User Fees,Airport Charges Make Flying A Costly Affair
EXPECTATIONS of air travellers that privatisation of Indian airports will bring in efficiency and make air travel cheaper seem to be completely misplaced. User fees and recovery of infrastructure charges by concessionaires on fuel, baggage handling will be passed on to passengers, thereby increasing the cost of air travel. After the muchdiscussed user development fee of Rs 675 that every passenger using the new Bangalore airport will have to pay, the GMR group-promoted Hyderabad airport has written to oil companies saying it will impose throughput charges of Rs 2,170 per KL of aviation fuel.
Oil companies have confirmed that they will pass on the cost to airlines. Airline executives said they would resist any increase in costs because margins in the business are already wafer-thin. The Federation of Airlines plans to take up the issue with the ministry of civil aviation. However, if they were forced to pay the charges, airline sources said they would have to pass them finally on to passengers. Incidentally, airlines are already fighting with airports on a similar increase in ground handling charges. Domestic airlines already collect Rs 1,600 as fuel surcharge on every ticket. This charge has been kept constant even though fuel prices have declined in January.
The confusion on how much to charge on each of these counts is compounded because of the lack of an airport regulator to decide on the issue. The proposed AERA (Airport Economic Regulatory Authority) Bill is slated to be presented in Parliament in the Budget session. The two new airports in Hyderabad and Bangalore will, however, be open for business in March.
The aviation fuel station at the Hyderabad airport, being built by GHIAL, owes its existence to an open access policy that allows every eligible oil company to market fuel. Throughput charges cause heartburn
ALMOST all oil refining companies, including RIL, MRPL and Essar Oil, had expressed interest in operating at this airport. But the higher throughput charges have come as a shock, said one private refiner who did not wish to be identified. GMR Group spokesman clarified: “No final decision has been taken on the fuel pricing yet.’’ However, the e-mail sent to the oil companies and available with ET details the proposed charges. The communication states that GHIAL plans an ‘infrastructure recovery charge’ of Rs 1,500/KL and throughput fee of Rs 670/KL. A service tax of 12.3% will be extra. The new airport is scheduled to be opened on March 16.
There is no information yet from the other private airport, which is being constructed by Siemens-led consortium in Bangalore. The BIAL airport spokesperson said the charges are still being worked out. However, oil companies maintained that a similar increase could be on the cards. A consortium of oil PSUs — Indian Oil and Indian Oil Tanking — is putting up aviation fuel facilities at this airport and they will be recovering the charges subsequently.
“Worldwide, throughput charges are imposed by airport authorities to recover the capital expenditure of setting up the infrastructure over a period of time. But at these high rates, GHIAL’s capital costs will be recovered in just 3-4 years. After that, it will be just pure profits to the airport owner,” said an airline company official.
While throughput charges at major airports are currently not very high, the tendering process for upgrading airports in Chennai and Kolkata had revealed that players were willing to pay up to Rs 1,200 per thousand litres of aviation fuel. However, the aviation industry appealed to the ministry against this method of deciding the throughput charges.
EXPECTATIONS of air travellers that privatisation of Indian airports will bring in efficiency and make air travel cheaper seem to be completely misplaced. User fees and recovery of infrastructure charges by concessionaires on fuel, baggage handling will be passed on to passengers, thereby increasing the cost of air travel. After the muchdiscussed user development fee of Rs 675 that every passenger using the new Bangalore airport will have to pay, the GMR group-promoted Hyderabad airport has written to oil companies saying it will impose throughput charges of Rs 2,170 per KL of aviation fuel.
Oil companies have confirmed that they will pass on the cost to airlines. Airline executives said they would resist any increase in costs because margins in the business are already wafer-thin. The Federation of Airlines plans to take up the issue with the ministry of civil aviation. However, if they were forced to pay the charges, airline sources said they would have to pass them finally on to passengers. Incidentally, airlines are already fighting with airports on a similar increase in ground handling charges. Domestic airlines already collect Rs 1,600 as fuel surcharge on every ticket. This charge has been kept constant even though fuel prices have declined in January.
The confusion on how much to charge on each of these counts is compounded because of the lack of an airport regulator to decide on the issue. The proposed AERA (Airport Economic Regulatory Authority) Bill is slated to be presented in Parliament in the Budget session. The two new airports in Hyderabad and Bangalore will, however, be open for business in March.
The aviation fuel station at the Hyderabad airport, being built by GHIAL, owes its existence to an open access policy that allows every eligible oil company to market fuel. Throughput charges cause heartburn
ALMOST all oil refining companies, including RIL, MRPL and Essar Oil, had expressed interest in operating at this airport. But the higher throughput charges have come as a shock, said one private refiner who did not wish to be identified. GMR Group spokesman clarified: “No final decision has been taken on the fuel pricing yet.’’ However, the e-mail sent to the oil companies and available with ET details the proposed charges. The communication states that GHIAL plans an ‘infrastructure recovery charge’ of Rs 1,500/KL and throughput fee of Rs 670/KL. A service tax of 12.3% will be extra. The new airport is scheduled to be opened on March 16.
There is no information yet from the other private airport, which is being constructed by Siemens-led consortium in Bangalore. The BIAL airport spokesperson said the charges are still being worked out. However, oil companies maintained that a similar increase could be on the cards. A consortium of oil PSUs — Indian Oil and Indian Oil Tanking — is putting up aviation fuel facilities at this airport and they will be recovering the charges subsequently.
“Worldwide, throughput charges are imposed by airport authorities to recover the capital expenditure of setting up the infrastructure over a period of time. But at these high rates, GHIAL’s capital costs will be recovered in just 3-4 years. After that, it will be just pure profits to the airport owner,” said an airline company official.
While throughput charges at major airports are currently not very high, the tendering process for upgrading airports in Chennai and Kolkata had revealed that players were willing to pay up to Rs 1,200 per thousand litres of aviation fuel. However, the aviation industry appealed to the ministry against this method of deciding the throughput charges.
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