Delhi airport cost overrun likely to get nod

The Airports Economic Regulatory Authority, which regulates rates for all  major airports, is likely to approve the cost escalation in building Delhi airport's Terminal-3.

If so, Delhi International Airport Ltd will be able to impose an airport development fee for another three and a half years or till the end of 2015.

Under the current order, based on an earlier estimation of the investment required for the airport, the government had given permission to impose ADF up to March 2012 (or three years).

ADF is meant to fill the gap between actual investment and the earlier estimate. The fee is levied on all customers who fly out from the airport. 

"Even as both the auditors have said the terminal building was over-engineered, they have not quantified the cost escalation. The money has been invested and the terminal is built.

"So, since the developer has made the investment, the escalation has to be approved and ADF adjusted," said a senior AERA official, who did not want to be identified.

To ascertain the reason behind escalation, AERA had tasked public sector Engineers India Ltd and global accounting advisory firm KPMG to audit it.

The audit report had said that the airport developer had built 80,000 sq metres more than the 470,000 sq metres it was supposed to build under the master plan approved for the  building by the government.

The report also noted the cost estimate had included Rs 350 crore (Rs 3.5 billion) for a new air traffic control tower, which DIAL has yet to build.

The estimated cost for building T-3 went up from Rs 8,975 crore (Rs 89.75 billion) to Rs 12,700 crore (Rs 127 billion) during the 37 months it took. In March 2009, the operator was allowed by the civil aviation ministry to collect an ADF for 36 months, to recover an estimated Rs 1,827 crore (Rs 18.27 billion).

The ministry had termed it a viability gap funding.

A spokesperson of GMR, the group which runs DIAL, said they'd asked the airport regulator to increase the ADF collection period till 2015-end.

"We have not asked for any increase in the ADF amount being collected but want it to be extended by three and a half years from March 2012," said the spokesperson.

Each domestic passenger flying out of Delhi is being charged Rs 200 and international passengers Rs 1,300. Of the 70,000 passengers Delhi airport caters to in a day, around half are departures.

Delhi airport has been upgraded and is being maintained by DIAL, a joint venture led by the Bengaluru-headquartered GMR Group and also comprising state-owned Airports Authority of India, Germany's Fraport and Malaysian Airport Holdings.

It built T-3, with an annual capacity of handling 34 million people, with cost escalation of Rs 3,725 crore (Rs 37.25 billion).

T-3 is the eighth largest terminal in the world and it has increased the total annual capacity of Delhi airport to 60 million.