India's regulatory regime for airports still evolving: Moody's

Published On: 03, Dec 2017 | Source: Timesofindia

NEW DELHI: Even as the number of passengers are on the rise, the regulatory regime in India for airports is still quite new and evolving, posing credit challenges for the aerodromes, said rating agency Moody's.

In a report released last week, Moody's Investors Service has said it expects large airports in India to bring forward plans to expand capacity to meet the growing demand. With high double-digit growth in domestic air traffic for the past couple of years, India is one of the fastest growing aviation markets in the world.

According to Moody's, terms and conditions stated in concession agreements for airports have been different from those stipulated under the regulatory act on certain key issues, leading to frequent misunderstandings.

"For example, there have been different interpretations of what constitutes aeronautical and non-aeronautical revenues and whether non-aeronautical revenues can be used to subsidies airport charges. Similarly, there are disputes over components of the rate base for arriving at aeronautical revenues. This has led to the Ministry of Civil Aviation playing a more active role and giving policy directives," the report said.

As per the report, major airports in India have been registering a strong rise in passenger traffic- which has recorded 20 per cent plus growth in last two years; large airports in the country are expected to bring forward plans to expand capacity.

"A further track record of consistent application of regulated settings will provide support for the credit profiles of airport operators in India, and encourage more and timely capital investment in the sector," said Moody's.

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