Tariff Based Bids for Airport Projects
In order to protect the interest of fliers and airlines from escalating prices at private airports, the Ministry of Civil Aviation may, for the first time, seek tariff-based bids from companies seeking to operate airfields at Jaipur and Ahmedabad airports, said sources, adding that bidders quoting the lowest tariff would win the projects The move is aimed at curbing sharp increases in charges at airports after they are privatized, as seen in some cases that were awarded on a revenue sharing basis. The model is being discussed on the line that the cost that the prospective airport operator would incur in terms of expansion or construction would be known to the bidder beforehand. Airports Authority of India would either ask for a one-time charge for using the infrastructure or lease rentals.

According to market watchers, the fixed-tariff model isn't appropriate for sectors such as aviation. Such bidding is possible in sectors that are mature and where traffic and costs can be reasonably predicted. This model has failed even in road and metro rail projects, with bidders chickening out once they realize that traffic and costs are beyond what they had predicted. As a matter of fact, in a volatile world of aviation wherein passenger traffic, fuel prices, dollar exchange rate, interest rate, price of airport equipment and construction material cannot be predicted even for the next 12 months, expecting bidders to bid at a fixed tariff for a period of 30 long years sounds impractical, Partner and India Head of Aerospace and Defence at global consultancy KPMG, Amber Dubey, said, reiterating that in most developed economies in the US and the European Union, airport tariffs are kept flexible and are adjusted periodically to provide a leveling field to both passengers and airport developers and operators.