The Government has approved the levy of Development Fee (DF) by the Delhi International Airport Limited (DIAL) @ Rs.1300/- per departing international passenger and @ Rs.200/- per departing domestic passenger with effect from 1 March, 2009. The DF which is being levied purely on an adhoc basis, is inclusive of all applicable taxes and is for a period of 36 months only.
This approval shall be reviewed specifically upon the following milestones:
- DIAL will submit final project cost estimates within 6 months of the commencement of the levy of DF, i.e. latest by 31 August, 2009. The project cost so submitted, including amount of contingencies, and their utilization shall be audited by an independent technical auditor to be appointed by Airport Authority of India (AAI) or as the Regulator / Government may decide.
- DIAL will undertake a review of the bidding process in respect of the hospitality district. They may approach the Government with the outcome of the review within 6 months of the commencement of the levy, i.e. latest by 31 August, 2009.
The approval is subject to the following conditions:-
- The final determination of levy may be made by the Government/Regulator upon compliance of the above two milestones.
- Following procedure monitoring mechanism shall be followed:
- DF receipts would be deposited in a separate Escrow Account. Modalities of the Escrow Account may be decided by DIAL, with the approval of the AAI, atleast one week before the commencement of levy.
- AAI and the Central Government would have supervening powers in respect of Escrow Account to ensure that all receipts are properly accounted for and are utilized only for permitted purposes. These powers may include stoppage of withdrawal by DIAL.
- Presently, other capital receipts like equity and debt funds are channelized through another Escrow Account of DIAL as per OMDA requirements. The Independent Auditor appointed by AAI, presently verifies only the revenue as defined in Article 1.1. of OMDA and not the receipts of capital nature and utilization thereof. As a condition of this approval, DIAL would be required to subject such capital receipts and expenditure also to AAI supervision.
- All accounting and auditing practices, as would have been applicable to AAI, will be applicable to DF receipts and expenditure by DIAL. The modalities in this respect should be worked out between AAI and DIAL, atleast one week before the commencement of levy.
- The compliance in respect of the above issues will be furnished by AAI and DIAL to the Central Government on event basis as well as on a periodical monthly basis.
- It will be ensured that DF is utilized for the development of such “Aeronautical Assets” only, which are “Transfer Assets” in terms of OMDA.
- DIAL should report the collection and usage of DF on a monthly basis to Central Government / Regulator through AAI.
- The levy will be reviewed 6 months after commencement by the Regulator/Central Government and thereafter at such intervals as the Regulator/Central Government may decide.
- At the stage of final determination, Regulator/Central Government will ensure adequate consultation with the users.
- The amount collected through DF would not in any case exceed the ceiling of Rs.1827/- crores (NPV as on 1.3.2009). The ceiling amount would be exclusive of taxes, if any.
- The balance amount of Rs.1250 crores received as shareholders advance (i.e., Rs.1750 crores net of Rs.500 crores to be appropriated towards equity) would be retained by DIAL. Any escalations of cost would be met from the amount so retained. In case the cost escalation is less than the retained amount, the ceiling amount of Rs.1827 crores would be reduced by an amount which is equal to the difference between the retained amount of Rs.1250 crores and the amount representing project cost escalation beyond Rs.8975 crores.
- Rate and tenure of levy are premised upon the traffic projections and other estimates. In case due to actual figures being different than those estimated, the collections during levy period exceed the amount of Rs.1827 crores (NPV as on 1.3.2009) or any other amount which the Regulator/Central Government may determine, the excess amount so collected shall not be utilized, for any purpose whatsoever, without the prior approval of the Regulator/Central Government.
The Delhi International Airport Private Limited (DIAL) are undertaking modernization, development and upgradation of IGI Airport, New Delhi as per the approved Master Plan. DIAL had estimated that the Master Plan will be implemented at an estimated cost of Rs. 8975 crores. Requisite funds were to be raised through Rupee Term Loan, External Commercial Borrowings (ECB), Base Equity, Internal Accruals and Refundable Security Deposits (RSD) from Hospitality District (commercial property development). However, it has now been brought to the notice of the Central Government that DIAL are unable to raise Refundable Security Deposits to the extent anticipated and a substantial short fall is expected. It has also been stated that the lenders have not agreed to extend any further debt as the existing debt arrangement takes into account all possible revenue streams and have suggested that levy in the nature of capital receipts to leverage any additional debt. The shareholders have brought in shareholders’ advances to the extent of Rs. 1250 crores and are not in a position to take additional equity exposure beyond Rs. 1200 crores. Further, the present declining air traffic scenario has adversely impacted the revenue streams of DIAL and the Debt Service Coverage Ratio (DSCR). Accordingly, DIAL have proposed a levy of DF under Section 22A of the AAI Act, 1994 @ Rs. 350/- per departing domestic passenger and @ Rs. 1000 per departing international passenger for a period of 39 months.
The proposal of DIAL was examined by the Ministry of Civil Aviation in consultation with the Ministry of Law and Airports Authority of India. The Government also engaged M/s KPMG Advisory Services Pvt. Ltd. to undertake diligence and verification of the proposal submitted by DIAL. Government has been advised that DIAL can levy DF under Section 22A read with Section 12A of the AAI Act for the purposes mentioned in clause (a) of Section 22A. Further, the completion of project by March 2010, i.e., in time for Common Wealth Games 2010 was of utmost importance. Keeping in view the position that all other funding options appeared to have been exhausted, there was no option but to levy a pre-funding charge as contemplated under Section 22A so as to ensure timely completion of the project. Such pre-funding charges are accepted by ICAO subject to compliance with laid down guidelines/principles.
The Central Government have, accordingly, approved the levy of DF by DIAL @ Rs. 1300 per departing international passenger and @ Rs. 200 per departing domestic passenger w.e.f. 1.03.2009 for a period of 36 months, inclusive of all applicable taxes, purely on an ad-hoc basis, to fund an estimated short fall of Rs. 1827 crores. This approval is subject to review after 6 months when DIAL is expected to furnish the final project cost, which will be audited by an Independent Technical Auditor. DIAL have also been advised to review the bidding process of the Hospitality District to explore the possibility of raising further resources therefrom. A detailed accounting/monitoring mechanism is required to be put in place, inter-alia, including deposit of all DF receipts in a separate Escrow Account where AAI and the Central Government will have supervening powers; the account will be maintained as per accounting and audit procedures followed by AAI etc. AAI will play a critical role in the monitoring of levy and usage of DF and keep the Ministry apprised. The DF receipts shall be utilized only for construction of such “aeronautical assets” as are required to be “transferred” to AAI by DIAL upon expiry of the lease of IGI airport. The shareholders advances amounting to Rs. 1250 crores shall be retained in the project to fund expected increase in project costs.
Source : Press Information Bureau, Government of India