Professional Documents
Culture Documents
Annexure II
Table of contents
1
Approach .......................................................................................... 4
1.2
2.2
2.3
2.4
Assumptions .......................................................................................... 11
3.1
3.2
3.3
3.4
3.5
Traffic ............................................................................................ 12
3.6
3.6.1
3.6.2
3.7
Revenue .......................................................................................... 13
3.7.1
Regulated charges......................................................................... 13
3.7.2
3.8
3.8.1
3.8.2
3.8.3
3.8.4
3.8.5
Utilities ..................................................................................... 14
3.8.6
Insurance ................................................................................... 14
3.8.7
3.8.8
3.8.9
3.9
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List of Annexure
Annexure
Annexure
Annexure
Annexure
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Annexure II
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Annexure II
2 Financial statements
2.1 Financials Aggregated
Table 2-1: Profit and Loss Account (INR million)
Particulars
Revenue
Revenues from Regulated Services
Revenues from other than Regulated Services
Operation and Maintenance expenditure
Personnel
Operations & Maintenance
Concession Fee
Lease Rent
Utilities
Insurance
Mark eting, Advt. and others
OMSA Fee
General Administration Costs
Earnings before depreciation, interest and taxation (EBDIT)
Depreciation and Amortisation
Earnings before interest and taxation (EBIT)
Total interest and finance charges
Profit/loss before tax
Other income
Provision for taxation
Profit /(loss) after taxation
Balance Carried to Balance Sheet
2009-10
Actuals
2010-11
2011-12
2012-13
2013-14
2014-15
Forecasts
2015-16
2016-17
2017-18
2018-19
2019-20
2020-21
3,669
977
4,198
1,197
7,942
2,438
9,531
2,720
11,263
2,982
13,331
3,295
15,701
3,645
25,541
4,034
29,879
4,700
34,892
5,249
39,730
5,834
45,105
6,363
(583)
(297)
(204)
(64)
(200)
(28)
(59)
(110)
(132)
2,968
(1,338)
1,630
(1,035)
596
187
(5)
777
777
(671)
(322)
(231)
(64)
(211)
(26)
(14)
(82)
(141)
3,634
(1,347)
2,288
(1,263)
1,024
301
(4)
1,321
1,321
(897)
(405)
(415)
(63)
(239)
(36)
(152)
(185)
(726)
7,261
(1,440)
5,821
(1,368)
4,453
95
(910)
3,638
3,638
(1,083)
(435)
(490)
(63)
(246)
(45)
(177)
(221)
(308)
9,184
(1,863)
7,321
(1,379)
5,942
108
(1,210)
4,840
4,840
(1,414)
(702)
(570)
(63)
(266)
(46)
(203)
(243)
(339)
10,399
(2,239)
8,160
(3,261)
4,899
79
(996)
3,983
3,983
(1,679)
(729)
(665)
(63)
(273)
(61)
(234)
(282)
(373)
12,267
(2,821)
9,446
(2,867)
6,579
163
(1,348)
5,393
5,393
(2,211)
(1,192)
(774)
(118)
(280)
(65)
(269)
(313)
(410)
13,714
(3,639)
10,075
(2,474)
7,601
125
(1,545)
6,181
6,181
(2,381)
(1,249)
(1,183)
(130)
(300)
(103)
(380)
(502)
(431)
22,916
(5,465)
17,451
(8,680)
8,770
30
(1,760)
7,040
7,040
(3,294)
(2,421)
(1,383)
(134)
(440)
(107)
(439)
(553)
(453)
25,354
(7,103)
18,251
(7,839)
10,412
101
(2,103)
8,411
8,411
(3,524)
(2,501)
(1,606)
(138)
(440)
(112)
(506)
(653)
(475)
30,188
(6,685)
23,503
(11,218)
12,285
67
(2,470)
9,881
9,881
(3,771)
(2,582)
(1,823)
(142)
(440)
(115)
(569)
(750)
(497)
34,874
(6,816)
28,058
(10,447)
17,611
323
(3,587)
14,348
14,348
(4,037)
(2,666)
(2,059)
(147)
(452)
(119)
(639)
(856)
(521)
39,973
(6,988)
32,985
(10,919)
22,066
586
(4,530)
18,122
18,122
Note:
1.
2.
Results of FY1 2009-10 and FY2010-11 represents actual results while other years represents forecasted values
Expenses and losses are depicted with negative and shown in brackets
1 Financial Year (FY) refers to year starting from April 1 and ending on 31st March
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2009-10
Actuals
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
Forecasts
2016-17
2017-18
2018-19
2019-20
2020-21
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
(1,511)
777
(733)
(733)
1,321
588
588
3,638
4,226
4,226
4,840
9,066
9,066
3,983
13,049
13,049
5,393
18,442
18,442
6,181
24,623
24,623
7,040
31,663
31,663
8,411
40,074
40,074
9,881
49,955
49,955
14,348
64,303
64,303
18,122
82,424
13,816
3,335
20,264
12,857
3,335
20,626
16,751
3,335
28,158
25,971
3,335
42,218
36,662
3,335
56,891
53,029
3,335
78,652
65,873
3,335
97,678
87,278
3,335
126,122
84,489
3,335
131,744
83,350
3,002
356
140,508
79,270
2,668
994
151,081
74,868
2,335
1,692
165,165
19,744
(2,485)
17,259
135
19,874
(3,832)
16,042
880
22,282
(5,271)
17,010
8,451
38,348
(7,134)
31,214
6,685
40,060
(9,373)
30,687
23,385
69,940
(12,194)
57,746
22,424
75,151
(15,834)
59,317
39,517
148,923
(21,299)
127,624
-
152,401
(28,401)
124,000
-
157,583
(35,086)
122,497
-
159,824
(41,902)
117,922
-
162,448
(48,890)
113,558
-
121
461
1,226
1,808
3,798
138
985
1,343
2,466
4,315
79
1,046
1,343
2,468
567
3,168
42
1,081
1,343
2,466
562
6,519
75
1,259
1,343
2,676
994
5,003
78
1,469
1,343
2,890
962
1,182
138
1,710
1,343
3,190
927
4,060
296
3,117
1,343
4,756
2,192
12,929
303
3,619
1,343
5,264
2,479
23,438
313
4,104
1,343
5,760
2,402
37,820
318
4,634
1,343
6,294
2,613
55,194
2,735
2,870
20,264
3,077
3,704
20,626
3,506
2,697
28,158
5,228
4,319
42,218
5,853
2,820
56,891
6,551
(1,518)
78,652
9,334
(1,157)
97,678
12,132
7,744
131,744
13,170
18,011
140,508
12,823
33,159
151,081
12,495
51,607
165,165
148
2,666
1,343
4,157
2,229
2,670
10,559
(1,502)
126,122
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Actuals
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
Forecasts
2015-16
2016-17
2017-18
2018-19
2019-20
2020-21
777
1,321
3,638
4,840
3,983
5,393
6,181
7,040
8,411
9,881
14,348
18,122
1,338
2,115
1,347
2,668
1,440
5,078
1,863
6,703
2,239
6,222
2,821
8,214
3,639
9,820
5,465
12,505
7,103
15,514
6,685
16,566
6,816
21,164
6,988
25,110
324
212
536
2,651
(658)
341
(317)
2,351
(3)
429
(567)
(140)
4,938
2
1,721
4
1,728
8,431
(210)
626
(431)
(16)
6,206
(214)
697
32
516
8,730
(301)
2,783
35
2,517
12,338
(967)
1,224
(1,302)
(1,044)
11,461
(599)
1,573
37
1,012
16,525
(508)
1,038
(287)
356
598
17,164
(496)
(347)
77
638
(127)
21,037
(535)
(328)
(211)
698
(376)
24,733
(236)
(236)
(875)
(875)
(9,979)
(9,979)
(14,301)
(14,301)
(18,412)
(18,412)
(28,919)
(28,919)
(22,304)
(22,304)
(34,255)
(34,255)
(3,478)
(3,478)
(5,182)
(5,182)
(2,241)
(2,241)
(2,624)
(2,624)
(304)
30
(274)
2,141
1,657
3,798
(959)
(959)
518
3,798
4,315
3,893
3,893
(1,147)
4,315
3,168
9,220
9,220
3,351
3,168
6,519
10,690
10,690
(1,515)
6,519
5,003
16,367
16,367
(3,822)
5,003
1,182
12,845
12,845
2,878
1,182
4,060
21,404
21,404
(1,390)
4,060
2,670
(2,789)
(2,789)
10,258
2,670
12,929
(1,139)
(334)
(1,472)
10,510
12,929
23,438
(4,080)
(334)
(4,414)
14,382
23,438
37,820
(4,402)
(334)
(4,735)
17,374
37,820
55,194
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Particulars
Revenue
Aero revenues
Operation and maintenance expenditure
Personnel
Operations & Maintenance
Concession Fee
Lease Rent
Utilities
Insurance
Mark eting, Advt.,and others
OMSA Fee
General Administration Costs
Earnings before depreciation, interest and taxation (EBDIT)
Depreciation and Amortisation
Earnings before interest and taxation (EBIT)
Total interest and finance charges
Profit/loss before tax
Other income
Provision for taxation
Profit /(loss) after taxation
Balance Carried to Balance Sheet
Actuals
2009-10 2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
Forecast
2016-17
2017-18
2018-19
2019-20
2020-21
3,669
4,198
7,942
9,531
11,263
13,331
15,701
25,541
29,879
34,892
39,730
45,105
(467)
(252)
(147)
(49)
(150)
(21)
(50)
(110)
(112)
2,309
(1,070)
1,239
(828)
411
(5)
406
406
(538)
(274)
(168)
(49)
(158)
(20)
(12)
(82)
(120)
2,779
(1,077)
1,702
(1,011)
691
(4)
687
687
(720)
(322)
(318)
(49)
(179)
(27)
(120)
(148)
(618)
5,441
(1,147)
4,294
(1,152)
3,143
76
(644)
2,575
2,575
(868)
(332)
(381)
(49)
(184)
(33)
(141)
(178)
(262)
7,101
(1,512)
5,589
(1,083)
4,506
86
(919)
3,674
3,674
(1,134)
(551)
(451)
(49)
(199)
(34)
(164)
(198)
(288)
8,195
(1,813)
6,382
(2,780)
3,602
63
(733)
2,932
2,932
(1,346)
(573)
(533)
(49)
(205)
(46)
(191)
(233)
(317)
9,839
(2,295)
7,544
(2,282)
5,262
130
(1,078)
4,314
4,314
(1,773)
(1,031)
(628)
(90)
(210)
(49)
(221)
(260)
(349)
11,091
(3,237)
7,854
(1,843)
6,010
100
(1,222)
4,888
4,888
(1,909)
(1,083)
(1,022)
(100)
(225)
(77)
(327)
(442)
(367)
19,990
(4,871)
15,119
(7,988)
7,131
24
(1,431)
5,724
5,724
(2,642)
(2,101)
(1,195)
(103)
(330)
(80)
(378)
(488)
(385)
22,177
(6,242)
15,935
(6,234)
9,700
81
(1,956)
7,825
7,825
(2,826)
(2,170)
(1,396)
(106)
(330)
(84)
(437)
(579)
(403)
26,561
(5,875)
20,686
(9,521)
11,165
53
(2,244)
8,975
8,975
(3,024)
(2,240)
(1,589)
(109)
(330)
(86)
(494)
(666)
(422)
30,768
(5,993)
24,774
(8,795)
15,979
259
(3,248)
12,990
12,990
(3,238)
(2,313)
(1,804)
(113)
(339)
(89)
(556)
(763)
(443)
35,447
(6,142)
29,304
(9,351)
19,953
469
(4,084)
16,338
16,338
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Particulars
Revenue
Non Aero revenues
Operation and Maintenance expenditure
Personnel
Operations & Maintenance
Concession Fee
Lease Rent
Utilities
Insurance
Mark eting, Advt.,and others
OMSA Fee
General Administration Costs
Earnings before depreciation, interest and taxation (EBDIT)
Depreciation and Amortisation
Earnings before interest and taxation (EBIT)
Total interest and finance charges
Profit/loss before tax
Other income
Provision for taxation
Profit /(loss) after taxation
Balance Carried to Balance Sheet
Actuals
2009-10 2010-11
977
(115)
(45)
(58)
(15)
(50)
(7)
(9)
(20)
659
(268)
392
(207)
185
187
371
371
1,197
(133)
(48)
(64)
(15)
(53)
(7)
(2)
(21)
855
(269)
586
(253)
333
301
634
634
2011-12
2012-13
2013-14
2014-15
2015-16
Forecast
2016-17
2017-18
2018-19
2019-20
2020-21
2,438
2,720
2,982
3,295
3,645
4,034
4,700
5,249
5,834
6,363
(178)
(82)
(98)
(15)
(60)
(9)
(32)
(37)
(109)
1,819
(293)
1,527
(216)
1,310
19
(266)
1,063
1,063
(214)
(103)
(109)
(15)
(61)
(11)
(35)
(42)
(46)
2,082
(350)
1,732
(296)
1,436
22
(291)
1,166
1,166
(280)
(151)
(119)
(15)
(66)
(11)
(39)
(45)
(51)
2,204
(426)
1,778
(481)
1,297
16
(263)
1,050
1,050
(333)
(156)
(132)
(15)
(68)
(15)
(43)
(50)
(56)
2,428
(526)
1,902
(585)
1,317
33
(270)
1,079
1,079
(438)
(161)
(146)
(27)
(70)
(16)
(48)
(54)
(62)
2,624
(402)
2,222
(630)
1,591
25
(323)
1,293
1,293
(472)
(166)
(161)
(30)
(75)
(26)
(53)
(60)
(65)
2,926
(594)
2,332
(693)
1,639
6
(329)
1,316
1,316
(653)
(320)
(188)
(31)
(110)
(27)
(61)
(65)
(68)
3,177
(861)
2,317
(1,605)
712
20
(146)
586
586
(698)
(331)
(210)
(32)
(110)
(28)
(68)
(74)
(71)
3,627
(810)
2,817
(1,697)
1,120
13
(227)
906
906
(747)
(342)
(233)
(33)
(110)
(29)
(75)
(84)
(75)
4,107
(823)
3,284
(1,652)
1,632
65
(339)
1,357
1,357
(800)
(353)
(255)
(34)
(113)
(30)
(82)
(92)
(78)
4,527
(846)
3,681
(1,568)
2,113
117
(446)
1,784
1,784
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Tariff Year 1 Tariff Year 2 Tariff Year 3 Tariff year 4 Tariff year 5
2011-12
2012-13
2013-14
2014-15
2015-16
11,196
7,509
9,045
12,506
16,989
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3 Assumptions
3.1 Bifurcation of Aero and Non-Aero assets and costs
The bifurcation of historical values of fixed assets and costs in Aero and Non-Aero is based on
the Auditors certificate issued after conducting agreed upon procedures. A copy of the
certificate is attached in Annexure 1. On the same basis, the projected fixed assets and costs
are bifurcated to estimate the future Aero and Non-Aero Assets.
The Aeronautical Assets, Non-Aeronautical Assets, Aeronautical Services and Non-Aeronautical
Services are as defined under Clause 1.1 and Clause 1.2 of the Annexure 1.
Historical fixed assets have been taken as per the books of accounts and records.
The RAB is based on capital expenditure estimates as per the Revised Master Plan.
Further details are provided under Annexure 2.
Depreciation has been considered as per the rates prescribed in the Companies Act,
1956. The financial statements have been prepared following Straight Line Method
(SLM) of depreciation.
The capital expenditure has been indexed based on Whole Price Index (WPI) of 2.7% on
year on year basis.
The WPI figures are derived based on the forecasted Producer Price Index (PPI) values
as provided by analysts projections.
The forecasted Consumer Price Index (CPI) values for the Control Period are
considered on the basis of analysts projections.
The forecasted values for the first Control Period are shown in table below:
Year
WPI
PPI
CPI
2011-12
7.7%
7.2%
6.8%
2012-13
7.6%
7.1%
6.5%
2013-14
6.2%
5.6%
6.0%
2014-15
6.0%
5.4%
5.7%
2015-16
5.8%
5.2%
5.5%
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3.5 Traffic
The traffic forecasts used in the financial statements are based on the report submitted by
M/s Landrum and Brown (L&B) in August 2010. The report provides annual forecasts of
passenger traffic, air cargo tonnage, and aircraft movements for the twenty year period of
2009-10 to 2029-30. The report presented growth under various scenarios; Master Planning
Traffic Forecast is taken as most likely scenario and included in the financial forecasts. The
report is attached as Annexure 3 for reference purpose.
The report was prepared considering base year of 2009-10. For projecting the aviation activity
at the airport, the estimated traffic figures of the 2009-10 and 2010-11 have been replaced by
the actual traffic figures of 2009-10 and 2010-11 respectively. Thereafter, the base traffic
numbers are increased at the rates estimated in the L&B report taking base of 2010-11.
Other key assumptions for traffic estimates are as under:
Domestic arrival to departure ratio is assumed at 50:50 for the first Control Period. In
case of international passengers, the arrival to departure ratio is 52:48 for the first
Control Period.
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3.7 Revenue
3.7.1 Regulated charges
The regulated revenues are increasing at a Compounded Annual Growth Rate (CAGR) of
18.58% over the first Control Period.
Landing charges: The landing charges for domestic and international aircrafts are
assumed at the rates prevailing in FY 2010-11 growing as per the growth rate of WPI
starting FY 2011-12 over the balance period of the first Control Period. The rise in the
landing revenues over the first Control Period is represented by a CAGR of 18.57%.
PSF (FC): Overall, the passenger service fee is assumed to grow at a CAGR of 18.57% in
the first Control Period.
UDF: The total revenue from UDF is expected to grow at a CAGR of 19.08% during the
first Control Period.
Parking charges: The parking revenue grows at a CAGR of 16.68% in the first Control
Period.
ATR2: INR 4,000 per landing per ATM has been considered.
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November 2012
Annexure II
Table of contents
1
Assumptions and drivers used for various Regulatory Building Blocks ..................... 9
3.1
3.2
3.3
3.4
3.5
3.6
Depreciation ..................................................................................... 21
3.7
Traffic ............................................................................................ 23
3.8
3.9
3.9.1
3.9.2
3.9.3
3.9.4
3.9.5
3.9.6
3.9.7
3.9.8
Insurance ................................................................................... 39
3.9.9
3.10
Taxation .......................................................................................... 39
3.11
3.12
3.13
4.2
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List of Annexures
Annexure 1: Cost of Equity report by KPMG
Annexure 2: Audited Financial Statements 2011-12
Annexure 3 Financial Model audit report
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AERA
AFL
AMC
AOD
AOCC
ARFF
ATC
BIAL
BOT
BHS
BRS
CA
Concession Agreement
CCTV
CUTE
CPI
CUSS
CPS
DG
Diesel Generator
DSCR
DSRA
E&E
EPC
ECB
FF
Fire Fighting
FOD
FAS
FROR
GOK
Government of Karnataka
HVAC
IATA
ICT
IT
Information Technology
ITES
KSIIDC
KSPCB
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LT
Light Tension
MCR
MOCA
MoEF
MOU
Memorandum of Understanding
MTBF
MYTP
NAR
NSPR
OFC
OMSA
PAPI
PBB
PIDS
PLC
PPI
PPP
PSF
RAB
RBB
RET
SSA
STP
TRA
T1
Terminal 1
T2
Terminal 2
TMRS
UDF
UPS
WPI
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Initial Shareholding pattern at the time of commencement of Airport and the present
shareholding pattern, is detailed as under:
Shareholder
Private Promoters:
1. Siemens Project Ventures GmbH
2. Flughafen Zurich AG Ltd.
3. L&T IDPL
4. GVK Group
Sub-Total
State Promoters:
1. Airport Authority of India (GoI)
2. Karnataka State Industrial Investment
Development Corporation Limited (GoK)
Sub-Total
TOTAL
40%
17%
17%
Nil
74%
26%
5%
Nil
43%
74%
13%
13%
13%
26%
100%
13%
26%
100%
&
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Plans, Means of Financing the Capital Expenditure and consequent changes in other
Regulatory Building Blocks (RBB). BIAL has carried out an assessment of these and the revised
MYTP is submitted herewith.
Total Stands
32
10
13
65
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In May 2010, BIAL had entered into a contract for construction of the additional stands. The
total investment estimated for the apron extension and related works is Rs.120 Crores. The
construction is proposed to be completed in phases by Q4 2012-13.
Out of the additional 24 Code C/10 Code E stands in the West Apron, 05 temporary stands
were operationalized on 30th Sept 2011 and 4 stands operationalized on 31st March 2012. The
remaining stands are likely to be handed over by Q4 2012-13.
Projects proposed to be executed
Basis
The company has also estimated the various Capital Expenditure Projects that need to be
executed to keep pace with the growth in Passenger, Cargo and ATM estimates, during the
first control period and has projected the costs to be incurred in line with the timing of the
Capital Expenditure. Airport development activities are projected based on the Jacobs
Consultancys Master Plan Update report dated August 2011, submitted earlier, which sets out
the vision for BIAL for the next 20 years and the strategy to translate the vision into facilities
development, necessitated based on the changes in demand, Economy and the aviation
Industry.
Methodology
The capital expenditure has been indexed based on Whole Price Index (WPI) of 2.7% on a year
on year basis. Financing Allowance as prescribed in Direction 5, at the cost of debt for the
year, has been estimated and considered for capitalization.
Depreciation has been computed on assets based on the defined depreciation rates. Average
RAB has been computed in line with the guidelines, for computing return on the same at Fair
Rate of Return (FRoR)
Overview of various Projects proposed
A brief overview of different Projects proposed to be executed during the first control period
is detailed below:
1. Terminal 1 (T1) expansion - Bangalore has experienced rapid growth in passenger volumes,
and will continue to realize significant growth over the 20-year planning period. In
2011/12, 12.7 million passengers (mppa) traveled through Bangalore, versus 1.8 million
annual passengers in 1995/96. The year-on-year growth for 2010 to 2011 represents an
annual growth rate of 9%, and CAGR of 14% per year for the past 15 years. International
traffic has been the fastest growing segment, increasing from a reported 1.2 percent of
total passengers in 1995/96 to nearly 20 percent currently. Growth has been particularly
robust since 2002/03, coinciding with ongoing deregulation of civil aviation in India, as
illustrated in Figure 1.1 below.
FIGURE 1.1
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International
12
Domestic
Passengers in mio
10
8
6
4
2
2011/12
2010/11
2009/10
2008/09
2007/08
2006/07
2005/06
2004/05
2003/04
2002/03
2001/02
2000/01
1999/00
1998/99
1997/98
1996/97
1995/96
Fiscal year
The expansion of the existing Terminal 1 has been designed to enhance the operational
performance in order to handle, inter-alia, the increase of passenger traffic from the
current 12.7 million passengers in 2011-12 upto approximately 17 20 million passengers
per annum, until the second terminal (T2) is planned to be operational.
BIAL commenced the next phase of development, which is the substantial expansion of
the existing T1. This expansion will cater to the expected growth of passengers, until the
second Terminal (T2) is planned to be operational, as illustrated in Figure 1.2. This is
based on the current projected forecast demand for the next 4 to 5 year period, which is
the estimated time period for planning, design and construction of the new T2.
FIGURE 1.2
Source: Landrum & Brown Traffic Report dated August 2010
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The terminal expansion program includes an extension by three grids (72m x 24m) on the east
and west sides of T1, East pier concourse, modifications to the existing T1, airside apron
expansion, ancillary facilities, and T1 kerb side and forecourt modifications.
The area of T1 is 73,627 sqm including the basement area, and is designed for IATA Level of
Service C. The existing layout provides a more or less balanced capacity for the domestic and
international processors of the different flows throughout the terminal building.
The design standards proposed would reflect the best industry practices and operating
standards. The facilities provided would also meet all relevant IATA standards. The total floor
area is planned to increase to approximately 150,556 sqm. Additional 7 Code C / 3 Code E and
1 Code F contact positions will be added improving the efficiency and level of service by
adding an East Pier to T1.
The Terminal 1 expansion Program includes minor improvements to the existing terminal
building, utility buildings and other related improvements to add capacity to meet the
forecasted demand. As there is a desire to expand the capacity of the overall operation
including airside, landside and terminal facilities, the improvements are divided to provide
further detail. The following are the proposed improvements:1)
2)
3)
4)
5)
6)
7)
BIAL conducted consultation processes on the following with the stakeholders including
airlines:
a.
b.
c.
d.
Master Plan aviation activity forecast for BIAL on 06th May 2010
T-1 expansion project on 06th August 2010
T-1 expansion airline sign-off on 15th July 2011 and
Smile Bengaluru Consumer campaign from Sept 27th 2010
The project started on 01st August 2011 and is expected to be completed in phases by
March/June 2013.
2. Runway 2 including Taxiway and Apron Phase 1 and Phase 2
Bangalore has experienced rapid growth in passenger volumes, and will continue to realize
significant growth over the 20-year planning period. In 2011/12, 12.7 million passengers
(mppa) traveled through Bangalore, versus 1.8 million annual passengers in 1995/96. The
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year-on-year growth for 2010 to 2011 represents an annual growth rate of 9%, and CAGR of
14% per year for the past 15 years. International traffic has been the fastest growing segment,
increasing from a reported 1.2 percent of total passengers in 1995/96 to nearly 20 percent
currently.
The continued robust growth in the local Bangalore and broader Indian economy are expected
to be the primary drivers of domestic air travel at Bangalore. Bangalore has a large
population base, a diverse and a high value-added economy from which to stimulate air
travel. It is assumed that the Bangalore economy will at a minimum mirror and potentially
exceed the economic growth of India as a whole, over the forecast period.
In order to predict the impact these drivers will have on aviation activity and for the Master
Plan update, a forecast update was developed by Landrum and Brown, Inc. for Bangalore in
2010. The Forecast provides the basis for establishing a long-term master plan and as such,
supports decisions related to the planning and implementation of capital and operational
improvements necessary to efficiently serve air transportation demand throughout the
planning period. The Forecast was developed through an evaluation and analysis of several
key areas such as:
Airline schedules
Indian aviation industry trends
GDP growth and econometric analysis
Comparable airport trends
Airport maturation considerations
Growth in low-fare market vs. network carriers
Master Plan
In order to meet the projected demand, a master plan has been developed to accommodate
55 mppa over the planning horizon and has been phased accordingly in line with demand. A
new runway, new terminal and associated airfield and apron works are proposed to cater to
the passenger demand. The Land Use Plan was presented to the airlines on 28 March 2011 to
keep them informed of the Plan which materialized following their input on the airports
forecast. The stakeholder briefing included discussion on the capacity challenges and
development strategy, new runway and associated airfield development, passenger terminals,
roadways and external connectivity and the airports overall land use plan.
Existing Runway and Capacity Constraints
The existing airfield consists of Runway 9-27, which is 4,000 meters long and 45 meters wide,
Taxiway A, which runs parallel to the full length of Runway 9-27, three rapid-exit taxiways
0
9
A6
K
Bangalore International Airport Limited (BIAL)
CP No. 14/2013-14- MYTP & ATP- BIAL-CP
A
H
A1
2
7
D
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(RETs), and one taxiway perpendicular to the runway. The existing airfield handles
approximately 26-28 aircraft movements per hour on typical busy weekdays and
approximately 32 movements per hour on special occasions. Taxiway A runs south of and
parallel to the existing runway along its entire length and provides the only means of
circulating between runway thresholds and the aircraft parking apron. An overview of the
existing layout of the Airport is provided in Figure below.
Existing Runway 09-27 Capacity
Physical and operational scenario
Hourly
Capacity*
36
45
170,000
46
172,000
136,000
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related facilities (with provisions for future expansion to 35 mppa in Phase 2), will be
required to be operational by 2017-18.
BIAL had invited Expression of Interest from experienced, internationally reputable
Architectural consultancy firms to provide Architectural and Engineering Design Consultancy
Services for Terminal 2 (T2) and associated works at the Airport.
Maintenance Capex Projects
Maintenance Capex Projects are required to be undertaken to ensure that the existing
facilities are maintained and are geared to be able to perform till the intended useful life.
Following are the key maintenance Capex costs projected:
The major maintenance capex investments in Control Period 1 are:a. Disabled aircraft removal equipment - Disabled aircraft removal is a specialized activity
for which specific resources are required to ensure safety and business continuity. As BIAL
has only one runway it is critical to have the capability to remove the disabled aircraft
from the movement area. There is only one basic kit available in Mumbai for the entire
south Asia, which again is not compatible for Code F category aircraft. The procured kit
can be made available for other airports in the region on cost sharing basis. Use of this
equipment by concerned airline at BIAL will also be on rent basis.
b. Integrated crisis center cum Haj terminal To improve and provide adequate facility to
take complete command-control, coordination- communication of disaster scenarios,
resulting in efficient management of contingency.
c. Airside infrastructure mainly airfield pavement, strengthening of perimeter
wall,
replacement of the runway, taxiway, approach, threshold, PAPI lamps at a time once in
three years with the past trend, replacement of polycarbonate facias of all the 70
signages after a period of 8 years, considering the upgradation from CAT I to CAT III in the
year 2017-18.It is planned for this upgradation after the NSPR comes into existence and a
stabilisation period of one year after installation of NSPR
d. Electrical and electronic system at the terminal mainly replacement of UPS batteries,
light fixtures, LT control panels, automatic doors etc
e. Software licenses and implementation mainly SAP and HR related
f. Extension of Kerbside of Terminal 1 for Passenger Services, Retail and F&B.
Following is the summary of key costs to be incurred for different projects in the First Control
period
S#
Activity Name
1
2
Cost proposed to be
incurred in First Control
Period Rs. Crore
8.00
6.00
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3
4
5
5.84
6.72
35.00
The bifurcation of historical values of fixed assets and costs in Aero and Non-Aero is based on
the Auditors certificate issued after conducting agreed upon procedures. A copy of the
certificate has been submitted earlier. On the same basis, the projected fixed assets and
costs are bifurcated to estimate the future Aero and Non-Aero Assets.
The Aeronautical Assets, Non-Aeronautical Assets, Aeronautical Services and Non-Aeronautical
Services are as defined under Clause 1.1 and Clause 1.2 of the certificate submitted earlier.
Real Estate Development
1. Airport Business Hotel Project
The Bangalore International Airport at Devanahalli which opened on 24th May 2008 has
improved Bangalores transportation links with other Indian and international cities, and also
is becoming a major catalyst for regional economic development in Karnataka and poised to
be the Gateway to South India. A business hotel of international standards is an important
facility at each international airport.
Pursuant to the Land Lease Deed, BIAL has been granted exclusive lease hold rights to the
Project Site for aeronautical and non- aeronautical activities with the development of hotels
as one of the non-aeronautical activities expressly permitted therein.
In view of the aforesaid, BIAL intends the establishment of a premium business hotel and
conference facility at the Project site at standards compliant with international best
practices.
Pursuant to the above, various consortiums submitted their proposals against the tender
document and the consortium of EIH Limited and Larsen & Toubro Limited were awarded the
rights for design, construction, financing, commissioning, maintenance, management and
operation of the facility. A Framework Agreement for design, construction and operation of
Business Hotel facility at the New Bangalore International Airport limited was entered to by
BIAL with EIH Ltd and L&T Ltd on 16th November 2006. The Consortium incorporated a Joint
venture company, Bangalore Airport Hotels Limited under the Companies Act, 1956.
L&T had submitted an income statement in response to the tender for airport hotel which is
also part of the agreement. The original bid was for airport hotel with a height of 45 m, 321
keys and a total area of 273,404 sq.ft. Since then there has been changes in the specifications
due to reduction in building height and hence other options like reduction in rooms and also
additional land were explored.
BIAL has consented for commencement of construction by its letter dated 18th September,
2007. BIAL has issued in principle approval for lay-out and plan by its letter dated 16th
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Interest
Year 1
510.7
Year 2
866.7
Year 3
391.8
Year 4
583.7
Rs. Crores
Year 5
1585.0
Means of Financing
Debt
862.4
51.4
697.3
Internal Accruals
510.7
4.3
340.4
583.7
888.7
Funding Gap
The shareholders have indicated, vide Board Minutes dated 6th Sept 2011 that no further
Equity Infusion will be possible into the Airport and any scenario indicating Equity Infusion
requires the matter to be brought back to the BIAL Board.
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207.6
207.6
ICICI Hong Loan converted and presented at Exchange rate of $=Rs. 41.50
Certain key terms and conditions of existing rupee loan facilities & ECB loan are as
detailed below:
a. Existing rupee loan facilities
1. Repayment period: 10 years with a moratorium of 2.5 years
2. Repayment terms: Repayable in 30 quarterly installments commencing from 31st Oct
2010 and ending on 31st Jan 2018.
3. Interest pricing: Interest rate is driven by prevailing market conditions from time to time.
BIAL intends to arrive at a common interest rate for all lenders. However, few banks may
reset interest at different rates, and the highest interest charged by any lender at a given
point of time would be applicable to all other lenders, irrespective of their sanction rate.
4. Interest payment: Interest being serviced monthly.
5. Debt Service Reserve Account (DSRA): As per Loan Agreement, we are bound to maintain a
reserve of one quarter loan repayment amount & one month interest amount at all times
till final settlement of loans.
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6. Debt Service Coverage Ratio (DSCR) As per loan agreement, we are bound to maintain a
minimum DSCR of 1.4 till the expiry of the loan. The same will be reviewed by lenders on
a half yearly basis.
b. ECB loan:
1. Repayment period: 10 years with a moratorium of 2.5 years
2. Repayment terms: Repayable in 30 quarterly installments commencing from 31st Oct
2010 and ending on 31st Jan 2018.
3. Interest pricing: Six months libor + 150 basis points
4. Interest payment: Interest on ECB being serviced half-yearly, on 31st Jan and 31st July
every year.
5. Debt Service Coverage Ratio (DSCR) As per loan agreement, we are bound to maintain a
minimum DSCR of 1.4 till the expiry of the loan. The same will be reviewed by lenders on
a half yearly basis.
6. Debt Service Reserve Account (DSRA): As per Trust & Retention Account (TRA) agreement,
we are bound to maintain a reserve of one quarter loan repayment amount & one month
interest amount at all times till final settlement of loans.
II. Cost of debt for existing rupee loan facilities & ECB loan:
The existing cost of debt for rupee term loan & ECB loan till FY 2011-12 has been considered
as per actual borrowing rate for the respective years.
Future Expansion New Facility Requirements:
The details relevant to debt for funding future expansion (First control period- FY 2011-12 to
FY 2015-16) is covered under New facility.
Amount
(Rs. Crore)
1611.1
Debt facility
Proposed Rupee term loan
2012
11.50%
2013
12.50%
2014
13.50%
2015
13.50%
2016
13.50%
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The weighted average cost of debt for rupee term loan upto FY 2010-11 was approx. 10 %.
This is rate has been recently reset upwards by rupee lenders at 11.5%.
Observing, the increasing trend in banks base rates, change in SBI PLR by 250 basis points
(from 12.25% to 14.75%) during August 2010 to Aug 2011, a nominal increase is assumed to
forecast the cost of debt for rupee loans.
b. ECB loan
The forecast cost of debt for ECB loan for the period from 2012-13 is assumed at 10.15%. This
is assumed based on indicative cost of complete hedge as conveyed by banks.
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2012
2013
2014
2015
2016
1461.7
2155.0
1983.2
1726.1
2148.7
849.8
1197.8
1600.5
2023.8
2595.6
2311.6
3352.8
3583.7
3749.9
4744.3
Kd
Kd
10.71%
10.71%
10.71%
10.71%
10.71%
Ke
Ke
24.40%
24.40%
24.40%
24.40%
24.40%
63.23%
64.27%
55.34%
46.03%
45.29%
= (C*G)/(C)
Rd
Effective
value
53.42%
10.71%
17.09%
State Support Loan has been considered as a Viability Gap funding by Government of
Karnataka. While this has been considered as Interest Free Debt in the above computation,
we request that a return may be considered on the same by the Regulator.
3.6 Depreciation
Depreciation measures the decline in the useful economic value of the asset due to use or
obsolescence.
Depreciation Companies Act
Depreciation has been provided on Straight Line Method (SLM) on the capitalized value of
assets including Interest during Construction. The rates of depreciation prescribed in Schedule
XIV of the Companies Act, 1956 are considered at minimum rates. If Managements estimate
of the useful life of a fixed asset at the time of acquisition of the asset or of the remaining
useful life on a subsequent review is shorter than envisaged in Schedule XIV then the
depreciation is provided at a higher rate based on the Managements estimate of the useful /
remaining useful life.
The depreciation rates determined by the Management of BIAL are as set out below:
Category of Asset
Buildings
Engineering structures
Plant and machinery
Office equipment
Computers
Furniture and fixtures
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Category of Asset
Vehicles
Assets individually costing up to Rs.5000/- are fully depreciated in the year of purchase and
depreciation on additions and disposals during the year is provided on proportionate basis.
Intangible Assets:
Intangible assets are recognised only if it is probable that future economic benefits that are
attributable to the asset will flow to the enterprise and the cost of the asset can be measured
reliably.
Computer software licences are capitalised on the basis of costs incurred to acquire and bring
to use the specific software. Operating software is capitalised and amortized along with the
related fixed asset. Other software is amortized, on a straight line method, over a period of
three to five years based on Managements assessment of useful life.
The Company had incurred certain legal and other expenses during the construction period
towards various agreements, viz. Concession Agreement, Communication, Navigation and
Surveillance and Air Traffic Management (CNS/ ATM) Agreement, Operations and Management
Services Agreement, State Support Agreement and Land Lease Agreement which are
capitalised as Intangibles Others and are amortized over a period of 30 years. The
amortization period and method used for intangible assets are reviewed at each financial year
end.
Depreciation Tax Laws
Depreciation has been computed on the asset value capitalized as per books as per the WDV
methodology as prescribed in Income tax Act at the rates specified therein, for the purpose of
computing Income Tax on the Profits earned.
Depreciation Prescription as per Direction 5
Depreciation has been computed on asset value computed which comprises of the projected
cost of asset and the Financing allowance computed as per the Directions. Rate of
Depreciation as determined by the company has been considered on such asset value,
considering a salvage value of 10% on the asset cost, in line with the specifications in
Direction 5.
For the purpose of considering Depreciation under Dual Till, depreciation has been
computed on Aero Assets based on the ratios defined and certification from auditors
submitted by us earlier in September 2011
The depreciation considered in the MYTP for the first control period is detailed below:
Bangalore International Airport Limited (BIAL)
CP No. 14/2013-14- MYTP & ATP- BIAL-CP
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Rs. Crore
Particulars
Depreciation as per regulatory
books
2011-12
2012-13
2013-14
2014-15
2015-16
100.8
106.0
136.9
162.8
159.5
3.7 Traffic
The traffic forecasts used in the financial statements are based on the actual traffic figures
for the period 2011-12 and the likely forecast made by the Management for 2012-13 and 201314. For the subsequent 2 years i.e 2014-15 to 2015-16, traffic is projected based on the
forecast growth % submitted by M/s Landrum and Brown (L&B) in August 2010. The report
provides annual forecasts of passenger traffic, air cargo tonnage, and aircraft movements for
the twenty year period of 2009-10 to 2029-30. The report presented growth under various
scenarios - Master Planning Traffic Forecast is taken as most likely scenario and included in
the financial forecasts. The report has been submitted earlier by us in September 2011.
However, we have also undertaken a revised study of traffic with L&B so as to capture the
recessionary trends that are witnessed with.
Other key assumptions for traffic estimates are as under:
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(in nos.)
Particulars
2011-12
2012-13
2013-14
2014-15
2015-16
Vice- Presidents
14
13
15
17
19
General Managers
33
40
44
49
54
Senior Managers
224
246
271
299
329
Managers
260
322
355
391
431
Executives
178
203
224
247
272
Assistants
25
10
11
12
14
735
836
922
1017
1121
10%
10%
10%
President / Sr Director
TOTAL
% increase Y-o-Y
An increase of 10% has been considered in Headcount for average increase of 1.4 Mio
passengers as per the Projections.
The projected additional head count requirement considering the future expansions planned
is detailed below.
In Nos
Level
Project
2014-15
T1 expansion
General Managers
Senior Managers
Managers
13
Executives
36
TOTAL
49
The table below represents the personnel cost for the first control period for Aero segment.
UOM 2011-12 2012-13 2013-14 2014-15 2015-16
Personnel cost Rs. Crore
63.7
74.2
93.9
116.0
139.9
Man power cost has been assumed to increase by 10% in first control period year-on-year
based on CPI increase and promotions. The increase in personnel cost considers the
competitive environment by addressing the attrition levels being currently experienced. The
airport industry is unique and requires skilled talent and is getting matured over the period of
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time. Also, Bangalore being an IT hub, cost of manpower and attrition rates are generally
higher as compared to other Metro cities.
Personnel cost relating to Aero Revenues, under Dual Till Mechanism has been derived as a %
to total Personnel cost based on the number of employees directly related to Aviation
services as defined in Budget and Cost Centre break-up
3.9.2 Operations and Maintenance Costs
BIAL aims at ensuring the activities relating to operation are maintained at best levels, by up
keeping the machinery and equipment. The state-of-the-art process implemented at BIAL also
aims at benchmarking the service quality levels to the international standards through
maintaining the facilities. For meeting the growing expectations, BIAL has set-up a separate
Engineering & Maintenance department which is one of the most crucial functions to ensure
that the airport functions in a safe, efficient and smooth environment.
Engineering and maintenance department basically meets the requirements of infrastructure
facilities on Landside, Airfield, utilities and maintenance of IT enabled services. Certain key
areas call for round the clock support and maintenance viz., Airside planning, Airport
Operation Control Centre (AOCC), Airfield Rescue Fire Fighting (ARFF), Baggage Handling
Systems, Safety Health and environment, terminal operations and so on.
IT and ITES are handled by a separate department having specialized skill set which provides
IT solutions for all the users at the airport.
Maintenance department looks after the entire repair and maintenance of airfield covering
runways, taxiways, aprons, parking bays, aerobridges, hangers, drains, general airfield
upkeep, power sub-stations, water and waste management and all allied airside
infrastructure for all the civil, electrical and mechanical works.
The Actual O&M expenditure for the first 3 years is plotted below:
Sl.
Particulars
No.
1
O&M Expenditure
2008-09
29.7
Actual
2009-10
29.7
2010-11
32.2
O&M expenditure forecast for MYTP, relating to Aero Revenues is detailed below:
Rs. Crore
MYTP - 1st Control Period
#
Particulars
2011-12
2012-13 2013-14
2014-15
1 O&M Expenditure - Aero
27.8
36.4
33.7
60.7
2015-16
66.7
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The O&M expenditure includes the operation and maintenance expenditure towards facilities
at landside, airfield, utilities, ICT and others.
O&M % defined for different categories of assets over the first control period is as under:
Asset Category
Phase 1
Phase 2
Landside
1.53%
1.92%
Airfield
0.73%
2.00%
Utilities
1.71%
3.17%
Increase in O&M Cost on account of increased wear and tear, expiry of defect liability period
and Y-o-Y WPI increases.
O&M relating to Aero Revenues, under Dual Till Mechanism has been derived as a % to total
O&M cost based on the analysis of underlying assets on which O&M activities are carried out
Overview of various Maintenance Activities carried out
A. Engineering & Maintenance:
Engineering and Maintenance Department is responsible for maintenance upkeep as well as
for the post AOD (Airport operation day) maintenance construction activities, with updated
design, as per suggested amendments to increase the service level in the airport. This
department looks after the entire repair & maintenance of the airport site.
Maintenance activity covers complete 4008 acres (approx.) of land area as required to be
maintained as per international regulations. It includes Air side, Land side & Utilities.
The activities for upkeep has special focus on runway, taxiway, aircraft stands at apron,
runway lighting system, High Voltage power network and operation/ serviceability of the
equipment installed in it, land side roads, parking, centralized HVAC for almost all
buildings.
The area of activity not only covers operation/providing of utility services (like water
supply, rain water storm water drains, sewage collection and treatment, power supply to
buildings, fire water pumping) but also keeping the service level high.
The departmental activities are not limited to Infrastructural engineering installations but
main elements of great concern in daily airport operation like nature conservation &
greenery, prevention of bird strike & cleaning, wild life conservation also.
Runway maintenance, is one of the main weekly maintenance activity performed on the
airport and covers almost all critical areas.
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Under the Maintenance department, there are various sub-functions which relate to the
maintenance of earmarked activities. These sub function (fund center) contribute to the
overall maintenance costs. The activities undertaken are unique which required specialized
engineering & technical skills. The main functions are as under.
AIRSIDE
Airfield Civil Division: is responsible to achieve 100% serviceability, ensuring effective
maintenance of Air side civil structures and development of infrastructure as per
safety & regulatory norms of an international airport. Air field civil department also
maintains clear, clean, distress free airfield pavement for its smooth operations. They
maintain civil structures established for air navigation equipment to achieve highest
efficiency.
The regular activities includes Runway friction test using Airport Surface Friction
tester
Rubber deposit removal using Track jet
Maintaining Airside pavements and structures with proper preventive, corrective
and emergency maintenance
Monitoring & maintenance of all distress reports of Airside Civil Structures.
Checking conspicuity of Airfield markings and repainting.
This department looks after regular maintenance & usually services the request of the
operation department for the following works:
Runway marking painting
Pavement repairs
Joint filling
Fencing
Gate repairs
Drain cleaning
Building painting
Fence maintenance etc.,
Most of these works are carried out based on requirement and past experience of the
domain department. The estimation of these expenses is based on the historical spends
achieved during the preceding year and the future likely trends.
Airfield Electrical division: Maintains the electrical installations in all airside zones which
are used for flight operations. The scope of maintenance task is enormous; it includes
Runway & Taxiway Lighting systems, Runway Edge, End/Threshold, Taxiway, PAPI,
Approach Lighting, Guidance Sign Boards, MCRs connected to Airfield ground lighting
circuits and its control & monitoring system. Other than this Airfield electrical
Department also maintains 400Hz Power Supply Units, Apron Lighting /High masts,
Perimeter/Street Lights, Stand Identification Sign Boards, Mobile Lighting Masts consists of
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DG, Airside Access sliding gates and LT supply of air side navigational & ancillary
buildings. Meeting the compliance to amendment to the regulatory requirements will also
be responsibility of the Team.
The preliminary cost of this function, comprises of regular maintenance related to AFL
including replacement of approach lights, power backup etc. Apart from above, necessary
inventory levels & consumables are also maintained internally as these are required for
conducting speedy & efficient maintenance.
Vehicle and Equipment division is responsible for the procurement, maintenance and
operation of the entire vehicle and Equipment fleet belonging to BIAL. The division
consistently strives towards creating and implementing process that not only enhances
service levels, but also results in cost effectiveness.
Major cost includes repair & maintenance of
Wildlife Control: This division is responsible to give safe flying environment for smooth
flight operations. This division provides/uses various bird scaring methods to avoid
aircraft bird collision/strike at the airside. The division takes care of approximately
1443 acres of area by using different bird scaring techniques during the day light
conditions with staff and an outsourced team of labors at the airside.
LANDSIDE
Landside Civil Division: Is responsible to maintaining the Civil Infrastructure in the
Landside which includes the Passenger Terminal Building, Access Roads & Parking Area,
ATC Tower, Administration Building, AC Plant Building, Power House North, MPSS Building,
Raw Water Pump House, Security Cabins, Sewage Treatment Plant, Fire Water Pump Main,
Fire Water Pump Satellite, Booster Pump House, Potable Water Pump, Switch Yard, Public
amenities Building, Police Help Center, Pass office, CISF Barak, Waste Dup Yard,
Horticulture Office & Stores, E&M Office, Project Offices of Airside Execution, Landside
Execution, Design. This division ensures seamless availability and 100% serviceability of all
civil facilities on a 24x7 basis.
Also, this team is responsible for executing Capex activities such as modification to
existing system, expansion & enhancement of facilities as and when the requirements
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arise along with taking up the maintenance activities for concessionaires like F&B,
Retailers etc., through annual maintenance contracts.
This department takes care of the entire repair & maintenance which includes AMCs for
Civil & Manpower.
Landside Building Maintenance (Electrical) is responsible for maintaining electrical
installation in Landside which includes Passenger Terminal Building, Administration
building, Airlines Building, Utility Building, Car Parking, Access Roads etc. This division is
also responsible for maintaining of emergency power supplies to data centers, other IT
Systems, Automatic doors, Screening systems, Signage's etc.
This department takes care of the entire repair & maintenance which includes AMCs for
Electrical & Manpower etc.
Mechanical division: The prime role of mechanical department is to ensure the
serviceability of various mechanical installations at airside & landside zones. The area
includes Heating, Ventilation & Air-Conditioning (HVAC), Baggage Handling System (BHS),
Fire Fighting (FF), Elevators & Escalators (E&E) and Passenger Boarding Bridges (PBB).
The major Maintenance expenditure here in for AMCs & CMCs is for
AMC for Baggage handling system maintenance
AMC for Passenger boarding bridges maintenance
AMC for Fire Fighting System and Elevators & Escalators
CMC for Air conditioning system
CMC for Elevator & Escalators
Mechanical maintenance of mechanical items etc.,
Apart from above, necessary inventory levels & consumables are also maintained
internally as these are required for conducting speedy & efficient maintenance.
Landside Services Landside Services Division takes care of Cleaning, Housekeeping, Pest
Control Services and Waste collection of entire airport on landside. This includes
Passenger Terminal Building (PTB), VIP Terminal & Landside Ancillary Buildings. Cleaning
of Car Parks, Main and Secondary Access Roads, Lawns and Building surroundings also falls
under the scope of Landside Services. The work also includes waste collection from the
buildings.
Major maintenance expenditure includes AMC for pest control, housekeeping & waste
collection.
Airside Services & Waste Disposal: The Division carries out every day cleaning tasks with
available resources at the Airfield as per adequate frequencies. Activity revisions are part
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Power system: is responsible for the power distribution network established at the
airport in the form of 66/11KV substation at the airport and 11 KV ring systems routed to
various areas within the complex and supplying the power to various airport applications
as well as the requirements of concessionaries such as cargo, catering, fuel farm etc.
Considering the 24 X 7 operation of the airport, continuous availability of power supply
with high reliability is of prime importance.
Power system team caters to the regular preventive maintenance works of all the HV
equipment, DG sets & AMCs of operation maintenance of power system equipment.
Water & Waste water division: Potable water pump house, raw water pump house are
the key areas of operation for this division in which potable water is sourced from
Bangalore Water Supply and Sewerage Board (BWSSB) and distributed in airport, where
as the raw water is sourced from three sources viz., BWSSB, BIAL Sewage Treatment
Plant (STP) and Rain Water Harvesting System of Airport.
Environmental division: This division looks after the monitoring of ambient air quality
across the airport, noise monitoring and stake monitoring; maintenance of all storm
water drainage network etc. Also compliance of all environmental parameter to
statutory body like MoEF, KSPCB, forest dept. etc. are the responsibility of this team. All
the portable water & waste water parameters are tested internally with laboratory
which is approved by KSPCB.
Major maintenance expenditure is towards AMC of Water & waste water system, disposal &
scientific processing of solid waste.
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To manage centrally, BIA ICT department has multiple ICT sub-verticals to manage end to end
the ICT services on 24x7 basis and the same is listed below:
ICT Networks: (Passive) Responsible for the OFC (optical fiber networks) and Copper
networks in the campus as only BIAL is responsible to deploy and manage and lease it to
clients as needed.
ICT Networks: (ACTIVE) by aggregating the requirement of all clients in the campus, ICT
department has deployed Enterprise class Network systems (CORE Switches) and access
switches that enhances the performance in terms of throughput or very high MTBF, as
individual organizations could not have justified the capex cost for such a class of hardware
and services. So BIA ICT has fully leveraged shared Infrastructure by aggregating the
requirements of all users.
Wi Fi Networks- BIA has deployed Wi Fi both for Passengers in the Terminal and to facilitate
business applications and this fiscal has since deployed Wi Fi in the Tarmac as well to cater to
Airlines new generation aircrafts and business needs.
Note: Networks becomes the backbone for all ICT services and have deployed a converged IP
Networks.
ICT Voice Communications
IP Voice - ICT department has deployed IP Voice for all users and provides the handset
based on actual user needs and in location of their choice.
IP TMRS (TETRA) Trunk Mobile services are deployed for captive usage for airport users
to seamlessly coordinate for airside operations.
IP TV & MATV As an Airport ICT provides for TV for PAX in the Public viewing areas of
the airport/ Security hold area and for clients in their back office.
Master Clock this is required to synchronize all Servers for all services.
IT
- Information Security
Firewall services
Managed internet and Firewall services
Intrusion detection and prevention services
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o
o
o
o
2011-12
2012-13
2013-14
2014-15
2015-16
Power
14.5
15.4
21.0
27.7
28.9
Water
1.7
1.8
2.5
2.6
2.8
16.2
17.2
23.5
30.3
31.7
TOTAL
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The increase in utility cost is mainly on account of increased consumption due to increased
passengers and future expansion plans.
3.9.4 Operation Maintenance and Support Fee
The OMSA between Flughafen Zurich AG (Unique), Switzerland and BIAL was entered on 8th
April 2005 for various services, as part of Project agreement to be provided by Unique to BIAL
as per Schedule-1 of the said agreement. The services include:
a. Staffing requirement at preparation phase,
b. Construction management support,
c. Preparation for start-up (i.e., security, safety management, emergency planning and
maintenance procedures),
d. Preparation of operational, commercial and financial management,
e. Environmental issues and
f. Operating plan
The agreed term of the agreement is upto the seventh anniversary from the date of
commencement of commercial operations of the Airport and period may be extended subject
to mutual agreement of the parties.
The fees payable to Unique comprises of 3 elements (Schedule-1 of OMSA):
(a) Input fees for engaging the services of experts and sub-contractors (input fee during
project implementation and operations will be Euros- 4239.28).
(b) Performance fees for achieving levels of economic and service quality performance
(not to exceed 2% of EBITDA in any one year); and
(c) Fixed fees as per the terms set out in the agreement (not to exceed Euro 857,200).
The OMSA fee considered in the MYTP submitted to AERA for the first control period, under
dual till is detailed below:
Particulars
2011-12
2012-13
6.18
10.17
2013-14
13.02
2014-15
15.47
2015-16
15.79
The increase is mainly on account of performance fee for achieving the economic levels and
service quality.
Requirement for truing up: While OMSA fee has been projected, based on the costs proposed
to be reimbursed, as OMSA Performance fee is based on the EBIDTA of the company, which is
directly dependent on Revenue, based on the Yield computed with WPI based increase, we
submit that the actual OMSA fee be trued up as a T+2 correction.
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2011-12
Concession fees
27.74
2012-13
28.97
2013-14
36.52
2014-15
45.10
2015-16
47.82
The concession fee @ 4% on gross revenue payable to GoI has been considered and provided as
year-on-year expenditure. The increase in the concession fees is on account of projected
increased gross revenue to BIAL.
Under Dual Till mechanism, Concession fee relating to Aero business has been computed
based on the revenues generated from Aero activities
Requirement for truing up: While Concession fee has been projected, based on the costs
proposed to be reimbursed, as this is directly dependent on Revenue, based on the Yield
computed with WPI based increase, we submit that the actual Concession fee be trued up as a
T+2 correction.
3.9.6 Lease Rent
The Land Lease Deed was executed between Karnataka State Industrial Investment and
Development Corporation (KSIIDC) and Bangalore International Airport Limited (BIAL) on 30th
April 2005, wherein KSIIDC leased / sub-leased to BIAL free from encumbrances and / or
encroachments, of all that piece and parcel of land measuring 3884 acres and 25 guntas and
further agreed to lease out 133 acres and 16 guntas together with all rights, liberties,
privileges, benefits, rights of way, paths, passages pertinent to the site to hold, possess, use
and enjoy the site and or any part thereof, in accordance with the provisions of the Deed.
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However, KSIIDC handed over the possession of 124 acres 6-guntas in the years 2006 & 2007
and subsequently an Additional Land Lease Deed dated 31st December 2011 has been executed
and registered.
As per the Land Lease Deed the lease rent payable to KSIIDC is nominal lease rent of one
rupee per annum up to Airport Opening Date (AoD) and lease rent @ 3% on the land value of
Rs. 211.7792 Crore on land parcel of 4008 acres and 6 guntas from AoD i.e., 24th May 2008 till
the end of 7 years, @ 6% for the 8th year after AoD and every year following 8th year lease rent
equivalent to preceding year lease rent plus @3%.
Based on the above, lease rent considered, relating to Aero Revenues, in the MYTP submitted
for the first control period is detailed below:
Rs. Crore
Particulars
2011-12
2012-13
2013-14
2014-15
4.90
4.90
4.90
4.90
Lease rent
2015-16
9.00
Under Dual Till mechanism, Lease rent relating to Aero business has been computed based
on the underlying asset base.
3.9.7 General Administration Costs
The General Administration costs category majorly includes costs towards Consultancy &
Legal, Travel and Office Costs. These costs are attributable basically to meet the day-to-day
running and administration of the airport.
The General Administration Costs considered, relating to the Aero Revenues, in the MYTP
submitted for the first control period is placed below:
Rs. Crore
Particulars
2011-12
2012-13
2013-14
2014-15
2015-16
9.52
12.16
13.37
14.71
16.18
Travel Costs
3.49
3.66
4.02
4.42
4.86
Office Costs
6.21
6.97
7.67
8.43
9.28
19.22
22.79
25.06
27.56
30.29
TOTAL
Normal increase of 10% y-o-y has been factored from 2012-13 forecasts to meet inflation and
other contingencies.
General Administration costs relating to Aero Services under Dual till mechanism has been
determined as a % of the total cost.
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3.9.8 Insurance
The total insurance premium cost projected for the first control period is as detailed below
and is determined based on the asset values in the respective years. Insurance cost relating to
Aero Revenues is detailed below
Rs. Crore
Particulars
Insurance
2011-12
2012-13
2013-14
2014-15
2015-16
2.76
3.00
3.63
3.72
3.80
Under Dual Till mechanism, Insurance cost has been considered in proportion to the value of
assets.
3.9.9 Marketing, advertising and others
The cost relating to Marketing, advertising and other expenses etc. projected for the first
control period is as detailed below.
Rs. Crore
Particulars
2011-12
2012-13
2013-14
2014-15
2015-16
1.78
1.99
2.15
2.33
2.52
2.48
3.04
3.38
3.85
4.36
Bad debts
1.57
30.21
11.71
13.64
15.71
3.10 Taxation
Direction 5 details that the Tax payments projected for the first control period will be
computed and added as a reimbursement in arriving at the Aggregate Revenue Requirement.
The computation of projected income tax payments has been made based on the prevailing
Income Tax laws and rules.
Tax Computations also considered MAT provisions and 80IA of Income tax act. BIAL is eligible
for Income Tax holiday for a continuous 10 year period in the first 15 years. BIAL proposes to
avail of this benefit from 2012-13 and accordingly the tax payment projections for the first
control period is based on Minimum Alternate Tax computed on Book profits, as given below:
Particulars
Taxation
Payment
2011-12
2012-13
2013-14
2014-15
2015-16
105.6
78.4
92.0
98.8
134.2
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relating
Tax considered for reimbursement as part of Dual Till is tax computed on the Profit computed
from Aero Segment.
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Hence a shortfall of Rs. 241.6 Crore has been claimed for the Pre-control period and added to
the Aggregate Revenue Requirement for the first year in the first control period. Regulatory
Building Blocks considered for the Pre-control Period is as detailed below:
Particulars
2008-09
2009-10
2010-11
Cost of Debt
6.66%
7.72%
8.12%
Cost of Equity
24.4%
24.4%
24.4%
10.08%
10.76%
11.36%
1499.7
1452.2
1352.7
129.2
156.2
153.7
92.8
109.6
109.9
119.1
132.4
140.9
Total
Basis of Claim
Cost of Debt computed
Interest cost as per
Financials / Average
Debt balance
FRoR
has
been
computed for each year
by computing Equity
considered
for
the
purpose of Gearing has
been
computed
considering
Equity
excluding losses in case
of Accumulated P&L
having Debit balance
and
including
P&L
balance in case of
Accumulated P&L being
in credit.
Average RAB as per
books, relating to Aero
Assets,
has
been
considered except for
1st year of operations
where the closing RAB
has been considered
proportionate to the
number of days in
Operation of the airport
(312 days of 365 days)
FROR % * RAB average
Depreciation accounted
in books has been
considered
for
reimbursement
proportionately at % of
the Aero Assets to total
assets,
80% of the Operating
Expenditure
as
per
Financial
Statements
has been considered as
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2008-09
2009-10
2010-11
Total
Basis of Claim
a reimbursement, as
relating
to
Aero
business,
excluding
Forex
losses.
Bad
debts/ waivers have
been claimed back as
part of the shortfall
0.7
7.0
23.7
341.8
405.3
428.2
(170.6)
(290.9)
(331.4)
114.4
96.8
As per financials
53.3
224.5
435.7
As OMSA Performance
fee and Concession fee
is payable on the
shortfall considered as
Revenue
14.3
7.3
6.2
Total claim
238.8
121.7
103.0
463.5
Compounded
291.1
134.7
103.0
528.8
For Dual Till - Costs, Asset base for computing Return on RAB etc. have been considered as
follows:
RAB As per the certified Asset bifurcation ratio
Depreciation In the ratio of assets
Costs 80% considered as Aero out of the total costs
The WPI figures are derived based on the forecasted Producer Price Index (PPI) values as
provided by analysts projections.
The forecasted Consumer Price Index (CPI) values for the Control Period are considered
on the basis of analysts projections.
The forecasted values for the first Control Period are shown in table below:
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Year
WPI
PPI
CPI
2011-12
8.9%
7.2%
6.8%
2012-13
7.6%
7.1%
6.5%
2013-14
6.2%
5.6%
6.0%
2014-15
6.0%
5.4%
5.7%
2015-16
5.8%
5.2%
5.5%
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4 Financial statements
4.1 Financials - Aggregated
Table 4-1: Profit and Loss Account (INR Crores)
S.N.
1
3
4
5
6
7
Particulars
Revenue
Revenues from Regulated Services
Revenues from other than Regulated Services
Operation and Maintenance expenditure
Personnel
Operations & Maintenance
Concession Fee
Lease Rent
Utilities
Insurance
Marketing, Advt. and others
Waivers and Bad Debts
OMSA Fee
General Administration Costs
Earnings before depreciation, interest and taxation (EBDIT)
Depreciation and Amortisation
Earnings before interest and taxation (EBIT)
Total interest and finance charges
Profit/loss before tax
Other income
Provision for taxation
Profit /(loss) after taxation
Balance Carried to Balance Sheet
2011-12
2012-13
2013-14
2014-15
2015-16
808
236
791
230
916
256
1,085
280
1,278
294
(79)
(39)
(42)
(6)
(22)
(4)
(5)
(2)
(11)
(23)
812
(135)
677
(156)
521
(115)
406
406
(92)
(49)
(41)
(6)
(23)
(4)
(5)
(30)
(18)
(27)
725
(142)
583
(148)
435
(87)
348
348
(117)
(49)
(47)
(6)
(31)
(5)
(6)
(12)
(20)
(29)
849
(174)
675
(172)
503
(101)
403
403
(145)
(83)
(55)
(6)
(40)
(5)
(7)
(14)
(23)
(32)
956
(206)
749
(220)
529
(106)
423
423
(174)
(91)
(63)
(12)
(42)
(5)
(7)
(16)
(26)
(36)
1,100
(210)
890
(175)
715
(143)
572
572
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S.N
2011-12
2012-13
2013-14
2014-15
2015-16
INR Crores
2020-21
385
385
385
385
385
385
385
385
385
385
385
385
60
465
813
1,216
1,639
5,112
406
348
403
423
572
706
465
813
1,216
1,639
2,211
5,818
1,128
1,821
1,650
1,393
1,815
8,501
334
334
334
334
334
233
60
76
87
243
2,312
3,353
3,644
3,826
4,832
15,180
Gross Block
2,044
2,240
3,845
3,987
4,068
16,216
(517)
(659)
(833)
(1,039)
(1,249)
(4,104)
Net Block
1,527
1,581
3,011
2,948
2,818
12,113
542
1,212
441
1,946
Particulars
Source of Funds
A)Shareholders' Funds
Capital
Additional Equity brought in
Total Shareholders' Funds
B)Reserves & Surplus
Profit & Loss Account Brought Forward
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15
16
18
30
32
64
Sundry Debtors
162
185
208
208
199
486
198
198
198
198
198
198
375
399
424
436
429
748
55
57
66
82
80
290
293
452
541
378
86
2,838
Project Creditors
98
14
14
14
14
14
Trade Creditors
31
19
22
28
32
91
148
72
72
72
72
72
98
139
186
241
303
526
Other Liabilities
105
105
105
105
105
105
481
349
399
459
527
808
243
560
632
437
68
3,067
2,312
3,353
3,644
3,826
4,832
15,180
Cenvat Credit
Total Current Assets, Loans and Advances
DSRA Reserves
Cash and Bank Balances
Less : Current Liabilities and Provisions
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S.N.
1
4
5
6
Particulars
Cashflow from operating activities
Net Profit before taxation
Adjustment for :
Depreciation and Amortisation
Operating Profit before working capital changes
Adjustment for :
(Increase)/ Decrease in Inventories, Debtors and Other Current Assets
Increase/ (Decrease) in Current Liabilities and Provisions
(Increase)/Decrease in DSRA Reserves
Increase/(Decrease) in Working Capital loans
Net Working capital changes
Cash generated from Operation
Cash flow from investing activities
Purchase of Fixed Assets
Net Cash from/ (used in) Investing Activities
Cashflow from financing activities
Changes in Share Capital
Proceeds from LT Debt incl. Loss on restatement/Fin Lease
Proceeds from State Financial Support
Net Cash from/ (used in) Financing Activities
Net change in cash and cash equivalents
Cash and Cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
2011-12
2012-13
2013-14
2014-15
2015-16
406
348
403
423
572
135
541
142
490
174
576
206
630
210
782
(139)
181
(55)
(14)
527
(23)
(132)
(2)
(157)
333
(25)
50
(9)
60
76
652
(12)
61
(16)
16
48
678
7
67
2
12
88
870
(511)
(511)
(867)
(867)
(392)
(392)
(584)
(584)
(1,585)
(1,585)
(158)
(158)
(141)
434
293
693
693
159
293
452
(172)
(172)
88
452
541
(257)
(257)
(163)
541
378
423
423
(292)
378
86
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Fair Rate of Return applied to the Regulatory Asset Base (FRoR x RAB)
Operation and Maintenance Expenditure
Depreciations
Taxation
The ARR calculated in the MYTP under Dual Till submitted is furnished below:
(Rs. Crore)
Till
Dual Till
2011-12
1128.1
2012-13
638.7
2013-14
824.4
2014-15
1036.4
2015-16
1102.4
ARR for the first year of the first control period i.e., 2011-12 has considered the pre-control
period under-recoveries (i.e., for FY: 2008-09 to FY: 2010-11).
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Board of Directors
03
Directors Report
05
Auditors Report
15
19
Financial Statements
-
Balance Sheet
24
25
26
29
Notes on Accounts
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Board of Directors
Dr. A Ramakrishna
Mr. V Somasundaram
Mr. S Chandrasekar
Statutory Auditors
Internal Auditors
Registered Office
:
Administration Block,
Bengaluru International Airport
Bangalore 560 300
Tel: +91 80 6678 2620, +91 80 6678 3366
Website
http://www.bengaluruairport.com
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DIRECTORS REPORT
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The Directors have the pleasure in presenting the eleventh Annual Report of Bangalore International
Airport Limited (the Company or your Company) for the financial year ended on 31st March
2012.
1. FINANCIAL RESULTS 2011-12
The details of the key financial results are summarized as follows:
(Rupees in Crores)
Financial Year
2011-12
Income
Expenditure
635.5
Financial Year
2010-11
586.6
Operating Expenses
205.1
176.1
Finance cost
134.9
143.6
Depreciation
134.8
134.7
474.8 454.4
Profit/(Loss) for the year
Profit/(Loss) carried forward to Balance Sheet
160.7
132.2
0.0
(0.1)
160.7
132.1
59.5
(72.6)
220.2
59.5
Financial Overview
During the year under review, your Company was able to achieve a turnover of Rs.635.5 crores
(increased by 8% compared to the previous year) and has reported a profit after tax of Rs.160.7 crores
compared to the profit of Rs.132.1 crores reported during the last financial year.
Allotment of Shares: During the year under review, no fresh allotment of shares took place.
2. CHANGES IN SHAREHOLDING IN BIAL:
During the year under review, Siemens Project Ventures GmbH (Siemens) transferred 53,844,000
(Fifty Three million, Eight hundred and Forty Four thousand) equity shares, aggregating to 14% of
the total equity of BIAL in favour of Bangalore Airport & Infrastructure Developers Private Limited
(BAIDPL), a GVK group Company. This has made BAIDPL the single largest Shareholder in the
Company with 43% share in aggregate.
3. OVERVIEW/INDUSTRY OUTLOOK
Traffic
During the year, your Company handled 119,033 Aircraft Movements (ATMs) which is 6.5% higher
than the previous year. The number of passengers who travelled through the Bengaluru International
Airport (the Airport) during the year was 12.71 million, which is higher by 9.3% from the previous
year. All major airlines increased frequencies to existing metro and non-metro airports in the country
along with connecting new domestic destinations. In 2012, low cost carriers witnessed increase in
domestic market share to 49%, the same is expected to grow and drive demand for domestic air travel
from Bangalore.
International ATM traffic showed a good growth of about 7.8% during the year. Bangalore attracted
four new international airlines in the year. Bangkok Airways and Tiger Airways connected Bangalore to
Bangkok and Singapore respectively. International traffic witnessed consistent performance on major
routes such as Middle East and Europe while traffic to North America and Asia have witnessed a steady
growth. The introduction of new services to Asian destinations by domestic airlines and international
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low cost carriers are expected during the next financial year.
Overall cargo traffic witnessed a growth of 1% due to slowdown in the global cargo business. Two new
cargo freighters, Cathay Pacific cargo and Aero Logic Cargo, started their operations to Bangalore.
Cargo tonnage handled by BIAL during the year was at 224,994 Metric Tons.
Regulatory Scenario
The Airport Economic Regulatory Authority (the AERA) had issued various Orders and Guidelines
on tariff determination. Your Company has appealed before the AERA Appellate Tribunal challenging
the various Orders and Guidelines 2011 (Directions 4 and 5) issued by AERA including the Single Till
approach. The said Appeals are pending for adjudication before the AERA Appellate Tribunal.
The Writ Petition filed by Federation of Indian Airlines challenging the ground handling policy of the
Ministry of Civil Aviation came to be dismissed by the Honble High Court of Delhi. Federation of Indian
Airlines has challenged the same before the Honble Supreme Court of India. The Honble Supreme
Court has granted Status Quo.
4. OPERATIONS UPDATE
The key highlights of the operations of your Company are as follows:
Financial Year 2011-12
Air Traffic Movements (Nos)
Number of passengers
119,033
111,787
12,710,531
11,634,035
224,994
222,783
Airport Operations continue to be smooth, efficient and uninterrupted during this financial year. Your
Company has shown consistency in its delivery of quality of operations at the Airport with respect to
defined performance parameters and targets.
Your Company has managed additional traffic demand with ease and continued to improve passengers
experience, safety and efficiency. Total number of passengers handled in the Airport during Financial
Year 2011-12 was 12.71 million. The Airport terminal & apron expansion is in progress to cater to
growing demand anticipated in future.
Your Company successfully conducted an Anti-Hijack mock drill for the year 2011 dealing with
unlawful interference to Civil Aviation, on September 23rd 2011 with the cooperation of Central
Industrial Security Force and other government and private stakeholders. The Aerodrome Committee
Meeting for the period January June 2012 was convened on 15th February 2012 to discuss and decide
date for conducting the next mock drill for the year 2012 which is fixed for 4th September 2012.
Your Company has also constructed a Police Help Centre at BIA which was inaugurated by Mr. Jyothi
Prakash Mirji IPS, Commissioner of Police, Bangalore on 23rd November 2011.
Management of Performance and Service Quality
Setting itself very high standards of performance, your Company monitors and measures the
performance of operations at the airport continuously. Such a quality management program has
yielded rich dividends in terms of high performance in operations.
Some of the highlights of operational performance at the airport were:
Your Company has achieved on time departure of 82.3% of the flights from the airport.
Your Company has received Airport Service Quality (ASQ) rating of 4.24 on a scale of 1 to 5 for
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calendar year 2011 and was ranked 53 among 180 participating airports worldwide.
Your Company achieved an overall mean-score of 4.24 against the target mean-score of 4.15
for 2011.
Your Company has initiated several process improvement initiatives to facilitate the smooth
transition of passengers and this is reflected in the performance of key processes during the
year. The average queue waiting time across the various measured processes were well below
the Company targets.
Your Company has invested over 6000 hours of time in measuring the key passenger impacting
processes and has measured over 60,000 passenger waiting times during the year.
The average pre-embarkation security queue waiting time was 6.37 mins for domestic
passengers and 4.04 mins for international passengers.
The average check-in queue waiting time was 4.07 mins for domestic passengers and 6.38 mins
for international passengers.
The average immigration queue waiting time was 5.27 mins for departing passengers and 4.46
mins for arriving passengers.
Your Company has entered into a new contract for refurbishment and upkeep of the Baby Care
Rooms at the Passenger Terminal Building at no cost to the Company.
Safety assurance & promotion components of Safety Management System (SMS) were effectively
implemented by regular detailed audits on all Operators/Concessionaires. DGCA recognizes
the Company as the first airport in India to be fully compliant with SMS implementation.
A joint Fire & Life safety survey audit was conducted on multiple parameters using sampling
methodologies from 12 to 15 Jul 2011 to assess the awareness and preparedness level of all
staff working at the Passenger Terminal Building. It was found that 88-93 % staffs were aware
of fire prevention methods and practice for life safety measures during emergency situations.
Full scale mock emergency exercise Challenger 2011 was successfully conducted on 07 Jun
2011 to test & validate the processes, procedures, systems, human readiness and response to
aircraft emergency/contingencies outside the airport but within its vicinity. The exercise was
of immense value in linking the stakeholders and familiarizing the emergency procedures in an
outside boundary crash scenario.
Dragon Air honored the Company for the excellent support rendered to their Bengaluru Team,
which enabled them to win the Best Airport Performance Award -2011 among Dragon Airs
entire network for the second consecutive year.
The Company was honored Computer World Honors Award in July 2011 at Washington.
CISO Chief Information Security Officer (IT Security) was for the first time constituted in India
and your Company received this award in May 2011
Your Company achieved as the second airport worldwide the ISO 25999 Certification for Business
Continuity Management
Your Company has undergone Certification audit for the continuing ISO standards currently
held by the company.
5. PROJECT UPDATE
The expansion of the existing Terminal 1 has been designed to enhance the operational performance in
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order to handle, inter-alia, the increase of passenger traffic from the current 11.2 million passengers
up to 20 million passengers annually.
The enhanced Terminal 1 will be spread over an area of 150,556 square meters. The architectural
concept is based on the idea of a dramatic swooping and curving roof, under which the enhanced
Terminal 1 is located. The roof is the unifying element for new and existing facilities, bringing both
together as one composition. It also forms a dramatic canopy to the main entrance, offering passengers
and public a giant covered area, protected from the vagaries of weather. The undulating wave form
provides the existing Terminal 1 with greater physical presence. The architectural concept is to ensure
that the existing building has a new look.
New Terminal 1 will significantly enhance passenger comfort and experience with the addition of 8
passenger boarding bridges, one contact stand for A380 aircraft, 1618 additional seating, 12 additional
immigration counters and 37 additional check-in counters.
The new expanded Terminal 1 will also showcase Karnatakas culture and the rich heritage through a
carefully curated art programme.
Project Progress
L&T was selected as the EPC contractor following an international competitive tendering process. The
contract was signed on 30 June 2011 and the Notice Proceed was issued on 1 Aug 2011.
The construction is well underway. Most of the new terminal facilities are scheduled to complete and
made operational in a phased manner starting in January 2013.
6. COMMERCIAL UPDATE
The total commercial revenue grew by 25% during the year. The share of non-aviation revenue
increased from 39% to 41% compared to the previous year. The revenue per departing passenger was
further increased by 6% and is at Rs. 191/- per departing passenger [includes Retail, Food & Beverages
(F&B), advertising and landside services].
Domestic and International Security Holding Area (SHA)
There was an increase of 17% in revenue per departing passengers, domestic as well as international.
By refining the menus in the F & B concepts in the Domestic SHA and by augmenting the seating areas,
an increase of 48% in the F & B revenues were noted. 17% increase in the F & B revenues was also seen
in the international SHA. The retail revenues grew by 37% and 27% in the domestic and international
areas. This was possible after all betterment in layout as well as offers and promotions.
Curb and Plaza area:
The revenues generated by retail & F&B in the Curb and Plaza areas increased by 9% and 26%
respectively. RFPs are released in order to modify all existing concepts. The landside services have
seen an increase of 22% during the financial year. Commercial department successfully completed
the Taxi tender process. Meru Cabs Private Limited & Mega Cabs Private Limited were awarded with
concession agreement to operate air-conditioned taxis for a 4 year term from June 2012. The tender
process is expected to result in a 60% increase to existing taxi revenues.. The advertising revenue has
increased by 43%, due to new contracts and will increase more in the financial year 2012-13.
7. HUMAN RESOURCES
The Human Resource (HR) of your Company progressed well during 2011-12 in terms of Headcount and
building the organization capability to take on new horizons for future. Headcount has risen from 710
to 792 as on 31st March, 2012.
Your Company has implemented on-line performance management system in ERP platform with
employee portal during this financial year. To support organizational requirements and career
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development of employees, implemented key initiatives such as internal job postings (IJP) and annual
promotion cycle.
During this financial year your Company has initiated organization-wide goal setting exercise with
inter and intra linkages with various stake holding departments.
The information required under Section 217(2A) of the Companies Act, 1956 and the Rules made there
under, is provided by way of an Annexure to this Report.
8. DISCLOSURE OF INFORMATION PURSUANT TO SECTION 217(1)(e) OF THE COMPANIES ACT,1956
Energy conservation & Technology absorption
Your Company has taken several energy conservation initiatives during the year like replacement of
Compact Fluorescent Lights and halogen lamps with Light Emitting Diodes type illuminaries, installation
of solar lighting systems in the remote substations throughout the Airport (Zero energy consumption)
and installation of BMS system for lighting control inside as well as outside the terminal building.
As per the latest guidelines of Bureau of Energy Efficiency, your Company has its own energy
management organization in place consisting of certified energy auditor.
Your Company has the credit of receiving the CII National Award for Excellence in Water Management
and Most Innovative (Top award) Environmental Best Practice Award 2012.
Your Company has received the distinction of being the first company in India to be certified as a green
company as per the CII GreenCo rating system.
Your Company has also bagged the credit of being first Terminal Building in the world to be rated LEED
Silver to get certified under Existing Building (EB) category. Your Company has been certified by
KSPCB for Analyzing/testing of water and Waste water parameter.
With a view to energy efficiency and reducing carbon footprint your Company, has announced its
partnership with Karnataka State Biofuel Development Board, Govt. of Karnataka for its operations
at Airport.
Foreign exchange earnings & outgo:
The foreign exchange outgoings during the year related mainly to the procurements of airport services
as part of day-to-day operation. Details of foreign exchange earnings/expenditure have been furnished
under Note no. 25 Note to Accounts.
9. PUBLIC DEPOSITS
Your Company has not accepted any deposits and hence no amount of principal or interest was
outstanding as on the date of Balance Sheet.
10. DIRECTORS
As per section 255 of the Companies Act, 1956 read with Article 108 (1) of the Articles of Association
of your Company, at least two-third of the Directors of your Company are liable to retire by rotation.
Pursuant to section 256 of the Companies Act, 1956 read with Article 108(3) of the Articles of Association
of your Company at-least one-third of such Directors must retire from office at every Annual General
Meeting of the Members of the Company. The retiring Directors are eligible for re-appointment.
Mr. L V Nagarajan, Mr. Klaus Kolof and Mrs. Indira Krishna Reddy retire by rotation at the ensuing
Annual General Meeting and being eligible, offer themselves for re-appointment.
During the year under review, Mr. Satish Chander Chhatwal, representing Airports Authority of India
resigned from the Directorship of BIAL with effect from 30th April 2011 and Mr. V Somasundaram
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was appointed as a Director of your Company with effect from 23rd May 2011 in the casual vacancy
created by resignation of Mr. Satish Chander Chhatwal. Dr.Rajkumar Khatri, IAS, nominee of Karnataka
State Industrial Investment and Development Corporation Limited has been appointed as Director
with effect from 17th June 2011 in the casual vacancy created by resignation of Mr. V Madhu. Dr.
Wolfgang Stefan Bischoff, Director representing Siemens Project Ventures, GmbH resigned from the
Directorship of BIAL with effect from 21st October 2011 and Mr. Johannes Schmidt was appointed as
a Director in the casual vacancy created by resignation of Dr. Bischoff with effect from 21st October
2011.
Consequent to divestiture of 14% equity stakes by Siemens in your Company in favour of BAIDPL,
Mr. Christian Peter Bindl and Mr. O P Narula, representatives of Siemens Project Ventures, GmbH
resigned from the Directorship of BIAL with effect from 20th October 2011 and Mr. Krishna Ram Bhupal
was appointed as an Additional Director on the Board of your Company representing BAIDPL with
effect from 20th October 2011.
The Board places on record its appreciation for the valuable services rendered by the outgoing
Directors, Mr. Satish Chander Chhatwal, Dr. Wolfgang Bischoff, Mr. Christian Peter Bindl and Mr. O P
Narula during their term as Directors of your Company.
11. CORPORATE GOVERNANCE
Your Company strongly believes that the spirit of Corporate Governance goes beyond the statutory
form. Sound Corporate Governance is a key driver of sustainable corporate growth and long-term
value creation for the stakeholders and protection of their interests. Your Company endeavors to
meet the growing aspirations of all stakeholders including shareholders, employees and customers.
Your Company is committed to maintain the highest level of transparency, accountability and equity
in its operations. Your Company always strives to follow the path of good Governance through a broad
framework of various processes.
Whistle Blower Policy
Your Company has established a mechanism for employees to report concerns about unethical
behaviors, actual or suspected fraud or violation of the Companys Code of Conduct. The mechanism
also provides for adequate safeguards against victimization of employees who avail of the mechanism
and also provide for direct access to the Chairman of the Audit Committee. The employees are
informed of this policy through appropriate internal communications. None of the employees have
been denied access to this facility.
12. AUDIT COMMITTEE
The Audit Committee presently has 3 Directors as its members viz., Mrs. Indira Krishna Reddy,
Mr. Pramod K Bhambani and Mr. Alok Shekar. The role, terms of reference, the authority and power of
the Audit Committee are in conformity with the requirements of Section 292A of the Companies Act,
1956.
The Audit Committee meets periodically with the Internal Auditors and the Statutory Auditors to
review the manner in which the Auditors are discharging their responsibilities and to discuss auditing,
internal control and financial reporting issues. To ensure complete independence, the Statutory
Auditors and the Internal Auditors have full and free access to the members of the Audit Committee
to discuss any matter of substance. Three meetings of the Audit Committee were held during the
financial year 2011-12.
13. AUDITORS AND THEIR REPORT
M/s. BSR and Company, Chartered Accountants the Statutory Auditors of your Company, hold office
until the conclusion of the ensuing Annual General Meeting of the Company and have given their
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consent for re-appointment. The Shareholders will be required to elect the Statutory Auditors for
the year 2012-13 and fix their remuneration. Your Company has received written confirmation from
M/s. BSR and Company, Chartered Accountants to the effect that their appointment, if made, would
be in conformity with the limits prescribed under section 224 (1B) of the Companies act, 1956.
The Board recommends the reappointment of M/s. BSR and Company, Chartered Accountants as the
Statutory Auditors of the company.
The observations of the Statutory Auditors, together with the Notes on Accounts referred to in the
Auditors report, are self-explanatory and do not call for any further explanation from the Directors.
14. DIRECTORS RESPONSIBILITY STATEMENT AS REQUIRED UNDER SECTION 217 (2AA) OF THE
COMPANIES ACT, 1956
Pursuant to the requirements specified under Section 217 (2AA) of the Companies Act, 1956, with
respect to the Directors Responsibilities Statement, it is hereby confirmed that;
i. in the preparation of the Annual Accounts for the financial year ended 31st March, 2012,
the applicable Accounting Standards have been followed along with proper explanations
relating to material departures;
ii. the Directors had selected such accounting policies and applied them consistently and made
judgments and estimates that are reasonable and prudent so as to give a true and fair view
of the state of affairs of the Company as at 31st March, 2012 and of the profit or loss of the
Company for the said period;
iii. that the Directors had taken proper and sufficient care for the maintenance of adequate
accounting records in accordance with the provisions of the Companies Act, 1956 for
safeguarding the assets of the Company and for preventing and detecting fraud and other
irregularities; and
iv. the Directors had prepared the Annual Accounts for the financial year ended 31st March,
2012 on a going concern basis.
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which also encouraged volunteer participation. In a bid to encourage the entire airport community to
involve in the spirit of giving, your Company celebrated the Joy of Giving, the proceeds from which
went to 4 NGOs in the airport vicinity. Childrens Day was celebrated with aplomb with the theme of
Centenary Year of Civil Aviation termed Flight of Fantacy wherein 44 children were invited from an
NGO and introduced to various vocations at the airport. Your Company celebrated three years of CSR
initiatives on March 26th 2012. On this occasion, it gave BIAL employees an opportunity to pledge 6
hours of their time to volunteer at various CSR activities in the organization.
In keeping with attempts to liaise with the right partners, your Company conducted a thorough Due
Diligence on 7 NGOs it is regularly associated with to ensure that the proceeds reach those who need
and deserve it the most. Your Companys programme on Fire Prevention and Safety was recognized
and awarded at two forums- The World CSR Day Award Ceremony and Public Relations Council of India
Annual Awards where it competed with over 800 entries. The Public Relations Council of India also
recognized and rewarded your Companys CSR events (Flight of Fantasy) and collateral (Know your
Airport Book).
16. ACKNOWLEDGEMENT
Your Directors take this opportunity to thank the Government of India, particularly, the Ministry
of Civil Aviation, Ministry of Defence, Ministry of Commerce & Industry, Ministry of Finance, and
the Airports Authority of India and the Government of Karnataka, in particular the Infrastructure
Development Department, the Finance Department, KSIIDC, Bangalore Water Supply and Sewage
Board, Bangalore Electricity Supply Company, Karnataka Power Transmission Company Limited,
Bangalore International Airport Area Planning Authority and other bodies associated with the Project,
the Customers, Shareholders, Suppliers, Bankers, Business Partners/Associates, Financial institutions,
Regulatory Agencies for their support and encouragement to the Company.
Your Directors also wish to place on record their appreciation to all the employees of the Company
for their hard work and commitment.Their dedication and competence has ensured that the Company
continues to be a leading player in the Airport Industry.
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AUDITORS REPORT
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(a)
we have obtained all the information and explanations, which to the best of our knowledge
and belief were necessary for the purposes of our audit;
(b)
in our opinion, proper books of account as required by law have been kept by the Company
so far as appears from our examination of those books;
(c)
the balance sheet, statement of profit and loss and the cash flow statement dealt with by
this report are in agreement with the books of account;
(d)
in our opinion, the balance sheet, statement of profit and loss and the cash flow statement
dealt with by this report comply with the accounting standards referred to in sub-section
(3C) of Section 211 of the Act;
(e)
on the basis of written representations received from the directors, as at 31 March 2012,
and taken on record by the Board of Directors, we report that none of the directors are
disqualified as at 31 March 2012 from being appointed as a director in terms of clause (g)
of sub-section (1) of Section 274 of the Act on the said date;
(f)
Without qualifying our opinion, we draw attention to Note 10(d) to the financial statements.
The Company was required to demolish certain assets in order to facilitate its expansion
programme. Since the expansion is being carried out to create an improved infrastructure,
the Company believes that the existing carrying values of the assets demolished, which
are integral to the plan should form part of the expansion cost capitalised. The Company
has, as a matter of abundant caution, also sought an opinion from the Expert Advisory
Committee of the Institute of Chartered Accountants of India (EAC) soliciting their
opinion on the appropriateness of the stated accounting treatment. Pending the opinion
from the EAC, the Company has currently recorded the carrying values of these demolished
assets aggregating Rs 6.38 crore under Capital work in progress. As informed to us by the
Management, the Company would carry out adjustments, if any, based on the opinion
from the EAC;
(g)
Without qualifying our opinion, we draw attention to Note 11 to the financial statements,
regarding recognition and carry forward of Minimum alternate tax (MAT) credit
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(h)
Without qualifying our opinion, we draw attention to Note 13 to the financial statements,
regarding outstanding dues from a customer aggregating Rs 55.32 crore, where there
appears to be significant uncertainty relating to the ability of the party to pay the debts
due to the Company, due to financial difficulties which have resulted in scaling down of
customers business. However, the Management is confident of eventual collection of the
debts due from the customer and accordingly believes that the current provision of Rs
2.64 crore created in accordance with the Companys provision policy is sufficient.; and
(i)
in our opinion and to the best of our information and according to the explanations given
to us, the said financial statements give the information required by the Act, in the manner
so required and give a true and fair view in conformity with the accounting principles
generally accepted in India:
(i)
in the case of the balance sheet, of the state of affairs of the Company as at
31 March 2012;
(ii) in the case of the statement of profit and loss, of the profit of the Company for the
year ended on that date; and
(iii) in the case of the cash flow statement, of the cash flows for the year ended on that
date.
Zubin Shekary
Partner
Membership no. 48814
Firm registration no. 128900W
Place: Bangalore
Date: 25 April 2012
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(a) The Company has maintained proper records showing full particulars, including quantitative
details and situation of fixed assets.
(b) The Company has a regular programme of physical verification of its fixed assets by which all
fixed assets are verified in a phased manner over a period of three years. In our opinion, this
periodicity of physical verification is reasonable having regard to the size of the Company
and the nature of its fixed assets. In accordance with the programme, fixed assets have been
verified during the year and no material discrepancies were noticed on such verification.
(c) Fixed assets disposed off during the year were not substantial, and therefore, do not affect
the going concern assumption.
2 (a) The inventories have been physically verified by the Management during the year. In our
opinion, the frequency of verification is reasonable.
(b) The procedures of physical verification of inventories followed by Management are reasonable
and adequate in relation to the size of the Company and the nature of its business.
(c) The Company is maintaining proper records of inventories. The discrepancies identified
on physical verification of inventories between physical stocks and book records were not
material.
The Company has neither granted nor taken any loans, secured or unsecured, to or from
companies, firms or other parties covered in the register maintained under Section 301 of
the Companies Act, 1956.
In our opinion and according to the information and explanations given to us, having regard
to the explanation by the Management that alternative quotes were not obtained for certain
items owing to those being specialized and proprietary in nature, there is an adequate
internal control system commensurate with the size of the Company and the nature of its
business, with regard to purchase of fixed assets and inventories and with regard to the sale
of services. The activities of the Company do not involve sale of goods. In our opinion and
according to the information and explanations given to us, there is no continuing failure to
correct major weaknesses in internal control system.
In our opinion, and according to the information and explanations given to us, the particulars
of contracts or arrangements referred to in Section 301 of the Companies Act, 1956 have
been entered in the register required to be maintained under the section.
The Company has not accepted any deposits from the public.
In our opinion, the Company has an internal audit system commensurate with the size and
nature of its business.
The Central Government of India has not prescribed the maintenance of cost records
under Section 209(1)(d) of the Companies Act, 1956 for any of the services rendered by the
Company.
9 (a) According to the information and explanations given to us and on the basis of our examination
of the records of the Company, amounts deducted/accrued in the books of account in respect
of undisputed statutory dues including provident fund, income-tax, wealth-tax, service tax,
sales-tax, customs duty, cess and other material statutory dues have been regularly deposited
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during the year by the Company with the appropriate authorities. As explained to us, the
Company did not have any dues on account of employees state insurance, excise duty and
Investor Education and Protection Fund during the year.
(b) According to the information and explanations given to us, no undisputed amounts payable
in respect of provident fund, income-tax, wealth-tax, service tax, sales-tax, customs duty
and other material statutory dues were in arrears as at 31 March 2012 for a period of more
than six months from the date they became payable.
(c) According to the information and explanations given to us, there are no dues of wealth-tax,
sales-tax and customs duty which have not been deposited with the appropriate authorities
on account of any dispute. According to the information and explanations given to us, the
following dues of Income-tax, service tax and Entry tax have not been deposited by the
Company on account of disputes:
Name of the
Nature of dues
Amount
Period to
statute
(in Rs crore) which it
relates
Income Tax Act,
Tax collection at
0.11*
2008-09
1961
source
Commissioner of
Income Tax
(Appeals),
Bangalore
Income Tax Act,
1961
Tax deduction at
6.84
2005-06
source (including
interest)
High Court of
Karnataka
High Court of
Karnataka
Joint commissioner
of Commercial
Taxes (Appeals)
Finance Act, 1994 Service Tax
7.78
2005-09
including interest
and penalty
Finance Act, 1994 Service Tax
1.10
2009-10
including interest
and penalty
10
Customs, Excise
and Service Tax
Appellate Tribunal,
Bangalore
* Out of the above, an amount of Rs 0.05 crore has been paid under protest.
** Out of the above, an amount of Rs 0.34 crore has been paid under protest and a bank guarantee
has been provided for the balance amount by the Company.
The Company does not have any accumulated losses at the end of the financial year and
has not incurred cash losses in the financial year and in the immediately preceding financial
year.
11 In our opinion and according to the information and explanations given to us, the Company has
not defaulted in repayment of dues to its bankers. The Company did not have any outstanding
dues to any financial institution or debentureholders during the year.
12
The Company has not granted any loans and advances on the basis of security by way of
pledge of shares, debentures and other securities.
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13 In our opinion and according to the information and explanations given to us, the Company
is not a chit fund or a nidhi/ mutual benefit fund/ society.
14
According to the information and explanations given to us, the Company is not dealing or
trading in shares, securities, debentures and other investments.
15
According to the information and explanations given to us, the Company has not given any
guarantee for loans taken by others from banks or financial institutions.
16
In our opinion and according to the information and explanations given to us, the term loans
taken by the Company have been applied for the purpose for which they were raised.
17
18
The Company has not made any preferential allotment of shares to companies/ firms/ parties
covered in the register maintained under Section 301 of the Companies Act, 1956.
19
The Company did not have any outstanding debentures during the year.
20
The Company has not raised any money by public issues during the year.
21
According to the information and explanations given to us, no fraud on or by the Company has
been noticed or reported during the course of our audit.
Zubin Shekary
Partner
Membership no. 48814
Place: Bangalore
Date: 25 April 2012
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FINANCIAL STATEMENTS
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Note
31 March 2012
31 March 2011
384.60
384.60
220.06
56.03
604.66
440.63
NON-CURRENT LIABILITIES
Long-term borrowings
1,273.58
1,435.59
225.66
192.32
Long-term provisions
6
2.92
1,502.16
2.13
1,630.04
CURRENT LIABILITIES
Trade payables
28.17
24.94
334.75
260.84
Short-term provisions
ASSETS
8.90
6.75
371.82
292.53
2,478.64
2,363.20
NON-CURRENT ASSETS
10
Fixed assets
Tangible assets
1,449.74
1,564.57
Intangible assets
Capital work-in-progress
432.66
92.14
1,910.80
1,687.83
28.40
11
31.12
185.20
92.86
2,096.00
1,780.69
13.82
CURRENT ASSETS
Inventories
12
15.29
Trade receivables
13
120.39
79.72
14
202.77
434.47
15
11.17
20.71
16
33.02
33.79
382.64
582.51
2,478.64
2,363.20
SIGNIFICANT ACCOUNTING POLICIES
NOTES ON ACCOUNTS
1
2 to 36
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Annexure II
Statement of Profit and Loss for the
Note
Year ended
31 March 2012
Year ended
31 March 2011
Revenue
Revenue from operations
17
Other income
18
Total revenue
605.68
538.20
29.84
48.39
635.52
586.59
Expenses
Employee benefit expenses
19
72.86
65.64
Finance costs
20
134.88
143.59
10
134.76
134.68
Other expenses
21
132.26
110.45
Total expenses
474.76
454.36
160.76
132.23
36.00
29.22
Tax expenses
(36.00)
(29.22)
0.13
0.13
160.76
132.10
4.18
3.43
384,600,000
384,600,000
34
1
2 to 36
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Annexure II
Year ended
31 March 2012
Year ended
31 March 2011
160.76
132.23
134.68
134.76
(0.01)
0.13
26.06
(11.19)
1.24
Interest income
0.05
0.11
Finance expenses
134.83
135.58
428.60
360.15
(29.09)
(2.95)
(28.44)
Inventories
(1.47)
(1.74)
Trade receivables
(41.90)
(30.87)
5.88
13.21
37.84
17.24
428.95
Cash generated from operations
357.99
(34.09)
(29.20)
394.86
328.79
(343.28)
(66.11)
Interest received
33.58
21.10
0.05
257.46
0.03
(48.10)
(93.08)
(183.63)
(91.98)
(0.05)
(1.62)
(0.05)
(0.11)
Finance expenses
(133.18)
(135.37)
(229.08)
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Year ended
31 March 2012
Year ended
31 March 2011
25.76
6.63
17.96
11.33
43.72
17.96
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The financial statements have been prepared and presented under the historical cost convention
on the accrual basis of accounting except for certain financial instruments which are measured
at fair values and comply with the Accounting Standards (AS) prescribed by Companies
(Accounting Standards) Rules, 2006, as amended, other pronouncements of the Institute of
Chartered Accountants of India (ICAI) and the relevant provisions of the Companies Act, 1956,
(hereinafter the Act) to the extent applicable. The financial statements are prepared in crore
of Indian rupees.
The Management evaluates all recently issued or revised Accounting Standards on an ongoing basis. Pursuant to ICAI announcement on application of AS 30 - Financial Instruments:
Recognition and Measurement, AS 31 - Financial Instruments: Presentation and AS 32
- Financial Instruments: Disclosures relating to financial instruments, the Company has
adopted the principles of AS 30, to the extent the adoption does not conflict with existing
mandatory accounting standards and other authoritative pronouncements, Company Law and
other regulatory requirements.
The preparation of financial statements in conformity with the generally accepted accounting
principles in India requires Management to make estimates and assumptions that affect the
reported amounts of income and expenses of the year, assets and liabilities and disclosures
relating to contingent liabilities as of the date of the financial statements. Actual results could
differ from those estimates. Any revision to accounting estimates is recognised prospectively in
current and future years.
Revenue from airport operations are recognised on accrual basis, net of service tax, applicable
discounts and collection charges, when services are rendered and it is probable that an economic
benefit will be received, which can be quantified reliably.
Aeronautical Revenue includes revenue from all regulated charges levied at the BIA, i.e.,
landing fees, parking and housing fees, passenger service fee (facilitation component) and user
development fees. Non Aeronautical Revenue means all revenue streams other than aeronautical
revenue streams.
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Interest is recognised using the time proportion method based on rates implicit in the transaction.
Award fees and tender fees are recognised on an accrual basis in accordance with the terms of
the relevant arrangement. Utility charges recovered from users of such utilities are adjusted
against the relevant expenses.
Depreciation is provided on a Straight Line Method (SLM). The rates of depreciation prescribed
in Schedule XIV to the Act are considered as the minimum rates. If Managements estimate of
the useful life of a fixed asset at the time of acquisition of the asset or of the remaining useful
life on a subsequent review is shorter than envisaged in the aforesaid schedule, depreciation is
provided at a higher rate based on Managements estimate of the useful/remaining useful life.
Pursuant to this policy, the rates of depreciation determined by the Management are as set out
below:
Class of Asset
Building
3.33%-5%
Engineering structures
3.33%-5%
4.75%-16.21%
Office equipment
10.34%-25%
Computers
16.21%-25%
6.33%-10%
Vehicles
9.5%-20%
Assets individually costing upto rupees five thousand are fully depreciated in the year of
purchase. Depreciation on additions and disposals during the year is provided on proportionate
basis.
Computer software licenses are capitalised on the basis of costs incurred to acquire and bring
to use the specific software. Operating software is capitalised and amortised along with the
related fixed asset. Other software is amortised, on a straight line method, over a period of
three to five years based on Managements assessment of useful life.
The Company had incurred certain legal and other expenses during the construction period
towards various agreements, viz. Concession Agreement, Communication, Navigation and
Surveillance and Air Traffic Management (CNS/ ATM) Agreement, Operations and Management
Services Agreement, State Support Agreement and Land Lease Agreement which are capitalised
as Intangibles Others and are amortized over a period of seven or thirty years.
The amortisation period and method used for intangible assets are reviewed at each financial
year end.
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Leases under which the Company assumes substantially all the risks and rewards of ownership
are classified as finance leases. Such assets acquired are capitalised at fair value of the asset
or present value of the minimum lease payments at the inception of the lease, whichever is
lower.
Operating lease expenses/income is recognised in the profit and loss account on a straight line
basis over the lease term.
The Company is exposed to foreign currency transactions including foreign currency expenses
and payables. With a view to minimize the volatility arising from fluctuations in currency rates,
the Company enters into foreign exchange forward contracts and other derivative instruments.
Additionally, the Company enters into interest rate derivatives to minimise its interest costs.
Foreign exchange transactions are recorded using the exchange rates prevailing on the dates
of the respective transactions. Exchange differences arising on foreign exchange transactions
settled during the year are recognised in the profit and loss account for the year.
Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date
are translated at the closing exchange rates on that date; the resultant exchange differences
are recognized in the profit and loss account. Non-monetary items which are carried in terms of
historical cost denominated in a foreign currency are reported using the exchange rate at the
date of the transaction.
For forward exchange contracts and other derivatives that are not covered by Accounting
Standard (AS) 11, The Effects of Changes in Foreign Exchange Rates (hereinafter referred
to as AS 11) and that relate to a firm commitment or highly probable forecast transactions,
the Company has adopted the principles of AS 30, Financial Instruments: Recognition and
Measurement (hereinafter referred to as AS 30) with effect from 1 April 2009. In accordance
with the principles of AS 30, such derivative financial instruments, which qualify for cash flow
hedge accounting and where Company has met all the conditions of cash flow hedge accounting,
are fair valued at balance sheet date and the resultant exchange loss/(gain) is debited/credited
to the Hedge Reserve. This loss/ (gain) would be recorded in profit and loss account when the
underlying transactions occur.
The derivative instruments which are termed as financial assets/ liability in accordance with
the principle of AS 30 are accounted at fair value through profit and loss account and any
subsequent change in measurement is also routed through the profit and loss account.
1.10 Inventory
Inventory consists of spares for machineries, which are charged to the profit and loss account
as and when they are consumed. The inventories are valued using the weighted average cost
method.
Defined-contribution plans
The Company has defined contribution plans (where Company pays pre-defined amounts and
does not have any legal or informal obligation to pay additional sums) for post employment
benefits namely Provident Fund, and the Companys contributions thereto are charged to profit
and loss account every year. The Companys contributions to State plan, namely, Employee
Pension Scheme, 1995, is charged to profit and loss account every year.
Defined-benefit plans
The Company has defined benefit plan (viz., Gratuity) for employees, the liability for which is
determined on the basis of actuarial valuation at the balance sheet date under the Projected
Unit Credit Method.
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The obligation for long term employee benefits like compensated absences is recognised at the
present value of the obligation based on actuarial valuation under the Projected Unit Credit
method at each balance sheet date.
Gains or losses arising out of actuarial valuation are recognised immediately in the profit and
loss account.
The Concession fee is computed as a percentage of gross revenue pursuant to the terms and
conditions of the Concession Agreement for designing, financing, construction, operation and
maintenance of an international airport at Devanahalli, Bangalore and is recognised in the profit
and loss account.
The current income tax charge is determined in accordance with the relevant provisions of the
Income-tax Act, 1961 applicable to the Company.
Deferred tax charge or credit are recognised for the future tax consequences attributable to
timing difference that result between the profit offered for income taxes and the profit as per
the financial statements. Deferred tax in respect of timing difference which originate during
the tax holiday period but reverse after the tax holiday period is recognised in the year in
which the timing difference originate. For this purpose, the timing differences which originate
first are considered to reverse first. The deferred tax charge or credit and the corresponding
deferred tax liabilities or assets are recognised using the tax rates that have been enacted or
substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the
extent there is reasonable certainty that the assets can be realised in future; however, when
there is a brought forward loss or unabsorbed depreciation under taxation laws, deferred tax
assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax
assets are reviewed as at each balance sheet date and written down or written up to reflect the
amount that is reasonably/virtually certain to be realised.
In accordance with the provisions of Section 115JAA of the Income-tax Act, 1961, the Company
is allowed to avail credit equal to the excess of Minimum Alternate Tax (MAT) over normal
income tax for the assessment year for which MAT is paid. MAT credit so determined can be
carried forward for set-off for ten succeeding assessment years from the year in which such
credit becomes allowable. MAT credit can be set-off only in the year in which the Company
is liable to pay tax as per the normal provisions of the Income-tax Act, 1961 and such tax is
in excess of MAT for that year. Accordingly, MAT credit entitlement is recognised only to the
extent there is convincing evidence that the Company will pay normal tax during the specified
period.
The basic and diluted earnings per share is computed by dividing the net profit/loss attributable
to equity shareholders for the year by the weighted average number of equity shares outstanding
during the year. The Company did not have any potentially dilutive equity shares outstanding
during the year.
Provisions are recognised when the Company has a present obligation as a result of past events,
for which it is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation and a reliable estimate of the amount can be made. Provisions
are reviewed regularly and are adjusted where necessary to reflect the current best estimates of
the obligation. A disclosure for a contingent liability is made when there is a possible obligation
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or a present obligation that may, but probably will not, require an outflow of resources. When
there is a possible obligation or a present obligation in respect of which the likelihood of
outflow of resources is remote, no provision or disclosure is made.
1.16 Impairment of assets
At each balance sheet date, the Company assesses whether there is any indication that an
asset may be impaired. If any such indication exists, the Company estimates the recoverable
amount. If the carrying amount of the asset exceeds its recoverable amount, an impairment
loss is recognised in the profit and loss account to the extent the carrying amount exceeds the
recoverable amount. The reduction is treated as an impairment loss and is recognised in the
profit and loss account. If at the balance sheet date, there is an indication that a previously
assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset
is reflected at the recoverable amount, subject to a maximum of depreciable historical cost.
An impairment loss is reversed only to the extent that the carrying amount of asset does not
exceed the net book value that would have been determined; if no impairment loss had been
recognised.
Cash flows are reported using the indirect method, whereby net profit before tax is adjusted for
the effects of transactions of a non-cash nature and any deferrals or accruals of past or future
cash receipts or payments. The cash flows from operating, investing and financing activities of
the Company are segregated.
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NOTES ON ACCOUNTS
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As at 31 March 2012
Particulars
As at 31 March 2011
Equity shares
Authorised:
700.00
700.00
700,000,000 (Previous year: 700,000,000) equity shares of Rs 10 each
Issued, subscribed and fully paid up:
384,600,000 (Previous year: 384,600,000) equity shares of Rs 10 each
fully paid up
384.60
384.60
384.60
384.60
The Company has only one class of equity shares having par value of Rs 10 per share. Each holder
of equity shares is entitled to one vote per share. The Company can declare and pay dividends.
The dividend proposed by the Board of Directors is subject to the approval of the shareholders in
the ensuing Annual General Meeting. No dividends have been declared by the Company till date.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining
assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the
number of equity shares held by the shareholders.
The details of shareholder holding more than 5% shares as at 31 March 2012 and 31 March 2011 is set below:
As at 31 March 2012
As at 31 March 2011
No. of shares
% held No. of shares % held
43
26
13
13
5
111,534,000
153,840,000
49,997,997
49,998,000
19,230,000
29
40
13
13
5
The reconciliation of the number of shares outstanding as at 31 March 2012 and 31 March 2011 is set out below:
Particulars
As at 31 March 2012
As at 31 March 2011
384,600,000
384,600,000
384,600,000
384,600,000
(in rupees crore)
As at 31 March 2011
(3.50)
(6.35)
3.27
2.85
(0.23) (3.50)
769.47
170.61
940.08
923.37
178.64
0.08
1,102.09
272.25
61.25
272.25
61.25
333.50
1,273.58
333.50
1,435.59
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6.66
1.88
137.11
133.97
Others
Security deposits from service provider, right holders, etc.
Concession fee payable (Refer note below)
81.89
225.66
56.47
192.32
The Company has entered into a Concession Agreement (hereinafter CA) with the Ministry of Civil
Aviation, Government of India on 5 July 2004 (as amended on 20 November 2006, to include scope
of re-design) whereby the Government of India has granted to the Company exclusive right and
privilege to carry out the development, design, financing, construction, commissioning, maintenance,
operation and management of BIA [excluding the right to carry out the reserved activities as per CA or
to provide Communication and Navigation Surveillance/ Air Traffic Management (CNS/ ATM) services,
which are required to be provided by AAI] for an initial period of 30 years (and renewable for a further
period of 30 years subject to stipulated conditions) from the date of commencement of commercial
operations of air traffic and has provided for the payment of a concession fee by the Company.
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The concession fee for the first ten financial years shall be payable in twenty equal half-yearly
instalments and first such instalment being due and payable on 30 June and second of such instalment
being due and payable on 31 December (Reference Date) on the eleventh financial year after the
AOD. For the rest of the term, the instalment shall be payable on the Reference Date falling thereafter.
6 Long-term provisions
Particulars
As at 31 March 2012
As at 31 March 2011
2.92
2.13
2.92
2.13
7 Trade payables
Particulars
As at 31 March 2012
As at 31 March 2011
0.37
0.16
27.80
24.78
28.17
24.94
Trade payables
Due to micro and small enterprises [Refer note 35]
Others
As at 31 March 2012
As at 31 March 2011
1.23
2.96
153.90
153.90
34.07
29.74
0.08
0.05
2.37
0.72
11.23
0.17
0.72
0.09
Deferred revenue
0.11
0.54
9.69
7.35
Other payables
Other liabilities
115.71
52.11
5.12
3.59
1.04
0.52
8.58
334.75
260.84
9 Short-term provisions
Particulars
As at 31 March 2012
As at 31 March 2011
0.09
0.02
Compensated absences
4.62
3.69
4.19
3.04
8.90
6.75
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1,977.96
1,965.02
13.52
29.60
43.12
3.19
1,934.84
560.48
537.88
662.99
2.62
77.00
67.06
23.62
As at
1 April
2011
26.44
16.13
1.15
1.15
-
25.29
6.03
8.53
2.78
0.33
4.53
2.41
0.68
11.09
3.19
-
-
-
2.81
11.09
1.70
-
2.38
0.01
0.02
4.17
-
Additions/
Deletions/
adjustments
adjustments
during the year during the year
Original Cost
1,993.31
1,977.96
14.67
29.60
44.27
0.38
1,949.04
564.81
546.41
663.39
2.94
81.51
65.30
24.30
As at
31 March
2012
382.27
247.67
7.70
4.30
12.00
1.48
370.27
52.88
63.47
195.54
0.82
35.83
12.36
7.89
134.76
134.68
2.37
1.50
3.87
0.06
130.89
18.77
22.36
69.44
0.32
12.97
4.19
2.78
1.86
0.08
-
-
1.31
1.86
0.17
-
0.82
(1.29)
0.85
-
As at
Deletions/
1 April
For the year adjustments
2011
during the year
Depreciation/Ammortisation
515.17
382.27
10.07
5.80
15.87
0.23
499.30
71.48
85.83
264.16
1.14
50.09
15.70
10.67
As at
31 March
2012
1,478.14
1,595.69
4.60
23.80
28.40
0.15
1,449.74
493.33
460.58
399.23
1.80
31.42
49.60
13.63
As at
31 March
2012
1,595.69
-
5.82
25.30
31.12
1.71
1,564.57
507.60
474.41
467.45
1.80
41.17
54.70
15.73
As at
31 March
2011
41
41
Notes:
a Engineering Structures represents runway, taxiways, apron and roads (including trumpet flyover).
b The above fixed assets include Rs 50.89 crore (Previous year: Rs 50.89 crore) funded by State Financial Support (Contingent amount).
c During the year, Computers amounting to Rs 2.81 crore, related accumulated depreciation amounting to Rs. 1.31 crore has been transferred from assets acquired on
finance lease to owned assets on completion of lease period and payment of lease obligations. During the previous year, Software amounting to Rs 2.94 crore, related
accumulated depreciation amounting to Rs.1.53 had been transferred from assets acquired on finance lease to owned assets on completion of lease period and payment
of lease obligations.
d During the year ended 31 March 2012, the Company has demolished a portion of its fixed assets, comprising of carrying values of Building aggregating Rs 1.52 crore,
Furniture and fixtures aggregating Rs 3.32 crore and Plant and equipment aggregating Rs 1.54 crore as a part of its airport expansion plan. The Management has not
derecognized the carrying values of these assets on demolition and has instead transferred the carrying values of such assets to Capital work-in-progress as it believes
that these costs are an integral part of the new asset being constructed and hence eligible for capitalisation. The Company has, as a matter of abundant caution, also
sought an opinion from the Institute of Chartered Accountants of India (EAC) soliciting their opinion on the appropriateness of the stated accounting treatment.
Pending the opinion from the EAC, the Company has currently recorded the carrying values of these demolished assets aggregating Rs 6.38 crore under Capital work-inprogress. The Company would carry out adjustments, if any, based on the opinion from the EAC.
Total
Previous year
Software
Others (Refer note 1.6)
Computers
Intangibles Assets:
Leased
Buildings
Engineering structures
Plant and equipment
Office equipment
Computers
Furniture and fixtures
Vehicles
Owned
Tangible Assets:
Particulars
Annexure II
Annexure II
As at 31 March 2012
As at 31 March 2011
59.06
5.17
Particulars
Capital advances
Deposits with Government authorities
Minimum alternate tax credit entitlement *
Advance tax (net of provision)
5.24
5.24
73.52
37.52
0.31
1.07
47.07
43.86
185.20
92.86
* The Company has recognised and carried forward Minimum alternate tax (MAT) credit entitlement
aggregating Rs 73.52 crore (Previous year: Rs 37.52 crore) as at 31 March 2012. This is based on the
profitable projections of the Company for aeronautical, non aeronautical and real estate businesses;
which are supported by the Concession agreement, which gives the Company the right to operate the
airport for a period of atleast 30 years from the airport opening date (i.e. 23 May 2008). Accordingly, the
Management believes that there will be sufficient future taxable profits to utilise the aforementioned
MAT credit entitlement within the stipulated period available under the provisions of the Income-tax
Act, 1961 of India, notwithstanding the fact, that the Company is entitled to a tax holiday period as
per the provisions of Section 80-IA of the aforesaid Act. The Company has, as a matter of abundant
caution, also sought an opinion from the Expert Advisory Committee of the Institute of Chartered
Accountants of India (EAC) soliciting their opinion on the appropriateness of the stated accounting
treatment. The Company is awaiting the opinion from the EAC, and has currently retained the MAT
credit entitlement aggregating Rs 73.52 crore (Previous year: Rs 37.52 crore) under Long-term loans
and advances. The Company would carry out adjustments, if any, based on the opinion from the
EAC.
12 Inventories
Particulars
As at 31 March 2012
As at 31 March 2011
15.29
13.82
15.29
13.82
13 Trade receivables *
Particulars
As at 31 March 2012
As at 31 March 2011
0.19
2.60
Others
3.13
2.39
3.32
4.99
Secured
Considered good
Unsecured
Considered good
26.38
17.57
Others
90.69
57.16
Considered doubtful
Others
2.75
-
119.82
1.52
76.25
(2.75)
(1.52)
120.39
79.72
* The trade receivables as at 31 March 2012 contain outstanding dues from a customer aggregating
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CP No. 14/2013-14- MYTP & ATP- BIAL-CP
Annexure II
As at 31 March 2012
As at 31 March 2011
0.01
0.16
0.01
2.53
11.17
32.38
43.72
13.53
1.89
17.96
159.05
159.05
202.77
33.50
383.01
416.51
434.47
The deposits maintained by the Company with banks comprise of time deposits, which can be
withdrawn by the Company at any point without prior notice or penalty on the principal.
15 Short-term loans and advances
As at 31 March 2012
Others
Prepaid expenses
Mark-to-market gain on forward and options contracts
Others
Deposits
7.95
0.85
1.79
0.58
11.17
7.49
1.42
1.32
0.48
10.00
20.71
(in rupees crore)
As at 31 March 2012
As at 31 March 2011
9.88
14.37
Unbilled revenue
23.14
19.42
33.02
33.79
Sale of services
Aeronautical revenues
367.69
331.40
Non-aeronautical revenues
237.99
206.80
605.68
538.20
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18 Other income
Particulars
Interest - banks
29.09
28.44
Interest - others
0.01
16.87
0.01
Tender fees
0.25
0.08
Miscellaneous income
2.95
0.48
0.05
29.84
48.39
Particulars
57.98
3.19
3.23
Staff welfare
2.12
2.45
1.35
1.98
72.86
65.64
20 Finance costs
Particulars
Interest - banks
Rupees term loan*
106.83
116.83
17.92
17.72
7.90
1.18
1.14
134.88
143.59
* Net of recovery from Passenger Service Fee (Security Component) Account Rs 3.95 crore (Previous year: Rs 5.28 crore) [Refer note 22]
21 Other expenses
Particulars
Rent
Land lease *
6.35
6.35
Others
0.41
0.29
0.81
0.14
Insurance
2.04
2.46
23.23
22.38
Repairs to buildings
15.07
11.97
20.61
17.77
5.32
3.78
25.42
23.15
5.37
2.67
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Annexure II
6.08
2.48
7.84
8.15
Advertisement
1.98
1.09
7.03
5.87
0.67
0.69
0.29
0.36
1.47
0.13
1.24
Miscellaneous
1.03
0.72
132.26
110.45
P
assenger Service Fee (PSF) collected from the departing passengers has two components, viz.
Facilitation component (FC) and Security component (SC). As per orders issued by Ministry of Civil
Aviation (MoCA) from time to time, PSF (SC) collections are held by the Company in fiduciary capacity
for the Government of India and are deposited in escrow bank account maintained for meeting security
related expenses.
he following is the Memorandum Account relating to PSF (SC) for which the books are maintained
T
separately. The balances/transactions do not form part of the Companys books of account.
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Annexure II
Income
PSF (SC) (net of service tax)
81.43
Other income
0.53
74.29
81.96
Expenditure
0.31
74.60
64.03
57.67
17.93
16.93
42.36
51.23
13.61
6.98
Sundry debtors
23.73
15.23
Cash on hand
Current accounts
Deposit accounts
0.63
1.35
11.69
12.32
6.62
7.97
92.02
81.41
Liabilities
Book overdraft
0.13
0.12
47.07
53.86
5.80
6.34
39.02
21.09
92.02
81.41
The following capital and revenue expenditure have been transferred/ debited to PSF (SC) Account by
the Company and included in the above balances:
Particulars
Year ended
31 March 2012
Year ended
31 March 2011
0.55
3.95
5.28
0.57
0.97
The Company had received observations from the Comptroller and Auditor General of India (CAG)
during the audit for the year 2010-2011, stating that the Perimeter wall should not form a part of
the PSF(SC) books based on Ministry of Civil Aviation (MoCA) SOP and clarification dated 5 July
2010. The Company has replied to the CAG stating that the general clarification by MoCA in July
2010, stated that the 16 April 2010 order shall be applicable prospectively and should not be applied
retrospectively and accordingly no adjustment is required to be carried out. The CAG has also sent
their comments to the MoCA in the month of March 2012 with a copy of the same to the Company.
Pending further communication from the MoCA, the Company has retained the security related capital
assets (including perimeter wall) in the PSF (SC) books.
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CP No. 14/2013-14- MYTP & ATP- BIAL-CP
Annexure II
The Finance Act, 2001 has introduced, with effect from assessment year 2002-03 (effective 1 April
2001), detailed Transfer Pricing regulations for computing taxable income and expenditure from
international transactions between associated enterprises on an arms length basis. These
regulations, inter alia, also require the maintenance of prescribed documents and information
including furnishing a report from an accountant within the due date of filing the Return of
Income.
For the fiscal year ended 31 March 2011, the Company had undertaken a study to comply with
the regulations for which the prescribed certificate of the Accountant has been obtained and
that did not envisage any additional tax liability. For the fiscal year ended 31 March 2012, the
Company is in the process of undertaking a study to comply with the said regulations.
(b) The deferred tax asset/ liability as at the balance sheet date resulting from timing differences
between book profit and tax profit are bifurcated between differences which relate to tax
holiday period and other timing differences. In the opinion of the Management, the timing
differences which pertain to the tax holiday period are expected to get reversed in the future
years within the tax holiday period and accordingly, no deferred tax has been created for the
same. The Management is of the view that the other timing differences are not likely to be
material.
24 Contingent liabilities and commitments (To the extent not provided for)
Contingent liabilities:
Particulars
As at 31 March 2012
0.98
0.98
(a) The Company has issued undertaking to Customs authorities aggregating to Rs Nil (Previous year:
Rs 0.78 crore) with respect to concessional rate of duty adopted for import of certain eligible
equipment for use in BIA.
(b) The Company has filed an application to get itself impleaded as one of the aggrieved party
against an appeal filed by the State of Karnataka, challenging the order of the Karnataka High
Court, issued in April, 2007, quashing the levy of Special Entry Tax of Rs 2.13 crore (Previous
year: Rs 2.13 crore).
(c) The Income Tax Department has filed an appeal in the Karnataka High Court against the
Income Tax Appellate Tribunal (ITAT) order regarding the Tax Deducted at Source (TDS) on the
reimbursement of Development Costs to overseas promoters in 2005-2006. The Company had
earlier paid the TDS amount of Rs. 5.94 crore (Previous year: Rs 5.94 crore) under protest
before getting the relief from ITAT. This was refunded to the company along with interest of Rs.
0.91 crore (Previous year: Rs 0.91 crore) as a result of favourable ITAT order. The Management
is confident of defending the Tribunal order in the High Court and made appropriate legal
representation in this regard.
(d) The Company has received two demand orders from Commissioner of Service tax for the periods
2005-2009 and 2009-10 for payment of service tax of Rs.2.36 crore as a recipient of service
towards reimbursement of salary costs to Zurich Airport (Previous year: Rs 2.36 crore as per the
show cause notices). The interest and penalty as per the above demand orders amounts to Rs
1.23 crore and Rs 2.93 crore respectively. Further, a show cause notice has been issued for period
2010-2011 for a sum of Rs.0.29 crore on the same account. These payments relate to salaries
of expatriates who were seconded to Company. The Company has preferred an appeal against
demand orders before the Tribunal (CESTAT) and challenged the show cause notice which
47
CP No. 14/2013-14- MYTP & ATP- BIAL-CP
Annexure II
is not confirmed by formal demand as on the balance sheet date. The Company has challenged
the demand based on the judicial precedence on the matter and is confident of non-applicability
of service tax since the payment relates to salary costs to expatriate employees of the Company
which cannot be treated as services received by the Company. Zurich Airport is only a remitter of
the foreign currency remuneration as is evidenced by Expatriate Remuneration Reimbursement
Agreement between the Company and Zurich Airport. The Company has accounted these
payments as salaries and discharged appropriate TDS as the economic employer of the said
expatriates.
Commitments:
Particulars
As at 31 March 2012
Other commitments *
* Pertains to open forward exchange contracts aggregating Rs 5.97 crore (Previous year: Rs 26.04
crore) and lease commitments aggregating Rs 0.18 crore (Previous year: Rs 0.31 crore).
As at 31 March 2011
564.64
97.52
6.15
26.35
2.56
3.43
0.13
Technical consultancy
1.57
2.90
0.50
0.41
Repairs
1.70
1.26
Interest banks
4.16
4.40
0.30
0.45
0.05
0.43
Others
0.38
0.01
0.83
0.43
1.16
1.25
Particulars
Indigenous
Imported
80%
20%
100%
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Annexure II
Year ended
31 March 2012
Year ended
31 March 2011
Statutory audit (including limited reviews)
Others*
0.25
0.15
0.40
0.25
0.10
0.35
0.01
0.01
Reconciliation of opening and closing balances of the present value of the defined obligation:
Particulars
As at 31 March 2012
2.15
1.32
0.81
0.50
Interest cost
0.26
0.15
Classified as:
(0.25)
0.14
0.04
0.04
3.01
2.15
Long-term provisions
2.92
2.13
Short-term provisions
0.09
0.02
Total
3.01
2.15
Defined benefit obligation liability as at balance sheet date is not funded by the Company
Particulars
Year ended 31 March 2012
0.81
0.50
Interest cost
0.26
0.15
(0.25)
0.14
0.04
0.04
0.86
0.83
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CP No. 14/2013-14- MYTP & ATP- BIAL-CP
Annexure II
Assumptions
Particulars
Attrition rate
As at 31 March 2012
As at 31 March 2011
8.70%
8.35%
7%
7%
Age 21-44:2%
Age 21-44:2%
Age 45-59:1%
Age 45-59:1%
0.10
0.10
Amounts for the current and the previous four years are as follows:
Particulars
Plan assets
Surplus/ (defecit)
b)
As at 31 March 2012 31 March 2011 31 March 2010 31 March 2009 31 March 2008
3.01
2.15
1.32
0.81
(3.01)
(2.15)
(1.32)
(0.81)
(0.09)
0.12
(0.02)
(0.01)
0.25
(0.25)
-
30 Segment Reporting
The Company is in the business of operations of the Airport at Bangalore. Consequently, disclosure
under AS 17 Segment reporting has not been made, as, in the opinion of the Management, the
Company does not have separate reportable business or geographical segments.
31 Related party
Orbit Tours and Travels Private Limited Enterprises in which directors have significant influence
GVK Projects & Technical Services Limited Enterprises in which directors have significant influence
GVK Power & Infrastructure Limited Enterprises in which directors have significant influence
The details of amounts due to or due from as at 31 March 2012 and 31 March 2011 are as follows:
Trade payables
0.18
0.01
Trade payables
3.43
The details of related party transactions entered into by the Company for the year ended 31 March 2012
and 31 March 2011 are as follows:
Nature
As at 31 March 2012
As at 31 March 2011
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CP No. 14/2013-14- MYTP & ATP- BIAL-CP
Annexure II
Year ended
31 March 2012
Year ended
31 March 2011
Remuneration
3.73
3.40
Marcel Hungerbuehler
Remuneration
0.04
0.78
0.54
12.00
0.53
0.65
GVK Projects & Technical Services Limited Travel cost & Technical
Consultancy fee
*Transactions falling under the purview of Section 297 of the Companies Act, 1956, for which
necessary approval has been received from the Ministry of Corporate Affairs.
32 Leases
Finance lease
The Company has acquired computer systems and software on lease for a period of three to five
years, which has been classified as a finance lease as envisaged in Accounting Standard (AS) 19
Leases:
Particulars
As at 31 March 2012
As at 31 March 2011
0.08
0.06
0.08
0.08
0.14
(0.01)
0.08
0.13
Particulars
As at 31 March 2012
As at 31 March 2011
0.08
0.05
0.08
0.08 0.13
Operating lease
(in rupees crore)
Particulars
Rent*
*The Company has entered into leasing arrangements for office and residential premises,which
are generally cancellable in nature. Such leases are generally for a period ranging from eleven
to one hundred eight months with options for renewal against increased rent, and premature
termination of agreement with notice periods ranging between one to six months.
The amount of lease rentals towards long-term non-cancellable operating leases for office
premises is Rs 0.15 crore (Previous year: Rs 0.13 crore).
The maximum obligations on long-term non-cancellable operating leases for office premises are
as follows:
0.42
0.43
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Annexure II
Notes on accounts for the year ended 31 March 2012
Particulars
As at 31 March 2012
As at 31 March 2011
0.13
0.13
Later than one year but not later than five years
0.05
0.18
0.18 0.31
The Company has entered into agreements for sub-lease of approximately 3.18 acres, with
three concessionaires/ airline operators to use the land for commercial operations. The
agreements provide for transfer of land back to the Company along with the buildings constructed
by the concessionaires/ airline operators, at the end of the sub-lease term which ranges from
seven to fifteen years. The company has recognised revenue of Rs 2.86 crore (Previous year: Rs
2.64 crore) as part of Non-aeronautical revenue (Also refer note 17).
33 Derivatives
As at 31 March 2012, the Company has outstanding forward contracts amounting to USD 0.12
crore (Previous year: USD 0.54 crore), EURO Nil (Previous year: EURO 0.02 crore) and CHF Nil
(Previous year: CHF 0.02 crore). These derivative instruments have been entered to hedge
highly probable forecasted payables.
The Company has unhedged foreign currency exposure of Rs 1.41 crore (Previous year: Rs 0.30
crore) for sundry creditors as at balance sheet date.
In accordance with the principles of AS 30, those derivative instruments which qualify for
cash flow hedge accounting have been fair valued as at balance sheet date and the resultant
exchange loss as at the year-end aggregating Rs 0.23 crore (Previous year: Rs 3.50 crore) has
been accounted in Hedge Reserve.
In accordance with the principles of AS 30, those derivative instruments which are termed as
financial assets/ liability, accounting have been fair valued as at balance sheet date at Rs Nil
(Previous year: Rs 0.98 crore) and the resultant exchange gain amounting to Rs 0.98 crore has
been credited to the Statement of profit and loss.
Particulars
Profit after tax for the year considered for the calculation
35
The Ministry of Micro, Small and Medium Enterprises has issued an Office Memorandum dated
26 August 2008 which recommends that the Micro and Small enterprises should mention in their
correspondences with its customer the Entrepreneurs Memorandum Number as allocated after
filing of the Memorandum. Accordingly, the disclosure in respect of the amounts payable of such
enterprises as at 31 March 2012 has been made in the financial statement based on information
received and available with the Company. The dues to such enterprises which have provided
goods and services to the Company and which qualify under the definition of Micro and Small
enterprises, as defined under Micro, Small and Medium Enterprises Development Act, 2006 is
stated as under:
10
10
384,600,000
384,600,000
160.76
132.10
4.18
3.43
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Annexure II
(in rupees crore)
Particulars
31 March 2012
(i)
(ii)
(iii)
31 March 2011
0.37
0.16
(v)
The above information has been determined to the extent such parties have been identified by
the Company, which has been relied upon by the auditors.
36
The Company has prepared these financial statements as per the format prescribed by Revised
Schedule VI to the Companies Act, 1956 (the schedule) issued by Ministry of Corporate Affairs.
Previous periods figures have been regrouped to conform to the classification required by the
Revised Schedule VI.
Director
S. Chandrasekar
Director - Finance
53
CP No. 14/2013-14- MYTP & ATP- BIAL-CP
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Annexure II
Annexure II
1
CP No. 14/2013-14- MYTP & ATP- BIAL-CP
Annexure II
Contents
INTRODUCTION.................................................................................................................................... 3
STATE CONCESSIONS (GOI AND GOK) ................................................................................................. 7
APPROPRIATE REGULATORY TILL......................................................................................................... 8
TILL - A POLICY DECISION ................................................................................................................... 25
AIRPORTS - WHETHER A MONOPOLY ................................................................................................ 26
FAIR RATE OF RETURN ....................................................................................................................... 27
LAND VALUE ADJUSTMENT ............................................................................................................... 29
SERVICES OTHER THAN REGULATED SERVICES ................................................................................. 31
SERVICE QUALITY ............................................................................................................................... 33
INCENTIVE BASED OR PRICE CAP REGULATION................................................................................. 35
INTRUSIVE / HEAVY HANDED REGULATION .................................................................................. 37
21.
22.
Refinancing of debt:........................................................................................................... 38
23.
25.
27.
28.
29.
Initial RAB........................................................................................................................... 44
30.
31.
32.
33.
34.
CONCLUSION ..................................................................................................................................... 51
2
CP No. 14/2013-14- MYTP & ATP- BIAL-CP
Annexure II
INTRODUCTION
1.
2.
The following orders and/or consultation papers have been issued by the Authority
in respect of the tariff determination exercise:
(i)
White Paper dated December 22, 2009 setting out the broad canvas, within
which, tariff determination exercise would be conducted;
(ii)
Consultation Paper No.3/2009-10 dated February 26, 2010 setting out the
proposed regulatory philosophy of the Authority;
(iii)
Order No.13/2010-11 dated January 12, 2011 setting out the Regulatory
Philosophy and Approach in Economic Regulation of Airport Operators;
(iv)
Order No.14/2010-11 dated February 28, 2011 further setting out the
Regulatory Philosophy and Approach in Economic Regulation of Airport
Operators; and
(v)
3.
BIAL had submitted a detailed response dated March 19, 2010 to Consultation
Paper No.3/2009-10. BIAL had also filed Appeal No.2/2011 challenging Order
No.13/2010-11; and Appeal No.7/2011 challenging Order No.14/2010-11 and
Direction No.5/2010-11.
4.
Appeal Nos.7 to 11 of 2011 were listed for hearing on February 15, 2013 before the
Honble Appellate Tribunal. During the course of hearing of Appeal No.7 to 11 of
2011, a submission was made on behalf of the Authority that, the Authority by
Order No.13/2010-11, Order No. 14/2010-11 and Direction No.5/2010-11 has only
3
Annexure II
indicated its mind prima facie and that it would be open to the contesting parties to
canvass their views regarding the principles to be applied in the tariff determination
exercise. In line with this submission, Appeal Nos. 7 to 11 of 2011 were disposed of
by a common order dated February 15, 2013 providing BIAL and other stakeholders
an opportunity to raise all pleas and contentions before the Authority. We at BIAL
welcome the submission made on behalf of the Authority since this provides a
window of opportunity to BIAL to convey its concerns, apprehensions and
difficulties with respect to Order No.13/2010-11, Order No.14/2010-11 and
Direction No.5/2010-11. As stated above, BIAL has already submitted a response
dated March 19, 2010 to Consultation Paper No.3/2009-10. BIAL has also, through
the appeals filed in Appeal No.2/2011 and Appeal No.7/2011 conveyed its principal
concerns. To avoid repetition, BIAL requests that its concerns set out in its response
dated March 19, 2010 and Appeal Nos.2 and 7 of 2011 be considered as a part of
this document. Although most of BIALs concerns have been highlighted in the
above referred documents, at the cost of repetition, BIAL wishes to set out below its
principal observations, concerns and submissions for the kind consideration of the
Authority.
5.
Annexure II
that except for user development fees, there will be total freedom for
airport operators in the matter of raising revenue through nonaeronautical revenue and there will not be any government control
over the same;
that the role of the central and state governments would, among other
things, include approval of aeronautical charges. A similar provision
with respect to non-aeronautical charges was however absent.
Privatization
The Airports Authority of India Act, 1994: The 2003 amendments to the
Airports Authority of India Act, 1994 strengthened investors confidence
and provided a further legal framework for privatization of airports. It is also
pertinent that the statement of objects and reasons for the 2003 amendments
5
Annexure II
In line with the Airports Infrastructure Policy, 1997 and the amendments to
the Airports Authority of India Act, 1994 and to attract investment in a
sunrise sector, the Central and the State Government offered multiple
concessions and initiated a global competitive bidding process for
development of an international airport at Bangalore. It is in this backdrop
that BIAL was selected to build, operate and transfer the Bengaluru
International Airport at Bangalore.
(iv)
6.
Bangalore International Airport was the first private Greenfield airport which was
developed in the new legal framework ushered in by the Airports Infrastructure
Policy, 1997 and the amendments effected by the Airports Authority of India
(Amendment) Act, 2003. BIAL faced myriad challenges and risks, both legal and
otherwise, since it was a prime mover. Amidst multiple uncertainties, commitments
were made by the shareholders of BIAL to develop a world class airport in
Bangalore. It is only fair that the promises made and the framework, in which
investments and commitments were made, be respected and adhered to.
7.
Order Nos.13 and 14 and Direction No.5 (collectively referred as tariff orders), in
their current form, have the effect of severely eroding benefits that had been given
and/or promised to BIAL. The tariff orders undermine the assurances on the basis
of which, investments were made into the Bengaluru International Airport (BIA).
6
Annexure II
In fact, certain observations in the tariff orders may have the effect of rewriting the
basis on which, investments were made into BIA. Additionally, certain regulatory
mechanisms proposed in the tariff orders are not in tandem with extant international
practices and standards. Some such mechanisms may also not be in line with the
regulatory framework contemplated under the Airports Economic Regulatory
Authority of India, 2008 (Act). It is BIALs endeavour to point out such portions
of the tariff orders and seek appropriate modifications thereto.
9.
Government has opined that the Concession Agreement, containing the philosophy
for economic regulation of aeronautical tariffs of the airports, has been approved at
the highest level at the Government and has been providing the guiding principles to
the Government in determination of aeronautical tariffs. It can be safely concluded
from the above that the Central Government is in favour of a full and effective
implementation of the concessions provided in the concession agreements executed
between airport operators and the State for the purposes of determination of tariffs
for aeronautical services. In fact, the statement on behalf of the Central
Government, in the affidavit, denotes that the terms and conditions of the
Concession Agreement are indicative of policy. As stated above, under Section 42
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of the AERA Act, the Authority is bound by the policy directives of the Central
Government. In summation, the AERA Act as well as the policy directives of the
Central Government prescribe that the State concessions to the airport operator be
given full effect to.
In Order No.13, the Authority has indicated that it will adopt Single Till regulatory
regime for major airports in India. Order No.14 and Direction No.5 prescribe
adoption of Single Till. The Authority has come to this conclusion on the basis of
reasons, which in our humble view, do not conform to the correct factual and/or
legal position. The Authoritys principal reasons for adoption of Single Till and
our responses thereto are below:
(i)
Position under the AERA Act: The Authority relies on certain observations
made in the 133rd Parliamentary Standing Committee Report.
It is our
The Parliamentary
In our view, the Authority need to have, in the first instance, considered the
very words employed in Section 13(1)(a)(v) to cull out the true import of
Section 13(1)(a)(v). Section 13(1)(a)(v) provides for consideration of
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The
provision does not indicate that all revenue must be included. Additionally,
the proviso to Section 13(1)(a) indicates that any or all of the considerations
specified in Section 13(1)(a) (i) to (vii) can be considered for determining
different tariff structures for different airports. These two features visibly
indicate that the AERA Act does not mandate a single till approach. Instead,
the AERA Act provides the leeway to the Authority to apply appropriate
mode of regulation, keeping in mind the factors prescribed in Section
13(1)(a)(i) to (vi). In the case of BIAL, in view of Section 13(1)(a)(vi), in
accordance with the Concession Agreement, BIAL should not be governed
under a single till regulation .
The conclusion of the Authority that dual and hybrid till are not
contemplated under the AERA Act runs contrary to the provisions of the
AERA Act as well as the subsequent orders passed by the Authority.
(ii)
ICAO recommends Single Till: This conclusion does not reflect the true or
correct position adopted by ICAO. ICAO has not recommended any form of
economic oversight over another. This is also the stated position of ICAO,
which is apparent from some of the extracts of ICAO documents, which are
reproduced below.
Convention on International Civil Aviation
The basic policy established by ICAO in the area of the charges for Airport
and Air Navigation Services is expressed in Article 15 of the Convention on
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- that where an airport is provided for international use, the users ultimately
bear their full and fair share of the cost of providing the airport
(paragraph 21);
- that the cost to be shared be the full cost of providing the airport and
its essential ancillary services, including appropriate amounts for
cost of capital and depreciation of assets, as well as the cost of
maintenance and operation and management and administration
expenses,
but
allowing
for
all
aeronautical
revenues
plus
Airports may produce sufficient revenues to exceed all direct and indirect
operating costs (including general administration, etc.) and so provide for a
reasonable return on assets at a sufficient level to secure financing on
favourable terms in capital markets for the purpose of investing in new or
expanded airport infrastructure and, where relevant, to remunerate
adequately holders of airport equity. (paragraph 22 vii);
ICAOs Policies on Charges also actively encourage the full development of
revenues from non- aeronautical activities in general (paragraph 34).
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- that airports may produce sufficient revenues to exceed all direct and
indirect operating costs and so provide for a reasonable return on
assets at a sufficient level to secure financing on favourable terms in
capital markets for the purpose of investing in new or expanded
airport infrastructure and, where relevant, to remunerate adequately
holders of airport equity (paragraph 22 vii);
Further,
1) ICAO lays emphasis on four key charging principles of non-discrimination,
cost-relatedness, transparency and consultation with the users.
2) ICAO does not propagate that airports have to adopt Single Till, though it
suggests that contribution from non-aeronautical revenues accruing from the
operation of the airport to its operators may be considered.
Mention of contribution from non-aeronautical revenues does in no way
suggest Single Till, as it does not stipulate all contributions. Mention of
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It is important to point out that the previous editions of ICAO Doc 9082
provided for inclusion of all revenues from non-aeronautical services.
Whereas, in the 6th edition, the language was modified to provide for
inclusion of contributions from non-aeronautical revenues. This amendment
reflects that ICAO does not recommend single till any longer.
The Authority has relied on a quotation by Prof. Dr. David Gillen in support
of its conclusion that ICAO recommends single till. BIAL has had the
opportunity of consulting David Gillen and had filed Dr. Gillens expert
affidavit dated January 12, 2012 in Appeal No.7/2011 in which he has
opined as under:56.
ICAOs policy regarding airport charges and air navigation
services are set out in ICAO document 9082/7.1 There is no statement
whatsoever regarding single or dual till price cap regulation and which it
prefers. There is a clear statement by ICAO that it considers that as a
general principle it is desirable, where an airport is provided for
international use, that the users shall ultimately bear their full and fair
share of the cost of providing the airport. Specifically, at paragraph 22i
under Airport Charges:
The cost to be shared is the full cost of providing the airport and its
essential ancillary services, including appropriate amounts for cost of
capital and depreciation of assets, as well as the costs of maintenance,
operation, management and administration, but allowing for all
aeronautical revenues plus contributions from non-aeronautical
revenues accruing from the operation of the airport to its operators.
57.
ICAOs latest document regarding charging policies (ICAOs
Policies on Charges for Airport and Air Navigation Services, Document
9082, 8th Edition 2009) is completely silent on single versus dual till. In
fact the word till does not appear in the document, nor do the expressions
1
See ICAO Document 9082/7, ICAOs Policies on Charges for Airports and Air Navigation Services. 7 th
edition 2004.
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single till or dual till. It is clear that ICAO has not taken an explicit
position on single versus dual till.
58.
This is instructive in interpreting the possible ICAO position
on single versus dual till. First, note that the position of ICAO is that all
costs, and no more or less, should be paid by users of airport services.
Second, it states that allowing for contributions from non-aeronautical
revenues accruing from airport operations. It does not say all nonaeronautical revenues should be passed on which is what single till
regulation would do. Further, its statement that all costs be paid, has an
implication of no subsidies, and is basically saying, do not charge less
than costs, just as do not charge more than costs.
59.
This position is supported by Odoni (2007) who notes that
ICAOs position on charging for airport services should be cost based,
that users should pay the full costs including repairs and management
and interest and depreciation and no more and that airports may produce
revenues greater than costs.2 ICAO is silent on what should happen to
these revenues.
60.
IATA not unsurprisingly since they represent only the
interests of airlines has claimed that only single till should be used in
price cap regulation and that ICAO supports this position. In an IATA
submission regarding the need for economic regulation of Hong Kong
International Airport in 2004, IATA simply listed paragraph 22i (listed
above in paragraph 14) claiming this was proof of the ICAO position.3 I
disagree for reasons stated above.
61.
In a presentation to the Strategic Airport Management
Program, April 13-17, 2007,4 an ICAO representative provides detailed
explanations of airport pricing and specifically what constitutes single
and dual till. There is no statement of the position ICAO takes on single
versus dual till. In this same presentation the argument is made that half
or more of airport services are subject to competition; this would
constitute the bulk of revenue from non-aeronautical services. Given
these services are in competitive markets it is the airport that generates
these revenues not the airlines. It is the airport that invests resources to
increase the spending of passengers not the airlines.
62.
Gillen and Niemeier (2008)5 state The single till principle
was recommended by ICAO and has been widely used in Europe, but this
long tradition is slowly breaking up. I also note that Airports Economic
2
See, Amadeo Odoni (2007), Airport Systems, Fall, Massachusetts Institute of Technology.
See, The Need for Economic Regulation of the Hong Kong International Airport, IATA Submission to the
Economic Development and Labour Bureau of the Hong Kong SAR, 14 January 2004, LC Paper
No.CB(1)773/04-05(05).
4
See, Eileen Poh (2007), Airport Economics, presentation to the Strategic Airport Management Program,
April 9-13, 2007 Singapore.
5
See, David Gillen and Hans Niemeier, European Union: Evolution of Privatization, Regulation and Slot
Reform, in Winston and Gines de Ruse (eds) Aviation Infrastructure Performance: A Study in Comparative
Political Economy, Brookings Institution, Washington DC March 2008.
3
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Government has opined that neither Doc 9082 nor Doc 9562 specifies the
extent to which the non-aeronautical revenues should be taken into
account..
The above makes it amply clear that ICAO does not recommend single till.
The Authoritys principal premise for proposing a single till form of
regulation is unfounded. BIAL therefore requests the Authority to reconsider
its conclusion that ICAO recommends single till and consequently, further
reconsider regulation under a single till mechanism.
(iii)
Set out below are certain salient features of the Concession Agreement:
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The Concession Agreement carves out a specified set of services that are
within the scope of regulation which are termed as Regulated Charges /
Services. All other services should be consequently not regulated by the
Authority. Under the single till mechanism proposed by the Authority,
although tariffs for non-aeronautical services are not fixed by the Authority,
the profits that the airport operator may earn from such services are fixed.
This is nothing but an indirect fixation of tariffs for non-aeronautical
services. Thus, the non-fixation of tariffs for non-aeronautical services is
only illusory and does not translate into any real or on the ground
entrepreneurial freedom to the airport operator. As submitted in the response
dated March 19, 2010, Appeal No.2 and Appeal No.7, the proposed single
till regulation effectively determines tariffs even for non-aeronautical
services, which is clearly impermissible under the AERA Act and was never
contemplated under the Concession Agreement, the legal and factual
framework within which significant investments were made by BIAL and its
shareholders to establish the Bengaluru International Airport.
In the proposed regulations, the Authority has further not considered the
concessions offered to BIAL in the form of the State Support Agreement and
the Land Lease Deed. In the detailed project report which was shared with
the bidders at several points of time during the course of the bidding, it was
understood and conveyed that aeronautical and non-aeronautical services
would be treated as distinct sources of revenue. In securing financial closure
of the project, the consortium which emerged as the successful bidder for the
Bengaluru International Airport created a financial model which operated on
the understanding that aeronautical and non-aeronautical sources of revenues
would be treated distinctly. The State of Karnataka acknowledged the
financial models specifically and used it for the purpose of calculation of the
viability gap in the form of state support. Thus, the State of Karnataka
invested into BIAL as a 13% shareholder and also provided viability gap
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funding of Rs. 350 crore on the basis of the understanding that aeronautical
and non-aeronautical revenues would be treated distinctly.
BIAL was granted state support to the tune of Rs.350 crore as per clause 3 of
the State Support Agreement to render the airport project viable. The State
Support Agreement further acknowledges that the State of Karnataka agreed
to provide financial support to improve the viability of the project and
enhance bankability of the initial phase and agreed to procure KSIIDC i.e.,
Karnataka State Industrial Investment and Development Corporation
Limited to execute the Land Lease Deed. Under the State Support
Agreement, BIAL is entitled to commercially develop real estate projects,
construction of hotels, restaurants, business centres, etc. for generation of
revenue. The Land Lease Deed was executed in furtherance of the State
Support Agreement and even under the Land Lease Deed; BIALs rights to
undertake non-airport activities such as construction of business parks,
hotels, etc are recognized.
Under the State Support Agreement as well as the Concession Agreement,
upon termination or expiry, BIAL has an option to continue to exercise
leasehold rights with respect to either the CA Excluded Area or SSA
Excluded Area, as the case may be. However, rest of the leased area is
deemed to have been surrendered. The fact BIAL has an option to exercise
leasehold rights with respect to certain portions of the leased land even
without the right to operate the airport makes it apparent that leased land was
provided to BIAL for the twin purposes of development of the airport and
commercial utilization. As stated above, one of the objectives of providing
leased land to BIAL for commercial utilization was to incentivize airport
development and expansion.
The Authoritys proposals in Direction No.5 not to consider the state
concessions would greatly impair the financial prospects of BIAL apart from
clearly setting at naught the intent of the State while entering into such
agreements. The Concession Agreement, State Support Agreement and the
Land Lease Deed form the bedrock of the relationship between the State and
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BIAL for the purpose of operating and maintaining the airport and therefore,
no guidelines should be issued by the Authority, which have the effect of
truncating the letter and spirit of the Concession Agreement, the State
Support Agreement and the Land Lease Deed.
Subsequent to the issuance of the tariff orders, the Authority appears to have
revised its position in relation to the meaning of the term concession. The
Operation, Management and Development Agreements have been executed
between the Airports Authority of India and Mumbai and Delhi Airports. It
is an admitted position that the OMDA are the repository of state
concessions. BIAL understands that, pursuant to communications received
by the Authority from the Central Government, the Authority has considered
and given effect to OMDA for final tariff determination in respect of Delhi
and Mumbai airports. In this view of the matter, the Authority should
consider and give full effect not only to the Concession Agreement but also
the State Support Agreement and the Land Lease Deed.
From a legal stand point, if the concessions are not considered, the
provisions of Section 13(1)(a)(vi) will be rendered otiose. Whereas, if
Section 13(1)(a)(vi) and (vii) are considered and given full effect to, the
entire gamut of factors prescribed in Section 13(1)(a) would have been
considered. In this light, BIAL urges the Authority to reconsider the
proposed regulations with respect to applicability of the Concession
Agreement, the State Support Agreement and the Land Lease deed.
The Authority, in its final tariff determination orders in the case of Mumbai
and Delhi airports, has considered and given effect to the Operation,
Management and Development Agreement entered into by the Ministry of
Civil Aviation with Mumbai International Airport Limited and the Delhi
International Airport Limited. However, in the case of BIAL, in clause 3.2
of Order No.13, the Authority has proposed that the Concession Agreement
may require appropriate modifications and in Direction No.5, the rights of
BIAL under the Concession Agreement have not been considered. BIAL
respectfully submits that the Authority does not have any power or
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If the fundamental bid assumptions are changed in any way, the risk
perception of the project will increase, resulting in an increased cost of
capital. Further, the reduced cash flows may not allow the airport operator to
cover the principal repayments, thereby reducing their debt service coverage.
This can impact future expansion of airport.
ii.
http://www.pecc.org/resources/doc_view/1002-airport-modernisation-in-india
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Also, financial closure of BIAL was achieved and VGF was calculated on
the basis that BIALs tariffs shall be determined under dual till regulation.
Not only BIAL, but State of Karnataka, MoCA and lenders have relied on
dual till basis and therefore, dual till regulation should be applied in the case
of BIAL. The same is detailed below.
The project information memorandum that was shared with the bidders, at
several points indicated that aeronautical and non-aeronautical services should
be treated as distinct sources of revenue.
i.
Part-II -Clause-1.2 para-1 on page 046, states that modern airports around
the world have a substantial quantum of revenue from activities which are
not directly linked to aeronautical services. This quantum varies from 5070% at major airports in the world. The present proportion for nonaeronautical revenues at BIAL is close to 40%8, much below the
international level. It is clear that unless non-aeronautical revenues are
allowed to develop independently, there is no incentive for the airport
operator to increase the proportion as the upside would be subsumed by a
reduction in the aeronautical tariffs.
ii.
Considering cargo and fuel farm as non-aeronautical services, as per the Concession Agreement
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iii.
Part-II -Clause-1.4 sub clause-19 on page 048 highlights the fact that the
airport shall have a distinct and significant commercial orientation to
capitalize on the development potential of Bangalore and the region
iv.
Part II - Para 3.2 on, Page 052 clearly states that it is proposed that nonaeronautical operations shall form a distinct and significant component of
the airport investment. It further states that land shall be optimally and
innovatively used to maximize commercial and business revenue.
v.
The entire business plan that was prepared for the project, and shared with
the government at various points in time, including for the purpose of
securing tariff approvals and finalizing User Development Fees was based on
this financial model, and therefore under the assumption of separation of
aeronautical and non-aeronautical revenue sources.
Several service provider Right Holder Agreements were executed and the
Service Provider Rights were granted to our concessionaires based on this
concept, as the revenue share under these SPRH Agreements was again
derived from the same model. The terms of these agreements range from 5
to 20 years. All these would stand to be affected if the model is assumed to
be single till.
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Section 42 of the AERA Act requires the Authority to comply with the policy
directions that may be issued by the Central Government. Recognizing the policy
implications of determination of an appropriate till mechanism, we understand that
the Ministry of Civil Aviation / Central Government commissioned M/s. Bridgelink
Advisors to provide a detailed report on Consultation Paper No.3/2009.
M/s Bridgelink Advisors submitted their initial report dated July 19, 2010 and
recommended the following:
(i)
(ii)
12.
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Government.
indicates the policy of the Central Government and therefore, needs to be given
effect to, in letter and spirit.
FINANCIAL COVENANTS
13.
Financing agreements including the business plan and details submitted in response
to the request for proposal and the tender document were arrived at / calculated on
the basis of a dual till approach. As is evident from the Concession Agreement,
achieving financial close was a condition precedent for the primary provisions of
the Concession Agreement to come into effect. Financial close required execution
of financing agreements between BIAL and its lenders and such financing
agreements were entered into on the basis of dual till approach.
14.
Clause 10.2.4 of the Concession Agreement prescribes that regulated charges that
may be approved by an independent regulatory authority shall comply with the
principles referred to in Article 10.2.1 until the earlier of (i) the date that the
outstanding debt in respect of the initial phase has been repaid; and (ii) fifteen years
from financial close. The Concession Agreement thus provides further protection to
BIALs investments and commitments inter alia keeping in mind the financing
agreements that were executed by BIAL. Any alternation of the basis of financing
will not only have a direct impact on BIAL, but may also affect BIALs line of
credit adversely. BIAL therefore requests that the basis of the financing agreements
be not altered post facto and tariffs be determined in accordance with the dual till
approach.
It is the Authoritys major premise that the airports in India are monopolistic entities
and should therefore be regulated. However, the Authority has not arrived at this
conclusion on the basis of evidence of misuse of alleged monopoly by the airport
operators. The Authority need to have considered and adopted a light handed
regulatory approach and need to have embarked on intrusive regulation only upon
evidence of an exploitation of monopoly, if at all. BIAL believes that, on account of
competition offered by airports in the vicinity coupled with alternative means of
26
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transport and competition in other segments of the airport business by other service
providers, BIAL can hardly be considered as a monopoly. Moreover, BIAL will be
required to keep in mind market conditions in order to cater to a continuously
fluctuating demand and further in order to continue its growth trajectory. In this era
of information, any inkling of exploitation of a supposed monopoly would surely act
against BIALs best interests. This is possibly true of all other major airports as
well. In this context, BIAL once again requests the Authority to revisit its major
premise and reconsider regulation by light handed approach. It is BIALs view that
the threat of intrusive regulation would be a sufficient deterrent for any airport
operator to misuse its supposed monopoly. BIAL also refers to the views of Prof.
David Gillen in this regard. Copy of Prof Gillens expert affidavit dated January 12,
2012 which was filed in Appeal No.7/2011 has been enclosed along with these
submissions.
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the airport sector will be perceived as less attractive for investment, which
will not be in the long term interest of the sector.
i.
Market risk premium: Equity Risk Premium (Rm-Rf) which is the difference
between the expected rate of return on the market portfolio and the risk-free
rate, the market rate of return or Rm may be calculated based on 10 year
annualized return on 90 days moving average of market return using BSE
Sensex as the market return indicator.
ii.
While computing the asset beta, consideration of betas of all listed airports in
developing and emerging country markets.
iii.
iv.
v.
For the purpose of computing debt to equity ratios, security deposits may be
treated as quasi-equity and hence may be included under the head equity and
Interest free loans and cost of debt may be treated as debt.
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Observations: BIAL was provided land under the Land Lease Deed by the State of
Karnataka inter alia as a part of its policy to:
The State of Karnataka has taken multiple steps for promotion of industries in the
state of Karnataka. The Karnataka Industrial Areas Development Board was set up
under the Karnataka Industrial Areas Board Development Act, 1966 in order to
encourage and promote industrialization of the state. Similarly, the Karnataka State
Industrial and Infrastructure Development Corporation (KSIIDC), earlier known as
Karnataka State Industrial Investment and Development Corporation, was
established in the year 1964, as a wholly owned undertaking of the State of
Karnataka inter alia to encourage industrial growth in the state of Karnataka. The
State of Karnataka, as a part of its overall objective of encouraging infrastructure
and industrial development, also provided Rs.350 crore to BIAL to improve the
viability of the Greenfield airport project and enhance the bankability of the initial
phase, as detailed in the State Support Agreement. Thus, the State of Karnataka, as a
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Additionally, the proposal with respect to land value adjustment would completely
set at naught the Land Lease Deed as well as the State Support Agreement. Clause
4.2 of the Land Lease Deed provides that BIAL may utilize the leased land inter
alia for (i) improving the commercial viability of the project; and/or (ii) such that
the utilization facilitates substantive further investment in or around the airport.
Land value adjustment as proposed by the Authority is the very antithesis of these
objectives. If market value of the land is deducted, BIAL would get little or no
benefit from the lease of the land and resultantly, will not be able to utilize any
income from utilization of such land to make the airport project more viable.
Further, ICAO doc 9562 recognizes the concept of an airport city, i.e. a city built
around an airport, which is reminiscent of cities that were built around sea ports and
river ports in the past centuries. This objective of development of areas surrounding
the airport is sought to be achieved under clause 4.2(v) of the Land Lease Deed.
Land value adjustment would be a full and complete disincentive for the airport
operator to utilize the land for facilitating further investment around the airport as
BIAL would be forced to buy land, which is already leased to it.
Without prejudice to the above, if market value of lands is reduced from the scope
of RAB, effectively, the airport operator is forced to buy such land at prevailing
market prices. This is an incongruous situation because such lands have been leased
by the state of Karnataka to BIAL for a fixed term of 30 years. BIAL cannot be
forced to pay market value of land, which it will never come to own and in respect
of which, it will only have leasehold rights.
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The proposed land value adjustments would also have the effect of negating the
benefits provided to BIAL under the State Support Agreement and the Land Lease
Deed. The effect of land value adjustment would be to recast the Land Lease Deed
in its entirety. The proposed regulations are beyond the ambit and powers of the
Authority.
From a legal standpoint, the Authority simply has no power or jurisdiction to make
land value adjustments or in any manner deal with assets that are beyond the scope
of RAB. The proposed regulations are wholly beyond the jurisdiction of the
Authority and are de hors the functions prescribed under the AERA Act.
Submissions:
It si humbly submitted the Authority should revisit the manner in which single till
mechanism is proposed to be implemented. The Authority need not make any land
value adjustments or in any manner deal with assets that are beyond the scope of
RAB. All proposals in this regard need to be cancelled.
Services other than Regulated Services / Revenues from Services other than
Aeronautical Services
Authoritys Approach: The Authority has proposed to apply the single till regulation
mechanism to regulate all major airports. BIALs comments with respect to the
singlet till mechanism have been set out in the preceding paragraphs. As stated
above, it is BIAL's submission that the single till mechanism is statutorily ruled out
and is further inapplicable to BIAL. In this section, BIAL is submitting its
comments in relation to the manner in which the single till mechanism is sought to
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regulated services and services other than regulated services, are similarly treated,
but for determination of tariffs. This is certainly not contemplated under the AERA
Act and is opposed to the very objective of privatization, i.e. introduction of private
capital and/or private management capacities.
Submissions: The proposed regulations are completely antithetical to the provisions
of the AERA Act and any form of regulation of services other than regulated
services inter alia as provided in clauses 8.9, 11.1 to 11.7, 13.1, 17.5.10 of Order
No.13 and clause 4.2.5 and entire clause 5 of Direction No.5, need to be revisited
and dropped. There can no regulation of any nature with respect to services other
than regulated services, even under a single till regime. Without prejudice to the
above, the Authority need to provide for error correction with respect to revenues
from services other than regulated services.
SERVICE QUALITY
19.
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down service quality parameters and proposes to impose a penalty / rebate if the
airport operators fail to keep up to the prescribed quality parameters. Appendix 2 to
Direction No.5 contains objective service quality parameters such as maximum
queuing time for Check-In, availability of baggage trolleys, parking bays, etc.
Appendix 3 to Direction No.5 sets out the subjective service quality parameter,
which is the rating on the ACI ASQ survey. Appendix 3 further sets out the criteria
which are considered in arriving at the ACI ASQ survey which includes waiting
time in check-in queue / line, availability of baggage carts / trolley, availability of
parking facilities, value for money of parking facilities etc.
Observations: As per the AERA Act, only those service standards, which are set by
the Central Government, can be implemented by the Authority. As per the Act,
only those service quality standards that are set by the Central Government can be
taken into account for determination of tariffs. Therefore, the Authority should not
have proceeded to set service quality parameters, either objective or subjective. The
Authoritys proposals include penalizing the airport operator for non-compliance
with service quality parameters, which hinges on regulating service quality and
which is contrary to the mandates of Section 13 of the Act.
Additionally, a number of service quality prescriptions are dependent on the quality
of service provided by third parties, over which the airport operator has little or no
control.
Industrial Security Force. The objective of the CISF personnel is to ensure safety of
airport users / premises by thoroughly frisking passengers during the check in
process. This frisking is also conducted to ensure that there is no transportation of
contraband or other impermissible articles. Therefore, the primary objective of the
CISF personnel is not to ensure a quick turnaround time per passenger but to detect
and prevent illegalities / unlawful activities. Thus, waiting time for security check
is not a relevant factor for CISF personnel. In such circumstances, to impose on
BIAL / airport operator conditions with respect to security check is unfair.
Likewise, in the case of immigration check in waiting time, the primary objective of
immigration department personnel is to screen passengers for appropriateness /
legality of documents and baggage. And BIAL / airport operator has little or no
control over officials who are in charge of immigration counters.
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Annexure II
Annexure II
adjustments for forecasting RAB. Likewise, per clause 5.2.6(b) of Direction No.5
which deals with rolling forward of RAB, the Authority has proposed to make
incentive adjustments. Certain factual scenarios, in which, the Authority may
consider incentivizing the airport operator are set out in clause 5.2.5 of Direction
No.5.
Observations: Neither Order No. 13 nor Direction No. 5 set out with any clarity the
circumstances in which the Authority will provide incentive adjustments. In Order
No.13, the Authority proposes to incentivize the airport operator by reducing the
minimum rate of penalty / rebate to 0.25% from 0.5% per month for non
compliance with objective service quality parameters. A reduction in the monthly
rate of penalty can hardly qualify as an incentive. In contrast, the Authority has
proposed detailed regulations for levying rebate/penalty for under performance with
respect to subjective and objective service quality parameters. In Order No.13, the
Authority has extensively dealt with service quality rebate / penalty in clauses 8.1.3,
12.9, 12.15, 12.16 and 17.5.9.c. Service quality rebate has been defined in clause
6.14 of Direction No. 5. Service quality rebate is proposed to be imposed in the
event the airport operator does not achieve service quality standards specified by the
Authority. The quality standards and the measurement mechanism are detailed in
Appendices 2, 3 and 4 to Direction No.5. The approach adopted by the Authority
with respect to incentives and rebates is starkly different and very unfair to the
airport operator.
Annexure II
Cost of Debt:
Authoritys approach: The Authority has proposed an intensive scrutiny approach in
clause 6.4 of Order No.13 read with clause 5.14 of Direction No.5 with respect to
variation in the cost of debt over a control period. The Authority proposes to
consider the forecast cost of existing and future debt within a control period, subject
to the Authority being assured of reasonableness of such cost based on review,
including of its sources, procedures and methods used for raising such debts. Per
clause 5.1.6 of Direction No.5, the Authority would also consider the nature of
financial instruments being used or proposed to be used to mobilize debt for
determining a cost of debt.
Observations: As per extant international practices and standards with respect to
utility regulators, intrusive regulation is employed, only when it is absolutely
essential and unavoidable. BIAL understands that the Authority also proposes to
determine tariffs with least amount of regulatory intervention in the day-to-day
business of, and management of the airport by, the airport operator. The approach
adopted with respect to variation and forecast in the cost of debt is intrusive and
37
Annexure II
requires to be revisited. A review of the sources, procedures and methods used for
raising debt by the Authority is excessively intrusive and vastly restricts
entrepreneurial freedom. If a transparent process is adopted by the airport operator
in line with prevalent market practices, there can be no requirement for further
regulatory oversight. Any further regulatory oversight will constrain entrepreneurial
ability and leveraging of market situation by the airport operator.
Submissions: In determining cost of debt, the Authority need not further require the
airport operator to provide justifications if such loans are obtained in a transparent
manner. To illustrate, if quotes for loans are called for from more than one bank
and thereafter, a competitive quote is considered, BIAL prefers that such loans be
accepted as such and without enquiry. Since there is scope for error correction or
truing up of accounts, a less intrusive approach would be in consonance with the
overall regulatory objective of achieving efficiency without needlessly exposing
airport users to risk. For services other than regulated services, there should be no
regulation whatsoever including with respect to cost of debt. Further, in determining
cost of debt, any fixing of ceilings on cost of debt need to be avoided.
22.
Refinancing of debt:
Authoritys Approach: The Authority expects airport operators to make every effort
to refinance / restructure debt in clause 6.5 of Order No.13. The costs and benefits
associated with refinancing would be passed on to the users.
Observations: The business reality is that refinancing / restructuring of debts is not
taken recourse to frequently. Refinancing/ restructuring of debt is also many a times
linked with obtaining further debt. To illustrate, certain existing debts may have to
be moved to a new lender who is willing to offer further debt on competitive terms.
These are decisions that are taken by the airport operator keeping in mind the airport
business as a whole and impositions of restrictions in that regard will impede on the
operational freedom of the airport operator.
Submissions: These are purely commercial decisions and BIAL prefers that these
decisions be left to the wisdom of the airport operator. Since restructuring of debt is
linked to myriad other factors, there cannot be no expectations in this regard. For
services other than regulated services, there should be no regulation whatsoever
including with respect to refinancing of loans.
38
CP No. 14/2013-14- MYTP & ATP- BIAL-CP
Annexure II
23.
BENEFIT OF CONCESSIONS
24.
Annexure II
Observations: Interest free or concessional loans are provided to the airport operator
as a fillip to its business operations and to enhance viability and profitability of the
airport operator. By considering interest free or concessional loans at actual cost,
such benefit is completely negated. To illustrate, if the airport operator obtains loans
at market rates, the market rates would get reflected in the cost of debt and
consequently, in the fair rate of return. Likewise, if interest free or concessional
loans are obtained, since they will be considered at actual, no benefit will accrue to
the airport operator at the time of calculation of fair rate of return. The proposed
arrangements will provide no incentive whatsoever for obtaining interest free or
concessional loans and in the scheme of things proposed, interest free or
concessional loans will become a misnomer. The proposed regulations are unfair to
the airport operator because they deprive the airport operator of a benefit which was
specifically conferred on it. For instance, if in a particular control period, the entire
financing requirements of the airport operator are met with by interest free loans,
the cost of debt will be zero, which in turn, will make the FRoR zero / nil leaving
the airport operator with no returns. This is certainly not contemplated under the
AERA Act.
Submissions: The Authority should consider and provide returns at market rates for
interest free or concessional loans. For services other than regulated services, there
should be no regulation whatsoever including with respect to interest free or
concessional loans.
25.
Annexure II
OTHER ISSUES
26.
Traffic Forecasting:
Authoritys Approach: Per clause 10.3 of Order No.13 and clause 6.15.2 of
Direction No.5, any variation of traffic forecast, outside of the bands, will be shared
equally between airport operators and users.
Observations: Airport operators have little or no control over the volume of traffic.
As it can be understood by examining historical traffic behavior, traffic normally/
functionally behaves in correlation to general economic scenario in the country and
abroad and the general economic situation in the country in a subsequent year is
almost impossible to predict. The September-2008 collapse of Lehmann Brothers
and the consequent economic downturn was not predicted by leading economists /
financial institutions or even governments world over. Further, there are a large
number of uncertainties which are simply beyond prediction, such as, failure of a
particular carrier resulting into zero ATMs from that carrier. In this context, it may
be relevant for us to consider studies of a world renowned economist / thinker
Mr. Nassim Nicholas Taleb and his works on insufficiency of knowledge and
consequent inability to predict. In the absence of effective tools for prediction being
available with the airport operator, it would be a herculean task and a near
impossibility for the airport operator to accurately forecast the traffic volumes.
More often than not, unprecedented situations could have the effect of pushing the
traffic volumes beyond prescribed bands. In such circumstances, all that the airport
operator can do is to provide its services efficiently and the AERA Act prescribes a
mechanism for implementation of set service quality parameters. Besides, the
proposed regulations will force the airport operator to focus on issues like
forecasting, which ought not to be the primary concern of the airport operator. As a
result, the airport operators focus on providing good quality airport services may be
diverted. The costs of regulatory compliance will also sky rocket since prediction
would require the airport operator to engage with specialized professionals in that
field. It is our humble opinion that, a regulation requiring myriad compliances will
increase the cost of regulation and will also restrict entrepreneurial freedom.
Submissions: The Authority is submitted to reconsider its proposals not to provide
error correction for forecasting errors beyond the bands that may be prescribed by
the Authority and should provide for complete error correction. . For services other
41
CP No. 14/2013-14- MYTP & ATP- BIAL-CP
Annexure II
27.
Without
42
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Annexure II
28.
Annexure II
29.
Initial RAB
Authoritys Approach: The Authority proposes to not just consider the original cost
of fixed assets as indicated in the last audited accounts, but further proposes to
assess the cost by considering (i) evidence of competitive procurement for
investments of more than 5% of the opening RAB of the first tariff year; (ii)
evidence that investment was made in accordance with the approved plan; and (iii)
evidence that investment, if any, over and above the approved investments, was
necessary for providing better services or on account of requests from users or
stakeholders.
The Authority has proposed to deduct accumulated capital receipts of the nature of
contributions from stakeholders including total contributions pertaining to the fixed
assets which are included in the scope of the RAB, including by way of
development fees, capital grants and subsidies.
Observations: The airport operators, in exercise of their entrepreneurial freedom and
enterprise, made multiple investments for development and/or modernization of
major airports. In case of BIA, exercise of entrepreneurial skills was especially
important and crucial because BIA was a Greenfield airport. Investments have been
made by BIAL in line with the master plan provided in the Concession Agreement.
Investments were approved by the Airports Authority of India and the State
Government as both the State parties are represented on the board of BIAL. In this
scenario, the Authority should not assess or evaluate the process or necessity of
creation of assets. Once accounts have been audited, such audited accounts indicate
the actual expenditure incurred for facilities that are available for all those who use
airports and therefore, it is only fair that all such assets and the expenses incurred
for their creation are included as a part of the RAB. There were no restrictions at
the time of making of investments and such restrictions cannot be now imposed post
facto.
As stated in the context of concessional loans, the purpose of a subsidy or grant by a
stakeholder such as the government is completely lost, if benefits therefrom do not
accrue to the airport operator.
Submissions: The proposal of the Authority for evaluating cost of fixed assets needs
to be dropped. The costs indicated in the last audited accounts can be considered for
the purpose of arriving at the initial cost of fixed assets and there need not be an
44
Annexure II
weighted average cost of capital, per clause 5.1.1 read with clause 5.1.5 of Direction
No.5, interest free or concessional loan arrangements will be considered at the
actual cost of such arrangements. However, even at the time of calculation of initial
RAB, accumulated capital receipts of the nature of contributions from stakeholders
are proposed to be reduced / subtracted from initial RAB. Thus, concessional loans
or contributions from stakeholders are factored in twice, resulting in an unfair
reduction of the returns to the airport operators. Additionally, without prejudice to
the above, the proposed regulations in relation to arriving at original cost of fixed
assets should not be applied in respect of services other than regulated services and
book value of such assets should be considered.
30.
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Annexure II
users and also because, it may not reflect the true value of the asset at the time of
inclusion.
Submissions: The Authority should revisit its proposal and consider only the book
value of assets proposed to be excluded from the scope of RAB. An asset which is
excluded from the scope of RAB, at the time of its subsequent inclusion, should be
assigned a true value / fair market value and the value assigned to it at the time of
exclusion should not be considered.
31.
Annexure II
32.
Bad debts
Authoritys Approach: In clause 11.7 and 17.5.8.f of Order No.13 and clause 5.4.3
of Direction No.5, the Authority has proposed that any allowance for working
capital should be net of allocation for bad debts.
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Observations: Bad debts are a business reality. No business can function without
facing bad debts. The Authority has not proposed any mechanism for
reimbursement of bad debts to the airport operator. Effectively, the airport operator
will be forced to pay out of the ARR towards bad debts. This is extremely unfair on
the airport operator because certain bad debts are completely beyond the control of
the airport operator. To illustrate, there are significant outstandings from Kingfisher
Airlines Limited and Air India Limited. Under the proposed regulations, for no
fault of BIAL, BIAL would be forced to bear the burden of this bad debt.
Submissions: The Authority should make provisions to reimburse bad debts to the
airport operator. If and when a bad debt is recovered, the provision for bad debts can
be reversed. The provisions in relation to bad debts should not be applicable to
services other than regulated services.
33.
proposed that initial capital expenditure on security related assets shall be included
as a part of the RAB. The Authority has further proposed that any incremental
capital expenditure on security related assets shall be met out of the passenger
service fee. The Authority has proposed to issue separate guidelines for
determination of passenger service fee.
Observations: Costs and expenses in relation to security related expenditure is likely
to be audited by the Comptroller and Auditor General.
Submissions: Expenses that may be disallowed by the CAG should be included
either as a part of the RAB or as operations and maintenance expenditure. BIAL
looks forward to the PSF guidelines containing necessary protections to safeguard
the interests and investments of the airport operators.
34.
Annexure II
allowing airport operator to raise tariff(s) to offset cost increases, but by a rate lower
than inflation, in order to encourage greater efficiency. The Authority has also noted
that the assessment of efficiency improvement can be complex and requires a
variety of considerations such as key performance indicators relating to trends in
cost per passenger, efficiency factors applicable to other entities in the country,
impact of various levels of efficiency factor on revenues, operation and maintenance
expenditures and returns and historical profitability and performance.
Observations: The Authority has not set out the manner in which it would arrive at
the X factor, while recognizing that the Authority is required to take into account a
wide array of factors. The approach of simulating a competitive environment by
Authority appears to be outside of the jurisdiction as provided under the Act. The
function of the Authority as provided under section 13 of the AERA Act is
restricted to determination of tariff, on the basis of expenditure incurred by the
airport operator. Realistically, simulation of a competitive environment is fraught
with uncertainties, which is something the Authority recognizes by listing the
multitude of factors that the Authority may have to consider in determination of the
X factor. In such circumstances, the possibility of the cost of regulation being more
than the efficiency that regulation may bring in, cannot be ruled out. Further, it is
beyond doubt that such attempts will largely restrict entrepreneurial freedom and
enterprise and will be the very antithesis of the philosophy with which private
airports were introduced in the country.
situations where the airport operator is unable to comply with the X factor because
of factors which are beyond the control of the airport operator. This is especially
important because a multitude of factors are involved in efficiency improvement.
The Authority has not appreciated the business reality that, inevitably, either supply
is greater than demand or vice versa. It is rarely that both are in perfect tandem. The
business of airport development can hardly be equated and understood in
mathematical terms, bereft of practicalities involved. Attempts by the Authority to
simulate market environment may lead to distortions which will affect not only the
airport operator but the users at large.
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35.
Observations and Submissions: BIAL prefers that all mandated expenditure either
capital or otherwise be considered by authority in the calculation of RAB or
reimbursed, as the case may be, within the control period.
36.
Taxation
Authoritys Approach: In clause 6.17 of Direction No.5, the Authority has proposed
not to consider increase in tax on corporate income or change in statutory operating
cost relating to input products or services procured by the airport operator.
Observations: Non-consideration of change in taxes on corporate income or taxes in
relation to input products or services is unfair. The airport operator cannot be forced
to bear the brunt of additional taxes. There appears to be rationale missing in
allowing for recovery of certain taxes, while not allowing for recovery in respect of
other forms of taxation. Unlike what is stated in the affidavit of the Authority filed
in Appeal No.7, there is no scope for the airport operator to reduce such losses. To
illustrate, there is no means by which the airport operator can reduce exposure to an
increase in fuel prices or account for it even before its occurrence.
Submissions: The Authority is requested to consider error correction with respect to
any direct or indirect increase in taxes either on the airport operator or through
increase in taxes for inputs and services, within the same control period.
50
Annexure II
CONSULTATION
37.
Consultation Protocol:
Authoritys Approach: Per clauses 8.1 to 8.22 of Order No.13 and Appendix 1 of
Direction No.5, the Authority has proposed a detailed Consultation Protocol
including by way of constituting an Airport Users Consultative Committee
(AUCC). The Authority proposes to apply the Consultation Protocol as detailed in
Appendix 1 of Direction No.5 in respect of aeronautical services as well as services
other than aeronautical services.
Observations: Under the AERA Act Authority has to determine tariffs for
aeronautical services. The Authority is also required to consider and give effect to
the concessions granted by the state, which in the case of BIAL, is the Concession
Agreement, State Support Agreement and the Land Lease Deed. As stated above, by
effect of the Concession Agreement, the services of cargo, ground handling and
supply of fuel are excluded from the ambit of regulation. In summation, under the
AERA Act, the Authority can determine tariff only for aeronautical services,
excluding cargo, ground handling and supply of fuel. The Authority may not
consider determination of tariffs for any other services that may be provided by the
airport operator. The function of regulating the consultation process appears to be
concomitant to the power of determining tariffs and may not be an independent
function. In the absence of jurisdiction to determine tariffs for services other than
regulated services, it appears to be that the Authority has no power or jurisdiction to
mandate consultation for such services.
Additionally, the constituents of AUCC include persons who do not fall within the
definition of stakeholder under the Act.
Submissions: The consultation process/ Consultation Protocol with respect to
services other than regulated services can be excluded. BIAL prefers that the
constituents of AUCC be restricted to those who fall within the definition of
stakeholder. Specifically, the Authority can exclude cargo, ground handling and
fuel supply services from the Consultation Protocol.
CONCLUSION
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38.
39.
BIAL also reserves the right to submit further submissions as may be required
52
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-1-
contributes to
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investments.
India has a federal structure and civil aviation is included in the
Central List in the Constitution of India.
Aviation, therefore, comes
Indian Parliament.
Aircraft Act
the
management
of
With a view to
international
airports,
This was
Annexure II
-3-
International
Domestic
Grand Total
1999-2000
99701
368015
467716
2000-2001
103211
386575
489786
2001-2002
107823
402108
509931
2002-2003
560578
International
Domestic
Grand Total
1999-2000
13293027
25741521
39034548
2000-2001
14009052
28017568
42026620
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2001-2002
13624712
26358627
2002-03
39983339
43988321
International
Domestic
Grand Total
1999-2000
531844
265570
797414
2000-2001
557772
288373
846145
2001-2002
560226
294050
854276
2002-2003
982464
Annexure II
-5-
for
private
sector participation.
! This Policy provides for foreign equity participation in airport
projects upto 74 % with automatic approvals and 100% on case-tocase basis. Foreign airports authorities can also participate. Private
sector participation is encouraged in the development of cargo
infrastructure including satellite freight cities.
! The policy permits development of Greenfield Airports where an
existing airport is unable to meet the projected requirements of
traffic or a new focal point of traffic emerges with sufficient
viability. It can be allowed both as replacement for an existing
airport or for simultaneous operations.
Under the new policy framework, some major initiatives have been
taken for
by some State
Governments.
! At Cochin, a new greenfield international airport has been built. It
was opened to traffic in 1999. The airport was built by a public
limited company promoted by the state government. While state
government is an important shareholder in the company, private
parties including non-resident Indians (NRI) and certain service
providers like Air India, Bharat Petroleum, State Bank of
Annexure II
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In all these airports, private sector partner will have majority stake with
operational and management control. Government of India has recently
formulated airport specific and general models of Concession Agreement.
Another major initiative under the new policy is the decision to induct
private sector, including foreign investors, for expanding and
modernizing the existing AAI airports including those in the metro
cities of Delhi, Mumbai, Chennai and Kolkata. The restructuring of
Delhi and Mumbai airports are being taken up at the first instance.
Government is committed to provide a transparent and fair bidding
process while privatizing the AAI airports. The process is likely to
begin very shortly and the private sector partner for each of these projects
will be selected on the basis of global bids. The proposed restructuring
of Delhi and Mumbai airports provides
Annexure II
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non-aeronautical/
commercial
operations,
which
through a global
4.Stable economic environment: The Indian economy has, since the start
of liberalization in the early 1990s, grown steadily. The strong GDP
growth has been accompanied by increasing FDI, an information
technology boom and expansion of industrial and services sector.
The
that the investor has total operational and managerial control in day to
day affairs within the overall legal framework.
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5/30/13
Annexure II
Su bje c t :
Fr o m :
To :
Cc:
Dat e :
Dear Madam,
Dear Sir,
I refer our discussion on the above subject and Pl find enclosed Annual Tariff Proposal (ATP) in Dual till and Single till along
with the ATP forms (Form 15A and 15B) for your needful.
The hard copies will be submitted at your office shortly by our representative. Kindly acknowledge.
Thank you and best regards,
Anand
Anand Kumar P.
Assistant Vice President & Head Controlling & Regulatory affairs
Bangalore International Airport Limited
Administration Block, Bengaluru International Airport, Devanahalli,
Bangalore 560300, India
Phone: +91 80 6678 2634 | Mobile: +91 95388 82634 | E-Mail: anandkumar@bialairport.com | Web: www.bangaluruairport.com
The inform ation containe d in this e le ctronic m e ssage and any attachm e nts to this m e ssage are inte nde d for the
e x clusive use of the addre sse e (s) and m ay contain proprie tary, confide ntial or le gally privile ge d inform ation. It should
not be acce sse d by anyone who is not the original inte nde d re cipie nt. Ple ase notify the se nde r if you have e rrone ously
re ce ive d this e -m ail and im m e diate ly de le te it from your syste m . Any unauthorize d re vie w, use , disclosure ,
disse m ination, forwarding, printing or copying of this e m ail or any action tak e n in re liance on this e -m ail is strictly
prohibite d and m ay be unlawful. The re cipie nt ack nowle dge s that BIAL is unable to e x e rcise control or e nsure or
guarante e the inte grity of/ove r the conte nts of the inform ation containe d in e -m ail transm issions and furthe r
ack nowle dge s that any vie ws e x pre sse d in this m e ssage are those of the individual se nde r and no binding nature of the
m e ssage shall be im plie d or assum e d unle ss the se nde r doe s so e x pre ssly with due authority of BIAL.
about:blank
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1
2
3
Particulars
2013-14 from
May 01, 2013 to
March, 2014
1,015.95
1,015.95
2014-15
998.50
998.50
2015-16
Remarks
1,042.24
1,042.24
Annexure II
Tariff Heading
Applicable Discount
Estimated units
(In Millions)
(Rs. In Millions)
Estimated
Revenue
Net
642.76
No Discount
No Discount
No Discount
No Discount
No Discount
No Discount
No Discount
No Discount
No Discount
No Discount
International UDF
No Discount
2,075.19
Domestic UDF
No Discount
7,759.72
814.32
63.18
28.27
310.66
10.17
1.34
0.38
2.09
38.43
8.86
6.93
-
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Tariff Heading
Applicable Discount
Estimated units
(In Millions)
(Rs. In Millions)
Estimated
Revenue
Net
833.74
No Discount
No Discount
No Discount
No Discount
No Discount
No Discount
No Discount
No Discount
No Discount
No Discount
International UDF
No Discount
2,711.28
Domestic UDF
No Discount
8,906.72
1,041.56
71.43
36.47
395.53
13.18
1.72
0.49
2.67
49.79
11.34
8.95
-
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Tariff Heading
Applicable Discount
Estimated units
(In Millions)
(Rs. In Millions)
Estimated
Revenue
Net
969.09
No Discount
No Discount
No Discount
No Discount
No Discount
No Discount
No Discount
No Discount
No Discount
No Discount
International UDF
No Discount
3,229.17
Domestic UDF
No Discount
10,095.85
1,390.52
76.87
42.91
465.39
15.42
2.29
0.58
3.14
58.26
15.17
10.53
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