Delhi Airport tariff hike to impact private-sector's role in infrastructure projects
06 March 2012
The Indian airport regulator's decision on a tariff-increase, proposed by the operator of Delhi's international airport, is likely to influence infrastructure projects in the country,
In a report published today, The Delhi Airport Project: A Case Study Of What Hinders Private Participation In India's Infrastructure Development, ratings agency Standard & Poor's Ratings Services said the decision is likely to affect private-sector participation in regulated capital-intensive projects in India.
Standard & Poor's credit analyst Rajiv Vishwanathan said, "The potential large increase in tariffs at Delhi airport emphasises the need for a detailed public-private participation policy and planning at all levels of the government."
"Standardisation of procurement processes; transparency in bidding; proper risk allocation among the different parties in a project; and adequate project preparation and feasibility studies are factors that make infrastructure projects more viable," Vishwanathan said, adding, "Having these factors can go a long way toward building confidence in a project and attracting private funding."
The report explains the need for higher tariffs at Delhi airport and the impact of such an increase on airlines and passengers that use the airport. It also highlights the effect of tariff-adjustment delays on the project sponsor. Private sector participants will be keenly watching the outcome, transparency, and timeframe of the regulatory process at Delhi airport.
"In our view, higher tariffs could negatively affect the credit quality and resilience of some low-cost airlines operating out of Delhi," Vishwanathan said.
"Large international full-service airlines may reduce the number of flights to the city, but we don't expect them to cease operations to Delhi or move their hubs to lower-cost airports," he concludes.