Airports Economic Regulatory Authority of India Determination Of

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Airports Economic Regulatory Authority of India Determination Of [F. No. AERA/20010/MYTP/HIAL/CP-II/2016-17/Vol-IV] Consultation Paper No. 30/2017-18 Airports Economic Regulatory Authority of India Determination of Aeronautical Tariffs in respect of Rajiv Gandhi International Airport, Shamshabad, Hyderabad for the 2nd Control Period (01.04.2016 – 31.03.2021) New Delhi: 19th December, 2017 AERA Building Administrative Complex Safdarjung Airport New Delhi - 110003 Table of Contents 1. Brief facts ................................................................................................................. 4 2. Guiding Principles for the Authority .......................................................................... 8 3. Consideration of True-ups for Pre Control Period and 1st Control Period .................. 17 a HIAL Submission on True-up for the 1st Control Period ............................... 17 b Authority’s examination of HIAL’s submission on True-up for the pre- Control Period and 1st Control Period .......................................................... 27 4. Control Period ......................................................................................................... 42 a HIAL Submission on Control Period ............................................................. 42 b Authority’s Examination of HIAL Submissions on Regulatory Period .......... 42 5. Regulatory Asset Base ............................................................................................. 43 a HIAL submission on Regulatory Asset Base (RAB) ....................................... 43 b Authority’s Examination of HIAL Submissions on Regulatory Asset Base (RAB) ............................................................................................................ 65 6. Weighted Average Cost of Capital (WACC) ............................................................... 89 a HIAL Submission on Weighted Average Cost of Capital (WACC) ................ 89 b Authority’s Examination of HIAL’s submission on Weighted Average Cost of Capital ......................................................................................................... 95 7. Operating Expenses .............................................................................................. 106 a HIAL Submission on Operating Expenses .................................................. 106 b Authority’s Examination of HIAL Submissions on Operating Expenses ..... 127 8. Taxation ………………………………………………………………………………………………………………155 a HIAL Submission on Taxation .................................................................... 155 b Authority’s examination of HIAL’s Submissions on Taxation .................... 156 9. Non-Aeronautical revenue .................................................................................... 159 a HIAL Submission on Non-aeronautical revenue ........................................ 159 b Authority’s Examination of HIAL Submissions on Non-Aeronautical Revenue ................................................................................................................... 179 CP. No. 30/2017-18 HIAL-MYTP Page 2 of 218 10. Traffic Forecast ..................................................................................................... 194 a HIAL submission on traffic forecast ........................................................... 194 b Authority’s Examination of HIAL submissions on traffic forecast ............. 198 11. Inflation ………………………………………………………………………………………………………………201 a HIAL Submission on Inflation ..................................................................... 201 b. Authority’s Examination of HIAL Submissions on Inflation ....................... 202 12. Quality of Service .................................................................................................. 204 a HIAL Submission on Quality of Service ...................................................... 204 b Authority’s Examination of HIAL’s submission on Quality of Service ........ 204 13. YPP Calculations .................................................................................................... 207 a HIAL’s submission on YPP Calculations ..................................................... 207 b Authority’s Examination of HIAL’s submission on YPP Calculations ......... 208 14. Matters regarding Error Correction and Annual Compliance Statement ................. 212 a Authority’s Examination on Matters regarding Error Correction and Annual Compliance Statement .............................................................................. 212 15. Stakeholder Consultation Timeline………………………………………………………………..……….214 16. List of Annexures…………………………………………………………………………….……………………..215 CP. No. 30/2017-18 HIAL-MYTP Page 3 of 218 In the matter of Determination of Tariffs for Aeronautical Services in respect of Rajiv Gandhi International Airport, Shamshabad, Hyderabad for the 2nd Control Period (01.04.2016 – 31.03.2021) 1. Brief facts Backdrop of the 1st Control Period and legal Proceedings 1.1. The GMR - MAHB (GMR Infrastructure Limited (GIL) and Malaysia Airports Holdings Berhad (MAHB) consortium was selected by the Government of Andhra Pradesh (GoAP) in December 2000 as the private partner for development of the proposed greenfield international airport at Shamshabad, Hyderabad. 1.2. GMR Hyderabad International Airport Limited (HIAL) was incorporated to design, finance, build, operate and maintain a world class Greenfield airport at Shamshabad, Hyderabad. HIAL is a joint venture company with following shareholding pattern: Table 1: Shareholding Pattern of HIAL as on 31.03.2016 Percentage Holding Company Shareholding GMR Airports Limited 63% GoI through AAI 13% Government of Telangana 13% Malaysia Airports Holdings Berhad (Mauritius) Pvt. Ltd. 11% 1.3. The airport, named as Rajiv Gandhi International Airport (RGI Airport / RGIA), Hyderabad, is among the few airports to be operationalized under the PPP model in India. The airport was inaugurated on 14.03.2008 and started the commercial operations from 23.03.2008. RGIA has an integrated passenger terminal with a capacity of 12 million passengers per year. It presently has a Code-F runway and a parallel standby runway. 1.4. The Authority determined the tariff in respect of RGIA for the 1st Control Period vide Order no. 38/2013-14 dated 24th February 2014; by adopting Single Till mechanism. HIAL stated that “Due to the aforementioned AERA order, there was no UDF revenue in FY 2015 and 3 quarters of FY 2016.” CP. No. 30/2017-18 HIAL-MYTP Page 4 of 218 1.5. HIAL was aggrieved by the aforementioned tariff Order, and filed a writ petition on 06.03. 2014. A summary of the proceedings is given below, “ 1. First Writ – W.P. No. 6487/ 2014: GHIAL vs. Ministry of Civil Aviation& 2 Others Details: AERA Order No.38/2013-14 dated 24.02.2014 has been challenged before High Court at Hyderabad. Status: a) The HC at Hyderabad disposed-off the writ on 10th June 2014. b) Directed the Central Government to take a decision within eight (08) weeks considering all aspects placed before it by GHIAL in its representation dated 24.04.2013. c) GHIAL is permitted to challenge the AERA order on merits before the Appellate Tribunal within four (04) weeks. d) The Central Government issued an order U/s 42 directing AERA to adopt “ Shared Till” with 30% cross subsidization on 10.06.2015. e) GHIAL filed an Appeal before the then AERAAT on the other issues.” 1.6. Further, HIAL filed an Appeal on 7th June 2014 before AERAAT on the other issues. As AERAAT then was not sufficiently constituted and declined to take the Appeal for hearing, HIAL filed another writ petition in the High Court at Hyderabad on 06.08. 2014. A summary of the proceedings is given below, “ 2. Second Writ – W.P. No. 22474/ 2014: GHIAL vs. AERAAT & 2 others Details: As the Appellate Tribunal refused to hear the above said Appeal filed by GHIAL due to the fact that the Tribunal was not constituted as per the CP. No. 30/2017-18 HIAL-MYTP Page 5 of 218 AERA Act. GHIAL approached the HC at Hyderabad and filed this WP for transmitting the appeal from the Tribunal to HC. Status: By mutual consent of the Parties the Appeal has been transmitted by AERAAT to the HC and the HC will hear the matter in due course. The writ is pending for adjudication.” 1.7. Lastly, HIAL filed a third writ petition, seeking the restoration of its UDF. The High Court gave an interim direction permitting HIAL to collect Airport Charges as were being collected prior to The Authority’s Order 38/2013-14. HIAL continues to collect user charges as restored on an interim basis till date. A summary of the proceedings is given below, “3. Third Writ – W.P. No. 27390/ 2015 GHIAL vs. UOI & other Details As AERA has not taken any decision on the order issued by the Central Govt. U/s 42, GHIAL filed this Writ Petition seeking restoration of UDF. Status: The HC has granted an interim relief and permitted GHIAL to collect UDF as was being collected prior to AERA’s Order and consequent to AIC issued by DGCA, GHIAL started collecting the UDF w.e.f. 06th Nov 2015.” MYTP Submissions for the 2nd Control Period 1.8. For the 2nd Control Period, HIAL submitted its Multi-Year Tariff Proposal (MYTP) on shared till basis. HIAL submitted an initial MYTP on 25.03.2016 which requested a YPP of Rs. 924.47 per passenger. HIAL further submitted a revised MYTP proposal dated 5.12.2016 and subsequently updated its tariff financial model which was submitted on 28.01.2017 (where it updated with HIAL’s audited financial results for FY 2015-16). This resulted in changes to HIAL’s YPP to
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