BIAL Airport Concession Agreement, Its future exapansion, UDF charges, No infusion of Capital by Promotors

As per Concession clause mentioned above,  its 25 years other Airports are not allowed except Mysore and Hassan as Domestic within 150 Kms Aerial Dist.

GOI and GOK should make plans to re-open  HAL airport  by 2033 which is leagally allowed.. 

Burdened by rising air fares, passengers at the Bengaluru International Airport (BIA) could be in for a hefty hike in User Development Fee (UDF). 

But even if a Wednesday notification by the Airports Economic Regulatory Authority of India (AERA) for a fresh consultation paper offers a temporary reprieve, the air commuters would eventually end up paying for the BIAL’s inability to raise revenue from the vast real estate adjoining the airport.

Two years before the airport construction took off, the Bangalore International Airport Limited (BIAL) had taken possession of 4,008 acres of land on concessional rental terms from the State government. Besides the runway, terminal and other airport infrastructure, a big chunk of this land -- valued then at Rs 175 crore -- was earmarked for real estate that could eventually generate big ticket revenue for the shareholders. But, as airport infrastructure experts point out, the land remained largely undeveloped in the last five years.

BIAL has now linked revenue from an increased UDF with its airport expansion plans. At a stakeholder consultation meeting convened by the Authority on July 22 this year, BIAL had cited the requirement for an additional equity infusion of Rs 649 crore to finance the airport’s future expansion. All the shareholders, including the Centre, State and the private promoters had expressed their inability to infuse any additional equity. Land monetization, BIAL had maintained, might not generate enough funds in the current market situation. 

The Concession Agreement (CA) had given BIAL the rights to generate its own revenue by developing commercial ventures on the allotted land. The suggested list included projects such as “hotels, restaurants, conference venues, meeting facilities, business centres, trade fairs, real estate, theme parks, amusement arcades, golf courses and other sports and/or entertainment facilities, banks and exchanges and shopping malls.”

Infrastructure experts contended that if BIAL had taken up these projects in right earnest, it wouldn’t have had a reason to depend on a UDF hike to raise funds. 

Single-till model

AERA insists that single-till model to calculate UDF is the best for passengers as under this, they had to pay the least. In this model, both aeronautical and non-aeronautical charges are considered to calculate the airport charges. The dual-till model considers only aeronautical activities, while a hybrid model takes into account all the aeronautical and 30 per cent of the non-aeronautical revenue.

BIAL had stoutly refused the single-till model, citing the CA, before agreeing for a 30 per cent cross subsidisation under the hybrid-till model. However, it sought a special consideration to raise funds for further expansion and debt repayment.

Under the airport’s current share-holding pattern, the private promoters hold 74 per cent. These include the GVK Group (43 per cent), Siemens (26 per cent) and Zurich Airport (5 per cent). The Airports Authority of India (AAI) and Karnataka State Industrial and Infrastructure Development Corporation (KSIIDC) hold 13 per cent each.  

The State government had extended an interest-free capital of Rs 350 crore for ten years to BIAL under a State Support Agreement. However, it turned down a request for another Rs 150 crore equity participation. Many infrastructure experts find this hard to digest. Contended one of 

them: “The State and Centre are able to spend Rs 40,000 crore through own funds and loans on the Metro project. But they are shying away from investing in an airport, the cost of which is pittance compared to the Metro project. They could get much higher returns here, every year. This should have been a great opportunity.”

http://www.deccanherald.com/content/359613/real-estate-lies-unexplored-bial.html

Good article by DH,  will GOK and GOI wake up on how BIAL is sitting on gold mine.

With AERA going for one more round of consultation fees,  Commuters travelling via BIAL will not charged more for some more time.   So it may take another 1/2 months time.