New Delhi: Bengaluru airport operator Bangalore International Airport Ltd (BIAL) is reworking its expansion plans after the airport tariff regulator cut its proposed five-year capital expenditure by about a third and shifted some major projects to a “user pays when the project is ready” model.
The Airports Economic Regulatory Authority (Aera) approved ₹13,742 crore of the ₹20,920 crore proposal by BIAL, while allowing recovery of some projects only after they are completed and put into use. One executive familiar with the matter said this was one factor leading to the deferment of some capex.
“We have deferred some of the projects to a later period of implementation,” a BIAL spokesperson told Mint.
The lower capex approval reduces the amount BIAL can seek to recover through regulated airport charges. For passengers, the impact would be reflected in lower user development fees, experts said.
“Simply put, the regulator has allowed BIAL to recover a much smaller amount from airport users during the five-year period,” said Amit Mittal, director at Delhi-based consultancy Aerointellect Aviation.
Aera has approved a baseline yield of ₹390.42 per passenger for Bengaluru airport, sharply below BIAL’s proposed ₹1,129.23 per passenger.
Projects deferred
The new structure leaves BIAL with two routes: defer some projects until demand and operational requirements justify them, while pursuing others through incremental tariff recovery, user pays or alternative funding and concession arrangements
BIAL is majority-owned by Fairfax, with the Karnataka government and Airports Authority of India (AAI) being the other minority owners. BIAL operates the country’s third-largest airport, which handled 48.16 million passengers in FY26.
Airport operators previously spread their capex over a five-year period, with recovery made through user development fees and other charges paid by airlines and passengers. Most of these costs are factored into airfares.
Since August, Aera has revised the concept, with Bengaluru being the first airport where capex recovery will start only after assets come on stream. This reduces the amount the airport can charge users upfront.
Of the 34 projects proposed, the majority were cleared, the BIAL spokesperson said. However, their value has been revised downwards.
The biggest project for the FY27-FY31 period is the second phase of Terminal 2, for which BIAL had proposed ₹7,480 crore. Aera approved ₹6,030 crore.
The regulator also pared back other projects. The West Cross Field Taxiway, which helps aircraft move between runways and terminal areas, was reduced from a proposed ₹1,567.33 crore to ₹1,225.30 crore. The T1 upgrade was cut from ₹1,129.95 crore to ₹893.22 crore, while the T2 Phase 2 apron, needed for additional aircraft parking, was reduced from ₹906.87 crore to ₹760 crore.
Aera excluded several projects after concluding that their benefits did not sufficiently justify recovering their costs from airport users.
One such project was the Eastern Connectivity Tunnel (ECT). BIAL had proposed ₹2,772 crore for the project, which would provide an alternative eastern access to the airport. AERA did not allow the entire project into the airport’s regulated asset base, which is used to calculate user charges for passengers. Instead, it valued the project at ₹1,600 crore and recognised 30%, or ₹480 crore, as allotable expenditure.
The ₹143 crore construction cost for KIA West Metro station was also excluded. AERA concluded that the station would not primarily benefit passengers and would instead serve employees and commercial and support establishments.
The North Boundary Road, for which BIAL had proposed ₹171.46 crore of capex, was also excluded. AERA said BIAL had not shown firm development commitments or sufficient demand to justify the investment in the current control period.
Aera also excluded the proposed general aviation terminal, citing limited demand. “Aera’s decision to not allow the full cost of the Eastern connectivity tunnel and other projects like KIA West Metro Station and North Boundary Road are seen as important challenges rather than permanent road blocks,” the spokesperson said.
“...we will continue to explore alternate funding mechanisms or concession structures, as potential solutions,” the spokesperson added.
The Bengaluru decision stands out against Hyderabad, whose regulatory charges were revised under the "user pays principle". GMR-led GMR Hyderabad International Airport Ltd had proposed about ₹15,400 crore of capex at the consultation stage, while AERA’s assessment was about ₹13,816 crore, a reduction of roughly 11%.
Mittal said BIAL would have less immediate incentive, or need, to seek recovery of the full cost of projects before they are operational, "potentially supporting the deferment of projects whose benefits or demand requirements are further out.”