New Delhi: India's biggest private-sector airport operators are pushing back against a regulatory proposal that would delay when they can start charging passengers for new terminals and runways, warning that the change could squeeze cash flows and complicate financing for billions of rupees in planned expansion.
GMR Airports, Adani Airport Holdings and Fairfax-backed Bangalore International Airport are among the operators objecting to the Airports Economic Regulatory Authority of India's (Aera) plan to link passenger fee increases to the actual completion of infrastructure projects, rather than allowing cost recovery once tariffs are approved, according to minutes of a 6 July stakeholder meeting reviewed by Mint.
The dispute, which first emerged during Bengaluru airport's tariff review, has escalated as Hyderabad airport undergoes its own tariff determination for the five years through FY31, in which Hyderabad and Bengaluru alone plan more than ₹32,000 crore of combined capital spending.
Airport executives argue that the incremental Aggregate Revenue Requirement framework, while well-intentioned, could trigger sharp fee increases later in the tariff cycle, weaken investor confidence, and complicate debt financing—concerns echoed by lenders including ICICI Bank, even as passenger advocacy groups back the regulator's user-pay principle.
"...while it (GMR Airports) respects the underlying rationale of the proposed user-pay, its implementation in the existing regulatory regime presents certain practical challenges," Narayana Rao Kada, group deputy managing director, GMR, said during the consultation meeting held on 6 July.
GHIAL's ₹13,548-crore expansion at stake
The issue is particularly significant for GMR-run Hyderabad International Airport Ltd (GHIAL), which has proposed a ₹13,548-crore expansion programme.
Nearly 80% of the investment is scheduled for the latter half of the five-year tariff cycle, between FY27 and FY31.
The airport’s finance chief, Anand Kumar P., urged Aera to retain the existing tariff philosophy or introduce the framework only partially. "...since the concept is being introduced for the first time, the same may initially be implemented only partially, such as through a 50% implementation…”
The proposal could lead to "tariff shock in the latter years” with significantly higher user development fees. A higher financing burden and “reduced tariff predictability” could affect internal accruals, he said.
Kumar warned of “any significant departure from established regulatory principles may also have implications for investor confidence and long-term financing arrangements.”
Other airport operators broadly echoed the same concerns, though each highlighted different operational challenges.
Delhi International Airport Ltd chief executive Pradip Panicker said the proposal could become difficult to administer because airports commission projects throughout the five-year control period, potentially resulting in numerous tariff revisions. Delhi airport is also run and managed by GMR Airports.
Adani Airport, which manages eight airports in the country, based its reasoning on implementation, noting that airlines sell tickets several months in advance.
"(So) any tariff revision consequent upon capitalisation of major assets should be initiated sufficiently in advance...” Ashu Madan, head-regulatory at Adani Airport, said at the meeting dated 6 July, as per the Minutes, reviewed by Mint.
“Airline tickets are booked several months in advance, and frequent or sudden revisions in user development fees create reconciliation and implementation issues for airlines," Madan said, suggesting a six-month implementation window.
Lenders and passenger groups weigh in
Fairfax-run Bengaluru International Airport Ltd (BIAL), which is itself undergoing a tariff determination exercise involving around ₹18,700 crore of planned investments, proposed introducing the framework only partially by "applying the user-pay principle only to 50% of the relevant Capex" or excluding projects capitalised during the first half of the control period.
GMR Airports, and BIAL did not respond to queries from Mint.
“The existing regulatory framework for capital expenditure recovery has demonstrated its effectiveness over multiple control periods and should therefore be retained,” an Adani Airport Holdings spokesperson said in response to an emailed query from Mint.
According to the spokesperson, the existing framework provides a transparent mechanism whereby tariffs are determined on projected capitalization and subsequently reconciled against actual capitalization through true-up/true-down adjustments.
“The government had bid out airports for the private participation with the same principles and spirit that ensure regulatory stability, supports sustained airport infrastructure investments, and avoids the administrative burden and tariff uncertainty inherent in the proposed ‘Incremental ARR’ and ‘pay-as-you-use’ model,” the spokesperson said.
The Association of Private Airport Operators (Apao), representing around 14 privately operated airports, also urged Aera to ensure there is "no adverse impact on the cash flows of airport operators."
When contacted, Apao secretary general Satyan Nayar told Mint, "Detailed consultation with members is underway, and responses will be submitted to Aera."
The concerns extended beyond airport operators.
ICICI Bank, which participated in the meeting, said that airport projects are largely financed through long-term debt and depend on predictable future cash flows. Its representative cautioned that any material change in tariff methodology could affect debt servicing, credit metrics and financing costs.
"Tariff uncertainty is often highlighted by rating agencies as a risk factor," the bank’s representative, Manmohan Dwarkani, zonal head - Corporate Banking, ICICI Bank, said in the 6 July meeting, as noted in the minutes. The bank is yet to respond to queries.
Mismatch in airport regulation
Passenger groups have supported Aera’s proposal. "Air Travellers Association (ATA) supports the principle that passengers should not be required to pre-pay for large future infrastructure through front-loaded charges," G.S. Bawa, secretary general of ATA, said. He argued that if projects are delayed, passengers who have already paid higher charges cannot realistically be identified and refunded.
Regulator Aera has again defended the proposal, saying it addresses a long-standing mismatch in airport regulation. Chairman S.K.G. Rahate said: "The Authority's objective is to ensure that the new approach does not cause any undue difficulty to airport operators."
Aera has argued that the current system allows airports to recover the cost of projects years before passengers can actually use them. The proposed framework seeks to align tariff recovery with asset commissioning, so that users pay only when infrastructure is available.
According to Amit Mittal, aviation expert and director at Aerointellect Aviation, the challenge is to strike the right balance between airport financing and passenger interests.
"The implementation of user development at airports has an important aspect of sorting out the intertwined aspects, such as capital expenditure (incurred by the airports) and when the actual benefits are available for use to passengers,” he said.
- Aera proposes delaying passenger fees until new airport infrastructure becomes operational.
- GMR, Adani, and BIAL resist citing cash flow and financing risks during construction.
- GHIAL's ₹13,548-crore Hyderabad expansion faces an 80% investment backloaded to the cycle's second half.
- ICICI Bank warns that tariff unpredictability could hurt debt servicing and credit ratings.
- Passenger group ATA backs Aera, opposing pre-payment for unused future infrastructure.