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Rediff.com  » Business » AAI defends joint venture deals at Delhi airport

AAI defends joint venture deals at Delhi airport

July 27, 2011 13:42 IST

The creation of joint ventures by Delhi International Airport Ltd (DIAL) has not impacted its revenue share, says the Airports Authority of India (AAI).

It has written a letter saying so to the civil aviation ministry and the Airports Economic Regulatory Authority (AERA).

"Our non-aeronautical revenue never included any share in the revenue earned from the sale of goods inside the terminal. All we got was the rental for using that space, which has not impacted yet," said a senior AAI official, who did not want to be identified.

The clarification comes at a time when questions have been raised on whether the formation of a JV by DIAL led to revenue losses for AAI. Both AERA and the Comptroller and Auditor General (CAG) have raised concerns on the issue.

Delhi airport is owned by a consortium. The GMR Group owns 50.1 per cent, AAI owns 26 per cent, Fraport AG and Malaysia Airports hold 10 per cent each, and India Development Fund owns 3.9 per cent. DIAL (run by GMR) is supposed to share 46 per cent of total revenue with AAI.

DIAL has created 11 JVs to operate various non-aeronautical businesses. Its share in the JVs range from 26 to 50 per cent and the revenue share is 15 to 25 per cent.

The JVs are for duty-free shops, food stalls, advertising, parking, fuel supply, cargo and other services.

In the duty-free shop JV, for instance, DIAL earns Rs 32 for sale of every Rs 100. DIAL gives 46 per cent of this, Rs 14.72, to AAI and keeps the rest.

Thus, on the revenue of Rs 100, AAI earns only Rs 14.72, not the Rs 46 those who criticise the arrangement say it should be earning. Many say that JVs like this are making a dent on the revenue share of AAI.

However, AAI says under the operations, maintenance and development Agreement it had signed, the airport operator can form any number of JVs.

"Suppose there is a JV formed to supply fuel to the aircraft. The JV company will pay the airport operator for using the infrastructure at the airport to DIAL and we will get 46 per cent from that. Now, why would I want to have any share in the fuel they sell to the airlines?" the AAI official explained.

He added that their revenue share from Delhi airport last year was Rs 550 crore,  the same they got earlier.

Others feel this needs probing. "It needs to be investigated through a different angle, if DIAL has to share only the rental collected from the airport. It should be seen whether there is any difference between the rentals charged from the JV companies and other installations," said an analyst, who did not want to be identified.

"If AAI and the government feels that there is no revenue loss on account of JV formation, we may not pursue the matter further. But we will always consider this while deciding the charges," said a senior AERA official, on condition of anonymity.

Mihir Mishra in New Delhi
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