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Home > India > Business > Business Headline > Report

Air passengers pay for govt's 'myopia'

Anjuli Bhargava in New Delhi | March 05, 2008 09:14 IST

The ceremonial ribbon has not yet been cut on the two new airports in Hyderabad and Bangalore but the airport authorities have already had their first taste of the shape of things to come and learnt their first lesson: Running an airport is fraught with daily challenges and controversies.

At the heart of the issue is the user development fees the authorities propose to charge from the first day and which is now being questioned by the civil aviation ministry on the grounds that since connectivity is an issue with both the airports, the passengers will face a double whammy.

First, you spend a huge amount to reach the airport (not to mention the huge time spent, depending on which part of the city you are trying to access it from) and then you pay through your nose to pass through them.

But guess what? The fees, which have been signed on in what now appears a very poorly thought out concession agreement, are in a sense cast in stone and have legal sanctity (not the actual numbers but the fact that they will be charged and the formula on which they will be calculated, which is based on capital invested, rate of return and the debt-service ratio).

Now, after adding the cost of reaching the airports, the fees are beginning to sound exorbitant.

Hyderabad International Airport Ltd is going to charge Rs 1,000 for international outgoing passengers and Rs 725 for domestic outgoing, while Bangalore International Airport Ltd will levy Rs 955 and Rs 675 for these, respectively. Taxes are over and above these charges.

In addition, a passenger will be charged about Rs 150 if he takes a bus to the airports and anywhere between Rs 450 and Rs 700 if he takes a taxi.

So, assuming that a mistake has indeed been made by those signing the agreement, can this be remedied in an amicable manner?

Well, it would have had there been an aviation regulatory authority in place. But unfortunately - although it has been much talked about - even the rudiments of a regulatory authority are not on the horizon. So, the dispute will continue and the authorities at the two airports will bargain and try to reach a transparent agreement with the aviation ministry.

A senior government official told Business Standard: "Someone needs to look into how the two airports are coming to these UDF numbers. Since traffic has increased, their income should go up. Their expenditure has bloated too, but without any checks and balances, we don't know how much it has gone up. Therefore, someone needs to do this exercise."

With the PPP model, efficiencies were expected to improve and so costs were meant to go down, which did not seem to be happening, the official pointed out. There is talk of delaying charging the UDF - especially on domestic passengers (GMR has announced it will charge only international passengers) - for one or two quarters.

But that too makes little sense as the airport authorities are questioning the relation of connectivity with UDF. Even if the two airports were better connected, the cost of reaching them would probably not go down, they argue.

In the case of Bangalore - with the current state of the state administration - connectivity will take more than two quarters to improve, and even when it does, the cost may or may not come down.

Even in Hyderabad, it will be a while before the journey becomes smooth. But the most important issue remains: The ease of the journey may improve but its cost is unlikely to.

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