Modernizing airports:Unnecessary costs to be borne by the tax-payers
In an expert call for an investigation, many things were revealed which might be detrimental for the ailing aviation industry. During the era of cheap flights, the demand was more and the industry was doing well. However post-recession demands went down as the companies started cost cutting measures and reduced travel for their executives and the retail flyers reduced their number of vacations and trips.
Now the builders are unnecessarily adding to the cost of the airports by using expensive fittings, using Italian instead of cheaper Rajasthani marble etc. and passing on the cost to the airlines, passengers and airports. Over the last decade, India has pumped nearly $10 billion into modernizing airports, including those at Delhi, Mumbai, Bangalore, Hyderabad, Kolkata and Chennai, besides 35 non-metro airports.
Now, the Airports Economic Regulatory Authority (Aera) has for the first time used the term “gold-plating” in its latest paper on economic regulation of airports. Gold plating is defined as any measure taken in a business to incorporate unnecessary and expensive features or embellishments into something that pushes up the cost of a project.
Airport operators are guaranteed a fair rate of return on their investments, which means that their returns will rise if the project cost is higher. The policies that govern the modernization of airports are flawed.
The airport operator also becomes eligible for availing viability-gap funding, a grant provided to support infrastructure projects that are economically justified but fall short of finances, from the government if the cost of building or upgrading an airport is high.However all these measures only put more pressure on the consumer as the fares go up and the government has to pay for unnecessary expenses which is again the tax payers money going down the drain.
Source- Mint
35 non metro airports, Airports Economic Regulatory Authority (AERA), Airports Economic Regulatory Authority’s, aviation
