport headaches have moved beyond lengthy check-in lines and draconian security measures. The Delhi International Airport Ltd (DIAL) received the go-ahead from the government to tax passengers passing through New Delhi’s Indira Gandhi International Airport, effectively receiving a passenger-funded subsidy for its airport development project.
While the fees are fairly nominal—Rs200 for domestic passengers and Rs1,300 for international fliers—DIAL hopes to raise Rs1,827 crore from the scheme, covering a budget shortfall in its project. DIAL initially planned to raise cash from security deposits on commercial property within the land for development. But the ministry of civil aviation shot down the plan, which circumvented a government revenue-sharing plan that standard leases would entail.
Illustration: Jayachandran / Mint
The ministry of civil aviation is irresponsible in allowing DIAL to tax fliers. The firm won a contract to modernize the airport in a competitive bidding war; surely, another bidder could have provided a better price when DIAL’s Rs1,827 crore free cash is taken into account. Instead, the government has created serious moral hazard with its passenger-funded bailout. DIAL has shown that it can circumvent a high-risk contract whose stipulations it actually cannot deliver on. What’s to say other ventures won’t follow suit in the future?
Some are predicting the fees could turn off fliers. That’s fairly unlikely, as the fees are nominal. But travellers shouldn’t be needlessly taxed for DIAL’s irresponsible risk-taking revenue scheme. DIAL made a specific agreement to develop the Indira Gandhi International Airport. It’s not unreasonable, therefore, that it be expected to account for its budget deficit on its own. Frustrated travellers shouldn’t be made to shoulder that burden, especially as they already pay exorbitant tariffs.
It’s bad enough that passengers are subsidizing DIAL’s project. It’s even worse that the government won’t see a penny of the revenue. While the funds may underwrite assets the government will later acquire, it’s unclear what these assets will actually be worth decades down the line.
It is common practice for travellers to pay nominal fees for the upkeep of the airports they use. But travellers shouldn’t be made to subsidize future airports. The government shouldn’t allow its contractual partners off the hook, especially when better alternatives did exist previously.
Should the government have allowed DIAL to tax travellers? Tell us at views@livemint.com
Comment E-mail Print Share
First Published: Tue, Feb 10 2009. 10 16 PM IST