AERA: complete 2nd terminal by March 2021

Any delay in commissioning the second terminal (T2) of the Kempegowda International Airport (KIA) by March 2021 could prove costly for the airport operators. The Airports Regulatory Authority of India (AERA) has warned that the delay will invite big costs and additional penalties.

In its recently released tariff order, AERA has noted: "Should BIAL (Bangalore International Airport Limited) fail to commission T2, in addition to the normal True-up with carrying cost, 1% additional penalty, by way of reduction of the said value from ARR (Aggregate Revenue Requirement), will be imposed on BIAL."

The authority has also warned that additional interest/financing allowance and project management cost will not be considered if there is a delay in executing the T2 project beyond March 2021.

Based on BIAL's contention that the project can indeed be completed by the deadline, AERA had decided to consider the capitalisation year for the first phase of T2 as 2020-21. To support its position, the airport operator had also furnished plans and estimates, citing its past experience in constructing the existing terminal (T1) and its expansion.

Aviation experts say the deadline could be challenging since the new terminal would have to be seamlessly integrated with the second runway, and all landing/take-off trials be completed before commissioning T2. To get a realistic window to undertake these mandatory trials, BIAL will have to look at a December 2020 completion of the terminal building.

On the Eastern Tunnel Connectivity to the airport, BIAL had contended that any reduction in the User Development Fee (UDF) could spark a revenue shortfall and thus, jeopardise the Rs 1,200-crore project. AERA has noted that the project is at a very initial conceptual stage, and would require further stakeholder consultations.

In its response to the AERA consultation, BIAL had cited infrastructure development costs to the tune of Rs 12,000 crore. While reducing the UDF levied from departing passengers by over 54%, AERA had allowed BIAL to collect a higher fee from March 31, 2019, till March 31, 2021.

Urban mobility analyst Sanjeev Dyamannavar opined that AERA's strict deadline of March 2021 and the provision for penalty are critical to ensure that the T2 project does not lead to cost and time over-runs.