Nov 27, 2008

Business - India;Hyd airport seeks review of user development fee

K.V.Ramana

Wants fee increased to Rs 600 on domestic routes

HYDERABAD: With the fall in passenger traffic having a direct impact on the cash flows, GMR Hyderabad International Airport Ltd (Ghial) is seeking a review of the user development fee (UDF) it collects from passengers flying out of the airport.

Ghial, a GMR Group company responsible for operating the Rajiv Gandhi International Airport in Hyderabad, finds the existing UDF a raw deal, having a negative impact on revenues.

The ministry of civil aviation has allowed the company to collect Rs 1,000 as UDF from international passengers flying out of the airport and Rs 375 from the domestic passengers. Viswanath Attaluri, Ghial’s chief commercial officer, told DNA Money “that’s not enough” to sustain revenues. “We will appeal against this and seek a revised UDF,” he added.

“We want the government to increase the UDF to Rs 600 on domestic routes. We will take it up immediately with the ministry,” he said.

The airport operators were waiting for the Airports Economic Regulator Authority (Aera) to be in place for filing their appeals. But, with the setting up of the regulatory body taking time, the operators are now planning to file their appeals with the government. “Aera is expected to provide us with quick solution. But, for now we will seek the ministry’s intervention,” Attaluri said.

The company had originally proposed a uniform UDF of Rs 750 for all passengers who depart from the airport. However, with connectivity to the airport becoming a key issue, the government had put the UDF on domestic passengers on hold and allowed UDF of Rs 1,000 on international passengers. Though Ghial was keen on collecting Rs 1,000 excluding taxes, the government included taxes in the permitted UDF rates. “The international UDF has a tax component of 12.36%. This itself means reduced cash flow even from the international passengers,” Attaluri said.

With the government allowing lower UDF than proposed by Ghial, GMR has revised the break-even period for the airport from five years to over six years.

“If the UDF is restored to the levels we are comfortable with, the break-even will be on the expected lines. But, without those revenues, we have no option but to stretch the time frame,” Attaluri said