The Central Government has approved the levy of Development Fee (DF) by Mumbai International Airport Ltd. (MIAL) at the Chatrapati Shivaji International Airport, Mumbai. The DF will be Rs100 per departing domestic passenger and Rs600 per departing international passenger, inclusive of all applicable taxes. The levy is intended to cover a perceived shortfall in funding resources for the implementation of the revised Master Plan of the development of the CSI Airport in Mumbai.
The ministry of civil aviation said the levy will be purely on an 'ad-hoc' basis, for a period of 48 months and will come into effect from 1 April 2009.
The ministry also said that the final determination of the levy would be made by the government/regulator post a detailed review six months after it comes into effect.
The receipts from the levy would be deposited into a separate escrow account.
The amount collected through DF would under no circumstances exceed the ceiling of Rs1543 crore, which is the perceived shortfall in raising resources for the modernization of the airport. The ministry has also stipulated that in case of any cost escalation beyond Rs9802 crore, the amount representing the escalation would have to be brought in by MIAL through other sources.
The ceiling amount would be exclusive of taxes, if any.
The Mumbai International Airport Limited (MIAL) is undertaking modernization, development and upgradation of the CSI Airport, Mumbai. In this regard, MIAL had prepared a Master Plan, and in October 2006 and tied up requisite resources of Rs5826 crore.
However, the increasing needs of the Mumbai Metropolitan region, which entailed the creation of adequate terminal and airside capacity, the Master Plan was revised in November 2007. The revised Master Plan is now being implemented at an estimated cost of Rs.9802 crore.
Requisite funds were to be raised through Rupee Term Loan, Base Equity, Internal Accruals and Refundable Security Deposits (RSD) from real estate development. However, it has now been brought to the notice of the Central Government that MIAL will not be able to raise RSD to the extent anticipated and a substantial short fall is expected.
Similarly, the internal accruals are expected to be substantially impacted, mainly due to current economic downturn.
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 indicated that any delay in tying up of envisaged shortfall would constrain the lenders from releasing further disbursements from already approved debt.
The shareholders have committed to contribute Rs1200 crore as equity as against the original commitment of Rs626 crore and are not in a position to take additional equity exposure beyond Rs1200 crore. In these circumstances, under Section 22A of the AAI Act, 1994, MIAL had proposed a levy of DF - Rs375 per departing domestic passenger and Rs1000 per departing international passenger.
MIAL's proposal was examined in consultation with Airports Authority of India. The Government also engaged KPMG Advisory Services Pvt. Ltd. to undertake diligence and verification of the proposal submitted by MIAL.
The Central Government has, accordingly, approved the levy of DF by MIAL purely on an ad-hoc basis to fund an estimated short fall of Rs1543 crore.