Ajit Singh’s bold gamble

The advantage of a rising tide is it makes even the poor boats glide along with the best. Civil aviation minister Ajit Singh was able to earn brownie points with airline passengers on Tuesday rolling back airport development fees (ADF) at Mumbai and Delhi airports simply because public sector Airports Authority of India (AAI) has also become cash rich as Delhi and Mumbai airports have boomed.

The same financially strapped entity, which could not increase its equity contribution as the GMR consortium raced to expand Delhi airport can now afford to spare Rs 390 crore as additional equity in the two airports. AAI has earned the money basically as sleeping partner in DIAL and MIAL and has been able to channel the funds to modernise Chennai and Kolkata airports. Their expansion had been on hold as long as AAI was financially strapped.

Scrapping the ADF means both GMR-run Delhi and GVK-run Mumbai airports will now have to rework their financial numbers, but more important it shows how arbitrariness in Indian policy making is a disease that is taking time to wear off.

In 2009, the same ministry under Praful Patel had levied the ADF. The levy was upheld by the Supreme Court in 2011. Based on the court interpretation, the sector regulator, the Airport Economic Regulatory Authority, allowed the charge to be hiked. And now just six months after the regulator's decision the minister is moving in to follow up on his orders last week asking AAI not to charge ADF at Kolkata and Chennai airports.

There can be quibbles if DIAL would have needed the ADF if its capital cost had been lower, but that is a debate which has drawn in supporters on both sides. The decision to not charge ADF will bring down passenger fares in these two airports though as Mumbai is undergoing expansion, the cuts may have to be revisited again. But would this provide a push to the passenger growth (the two airports make for 70 per cent of domestic traffic) that is falling for the last three months? Unlikely.

... contd.

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