Snag Hits Hyderabad Intl Airport Project

February 10, 2004

Snag Hits Hyderabad Intl Airport Project  
Financial Express, India 

 
NEW DELHI, FEB 10:  The Rs 2,883-crore Hyderabad
International Airport project has hit an airpocket
after the recent government decision to abolish Inland
Air Travel Tax (IATT) and Foreign Travel Tax (FTT). 
 
“The abolishion of IATT and FTT can severely hamper
the viability of greenfield airports and chances of
their achieving financial closure, as one of the main
revenue sources of these airports are clipped,” an
advisor to the Hyderabad International Airport Ltd
(HIAL) said. The concession agreement bet-ween Centre
and HIAL is likely to be signed by March end. 

Speaking to FE from Hyderabad, he said: “The viability
of the project was worked on the understanding that
the new greenfield airport was exempted from IATT and
FTT and an equivalent of the same was to be charged by
the airport as a user fee. While the government
decision has dried two of our major revenue sources,
it has not suggested an alternative.” 

The viability of the project was calculated in the
light of Budget (2002-03) announcement which had
offered “a package of concessions” to private
investments in the development of green field
airports. The Budget had exempted the project “from
levy of IATT and FTT on departing passengers for
projects located in states that charge sales tax on
aviation turbine fuel (ATF) at central sales tax (CST)
rate.” 

The Budget also allowed greenfield airports to “levy
an user development fee (UDF) at the new airport.” The
HIAL, however, said: “If greenfield airports lavy a
UDF, they will become expensive for users compared to
other airports, denting the competitive capacity of
these airports.” The Budget also announced financial
assistance in terms of equity participation by
Airports Authority of India (AAI) in such projects.
HIAL is a joint venture between a consortium led by
GMR Infrastructure Limited and Malaysia Airports
Holding Berhard (Malaysia) with equity participation
of AAI and Andhra government. Tata Economic
Consultancy Ser-vices Limited and Speedwing, UK, (part
of the British Airways) are the project consultants
who have preapered the detailed feasibility study
report. 

An Andhra Pradesh government source said: “The state
government has already requested the central
government to formulate a greenfield airport policy
for extending incentives and concessions to the
private sector developers. The contractual issues are
currently being finalised.” 

Giving breakup of revenue earned per ticket after
abolition of IATT and FTT, a HIAL source said, “On the
basic fares of Rs 6,235 (executive class) and Rs 4,022
(economy class) in Hyderabad-Mumbai sector, the
airport will be able to earn a mere 2 per cent on an
executive class ticket and 3 per cent on economy
class. 

The first phase of Hyderabad airport project is likely
to be completed by 2010 with an investment of Rs 1,318
crore. Phase II (Rs 368 crore), Phase III (Rs 830
crore) and Phase IV (Rs 367 crore) are slated to be
completed by 2015, 2035 and 2050, respectively. 
 

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