Consultation Paper No. 01/2024-25 In the matter of Determination of Aeronautical Tariff for Lokpriya Gopinath Bordoloi International Airport, Guwahati (LGBIA) for the Third Control Period (01.04.2022 - 31.03.2027)

फा. सं. ऐरा/20010/एमवाईटीपी/जीआईएएल/सीपी-III/2022-27 F. No. AERA/20010/MYTP/GIAL/CP-III/2022-27 परामर्श पत्र संख् या 01/2024-25 Consultation Paper No. 01/2024-25 भारतीय ववमानपत् तन आवथशक वववनयामक प्राविकरण Airports Economic Regulatory Authority of India लोकवप्रय गोपीनाथ बारदोलाई अंतरराष्ट्रीय हवाईअड्डा (एलजीबीआईए) के वलए तृतीय वनयंत्रण अववि (01.04.2022–31.03.2027) के वलए वैमावनक टैररफ वनिाशररत करने के मामले में IN THE MATTER OF DETERMINATION OF AERONAUTICAL TARIFF FOR LOKPRIYA GOPINATH BORDOLOI INTERNATIONAL AIRPORT, GUWAHATI (LGBIA) FOR THE THIRD CONTROL PERIOD (01.04.2022 - 31.03.2027) जारी करने की तारीख : 06 जून, 2024 Date of Issue: 06 June, 2024 उड़ान भवन/ Udaan Bhawan, तृतीय तल/ 3rd Floor डी ब्लॉक/ D Block, ऱाजीव ग़ाांधी भवन/ Rajiv Gandhi Bhawan सफदरजांग एयरपोर्ट/ Safdarjung Airport नई ददल् ली/New Delhi – 110003 पऱामर्ट पत्र सांख् य़ा 01/2024-25/Consultation Paper No 01/2024-25 पृष् ठ 254 क़ा 1/ Page 1 of 254STAKEHOLDERS’ COMMENTS STAKEHOLDERS’ COMMENTS Lokpriya Gopinath Bordoloi International Airport (LGBIA) is a Major Airport as per the definition outlined in Section 2 (i) of the AERA Act 2008 read with AERA (Amendment) Acts of 2019 and 2021, based on annual passenger throughput volume. It had passenger throughput of about 5.45 MPPA in the FY 2019-20 (being the pre-pandemic year). The Airport witnessed a steady recovery in the passenger traffic from FY 2021-22, in the aftermath of COVID-19 pandemic and has handled 5.05 million passengers in FY’231 LGBIA was operated by Airports Authority of India (AAI), which had entered into a Concession Agreement with the current Airport Operator (Guwahati International Airport Limited) on January 19, 2021, for the Operation, Management and Development of LGBIA for a period of 50 years from the Commercial Operation Date (COD). The COD was achieved on October 8, 2021. The period from FY’17 to FY’21 was Second Control Period, the period starting from 1st April’2021 to October 7, 2021 has been considered as pre-COD period and the period from COD till March 31, 2022, has been considered as post-COD period. In this tariff determination exercise, as two airport operators are involved i.e., Airports Authority of India (Second Control Period and pre-COD) and Guwahati International Airport Limited (post- COD and third control period). For the sake of clarity in this Consultation Paper, the Authority has used AAI for Airports Authority of India for prior to COD and GIAL for Guwahati International Airport Limited after the COD including third control period. GIAL, on 15th April 2022 sought clarification from the Authority related to control period for LGBIA. The Authority vide its Public Notice No. 05/2022-23 dated 20th June 2022 decided the following:  “To shift the Control Period for Guwahati Airport from 01.04.2021-31.03.2026 to 01.04.2022- 31.03.2027. The periodicity of the Control Period will be five years only.  To consider the true up for 01.04.2021 to 31.03.2022 at the time of determination of tariff for the Third Control Period as per AERA policy.” As per the provisions of the Concession Agreement, AAI and the GIAL have submitted their Multi Year Tariff Proposal (MYTP) as follows:  True up submission of AAI for the Second Control Period and for the period from April 01, 2021 up to COD  True up submission of GIAL for the post-COD period from the COD up to March 31, 2022  MYTP for the Third Control Period from April 1, 2022 to March 31, 2027 submitted by GIAL. For this Consultation Paper, the Authority has considered the audited figures submitted by AAI for LGBIA for the Second Control Period and for the period from April 01, 2021 up to COD (FY 2016-17 to COD) and the audited financials submitted by GIAL from COD till March 31, 2022 and from April 1, 2022 till March 31,2023. The Authority has released this Consultation Paper putting forward its proposals in the background of involvement of two airport operators in the tariff determination process. The Authority shall consider written evidence-based feedback, comments, and suggestions from all the stakeholders on the proposals made in the Consultation Paper and pass suitable Order determining the tariff for aeronautical services taking on board the feedback from the stakeholders, on merit. The Authority would like to emphasize that the timelines for consultation process are sacrosanct and hereby requests the stakeholders to provide their comments/ inputs within the timelines specified in this Consultation Paper, beyond which the same will not be considered by the Authority. 1 AAI.aero https://www.aai.aero/sites/default/files/traffic-news/rev_Mar2k23Annex3.pdf Consultation Paper No. 01/2024-25 Page 2 of 254STAKEHOLDERS’ COMMENTS As per the provisions of Section 13(2) of the AERA Act 2008, the tariff so determined under the Tariff Order can be reviewed and revised. Thus, in accordance with the provisions of Section 13(4) of the AERA Act, the written comments on Consultation Paper No. 01/2024-25 dated 06th June 2024, are invited from the stakeholders, preferably in electronic form, at the following address: Director (P&S, Tariff) Udaan Bhawan, 3rd Floor D Block, Rajiv Gandhi Bhawan Safdarjung Airport New Delhi – 110003 Email: director-ps@aera.gov.in, rajan.gupta1@aera.gov.in, inderpal.s@aera.gov.in copy to secretary@aera.gov.in Stakeholders’ Consultation Meeting 21st June 2024 Last Date for submission of comments 06th July 2024 Last Date for submission of counter comments 16th July 2024 Comments and Counter Comments will be posted on AERA’s website: www.aera.gov.in. For any clarification/ information, Director (P&S, Tariff) may be contacted at Telephone Number: Tel: 011-24695048. Consultation Paper No. 01/2024-25 Page 3 of 254TABLE OF CONTENTS TABLE OF CONTENTS 1 INTRODUCTION ............................................................ 17 1.1 Background .................................................................................................................................... 17 1.2 Profile of LGBIA ........................................................................................................................... 17 1.3 Development of LGBIA through PPP mode ................................................................................. 18 1.4 Cargo Facility ................................................................................................................................ 18 1.5 Ground handling operations .......................................................................................................... 19 1.6 Fuel Facility Operations ................................................................................................................ 19 2 TARIFF DETERMINATION OF LGBIA ............................................................ 20 2.1 Introduction ................................................................................................................................... 20 2.2 Authority’s orders applied in tariff proposals in this Consultation Paper ..................................... 21 2.3 Background to tariff determination process of LGBIA ................................................................. 21 2.4 Multi Year Tariff Proposal submission ......................................................................................... 22 2.5 Construct of this Consultation Paper ............................................................................................. 25 2.6 Studies commissioned by the Authority ........................................................................................ 26 3 FRAMEWORK FOR TARIFF DETERMINATION OF LGBIA FOR THE THIRD CONTROL PERIOD ............................................................ 28 3.1 Methodology .................................................................................................................................. 28 3.2 Revenues from Air Navigation Services (ANS) ........................................................................... 28 4 TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD AND PRE-COD PERIOD ............................................................ 30 4.1 Background .................................................................................................................................... 30 4.2 AAI’s submission regarding True up for SCP and period from 1st Apr’21 to 7th Oct’21 ............. 30 4.3 Authority’s examination of True up submitted by AAI for Second Control Period and pre-COD period ............................................................................................................................................. 31 4.4 True up of Traffic .......................................................................................................................... 34 4.5 True up of Capital Expenditure (CAPEX) .................................................................................... 36 4.6 True up of Depreciation ................................................................................................................. 49 4.7 True up of RAB ............................................................................................................................. 50 4.8 True up of Fair Rate of Return ...................................................................................................... 52 4.9 True up of Aeronautical Operation and Maintenance (O&M) expenses ...................................... 53 4.10 True up of Non-aeronautical revenue ............................................................................................ 60 4.11 True up of Aeronautical Revenue .................................................................................................. 61 4.12 True up of Taxation ....................................................................................................................... 63 4.13 True up of Aggregate Revenue Requirement (ARR) for Second Control Period and the Pre-COD Consultation Paper No. 01/2024-25 Page 4 of 254TABLE OF CONTENTS period ............................................................................................................................................. 65 4.14 Adjusted Deemed Initial RAB ....................................................................................................... 66 4.15 Authority’s proposals regarding true up for SCP and pre-COD period (FY17 up to COD) ......... 68 5 TRUE UP OF GIAL FOR THE PERIOD FROM COD TILL MARCH 31, 2022 ... 69 5.1 Background .................................................................................................................................... 69 5.2 GIAL’s submission regarding True up for the period from COD till March 31, 2022 ................. 69 5.3 Authority’s examination of the true up submitted by GIAL for the period from COD till March 31, 2022 ............................................................................................................................................... 70 5.4 True up of Capital Expenditure (CAPEX) .................................................................................... 70 5.5 True up of Depreciation ................................................................................................................. 72 5.6 True up of FRoR ............................................................................................................................ 73 5.7 True up of Aeronautical O&M expenses ...................................................................................... 74 5.8 True up of Non-aeronautical revenue (NAR) ................................................................................ 79 5.9 True up of Aeronautical Revenue .................................................................................................. 79 5.10 True up of Taxation ....................................................................................................................... 80 5.11 True up of Aggregate Revenue Requirement (ARR) for period from COD till March 31, 2022 . 81 5.12 Authority’s proposal regarding True up for the period from COD till March 31, 2022 ............... 81 6 TRAFFIC PROJECTIONS FOR THE THIRD CONTROL PERIOD ..................... 83 6.1 GIAL’s submission regarding Traffic projections for the Third Control Period .......................... 83 6.2 Authority’s examination regarding Traffic projections for the Third Control Period .................. 84 6.3 Authority’s Proposal regarding Traffic for the Third Control Period ........................................... 90 7 CAPITAL EXPENDITURE (CAPEX), DEPRECIATION AND REGULATORY ASSET BASE (RAB) FOR THE THIRD CONTROL PERIOD ................................ 91 7.1 Background .................................................................................................................................... 91 7.2 GIAL’s submission regarding Capital Expenditure proposed for the Third Control Period ........ 93 7.3 Authority’s examination regarding Capex, Depreciation and RAB for the Third Control Period 93 7.4 Capital addition for the Third Control Period ............................................................................. 154 7.5 Depreciation for the Third Control Period .................................................................................. 157 7.6 Regulatory Asset Base (RAB) for the Third Control Period........................................................ 161 7.7 Authority’s proposal regarding CAPEX, Depreciation and RAB for the Third Control Period. 162 8 FAIR RATE OF RETURN (FROR) FOR THE THIRD CONTROL PERIOD .... 164 8.1 GIAL’s submission regarding FRoR for the Third Control Period ............................................. 164 8.2 Authority’s Examination regarding FRoR for the Third Control Period .................................... 165 8.3 Authority’s proposals regarding FRoR for the Third Control Period ......................................... 168 Consultation Paper No. 01/2024-25 Page 5 of 254TABLE OF CONTENTS 9 INFLATION FOR THE THIRD CONTROL PERIOD ........................................... 169 9.1 GIAL’s submission regarding Inflation for the Third Control Period ........................................ 169 9.2 Authority’s examination regarding Inflation for the Third Control Period ................................. 169 9.3 Authority’s proposal relating to inflation for the Third Control Period ...................................... 169 10 OPERATION AND MAINTENANCE (O&M) EXPENSES FOR THE THIRD CONTROL PERIOD .......................................................... 170 10.1 GIAL’s submission regarding Operation and Maintenance (O&M) Expenses for the Third Control Period ........................................................................................................................................... 170 10.2 Authority’s examination regarding Operation and Maintenance (O&M) Expenses for the Third Control Period .............................................................................................................................. 173 10.3 Authority’s proposal regarding Aeronautical O&M expenses for Third Control Period ............ 203 11 NON-AERONAUTICAL REVENUE FOR THE THIRD CONTROL PERIOD .. 204 11.1 GIAL’s submission of Non-aeronautical revenue for the Third Control Period ......................... 204 11.2 Authority’s examination regarding Non-aeronautical revenue for the Third Control Period ..... 205 11.3 Authority’s proposal relating to Non-aeronautical revenue for the Third Control Period .......... 210 12 TAXATION FOR THE THIRD CONTROL PERIOD ............................................. 211 12.1 GIAL’s submission regarding Taxation for the Third Control Period ........................................ 211 12.2 Authority’s examination regarding Taxation for the Third Control Period .................................. 211 12.3 Authority’s proposal regarding Taxation for the Third Control Period ...................................... 212 13 QUALITY OF SERVICE FOR THE THIRD CONTROL PERIOD ...................... 213 13.1 GIAL’s submission relating to Quality of Service ...................................................................... 213 13.2 Authority’s examination regarding Quality of Service for the Third Control Period ................. 213 13.3 Authority’s proposal relating to Quality of Service for the Third Control Period ...................... 214 14 AGGREGATE REVENUE REQUIREMENT (ARR) FOR THE THIRD CONTROL PERIOD .......................................................... 215 14.1 GIAL’s submission regarding ARR for the Third Control Period .............................................. 215 14.2 Authority’s examination of Aggregate Revenue Requirement (ARR) for the Third Control Period ..................................................................................................................................................... 215 14.3 Authority’s proposal regarding Aggregate Revenue Requirement (ARR) for the Third Control Period ........................................................................................................................................... 217 15 SUMMARY OF THE AUTHORITY’S PROPOSALS PUT FORTH FOR STAKEHOLDER CONSULTATION .......................................................... 219 Chapter 4: True up of AAI for the Second Control period from FY 2017 till COD ............................... 219 Chapter 5: True up of GIAL for the period from COD till March 31, 2022 ........................................... 219 Chapter 6: Traffic Projections for the Third Control Period .................................................................... 219 Consultation Paper No. 01/2024-25 Page 6 of 254TABLE OF CONTENTS Chapter 7: Capital Expenditure (Capex), Depreciation and RAB for the Third Control Period ............. 219 Chapter 8: Fair Rate of Return (FRoR) for the Third Control Period ..................................................... 220 Chapter 9: Inflation for the Third Control Period .................................................................................... 220 Chapter 10: Operation and Maintenance Expenses for the Third Control Period ................................... 220 Chapter 11: Non-aeronautical revenue for the Third Control Period ...................................................... 220 Chapter 12: Taxation for the Third Control Period.................................................................................. 221 Chapter 13: Quality of Service for the Third Control Period .................................................................. 221 Chapter 14: Aggregate Revenue Requirement (ARR) for the Third Control Period .............................. 221 16 STAKEHOLDERS’ CONSULTATION TIMELINE................................................ 222 17 ANNEXURES .......................................................... 223 17.1 Annexure 1 – Summary of study on allocation of assets between Aeronautical and Non- aeronautical assets ........................................................................................................................ 223 17.2 Annexure 2 - Summary of study on efficient Operation and Maintenance expenses ................. 233 17.3 Annexure 3 – Clauses of the Concession Agreement entered between AAI and GIAL ............. 239 18 APPENDICES .......................................................... 254 Consultation Paper No. 01/2024-25 Page 7 of 254LIST OF TABLES LIST OF TABLES Table 1: Shareholding pattern of GIAL .............................................................................................................. 17 Table 2: Technical and Terminal Building details of LGBIA as submitted by GIAL ....................................... 18 Table 3: Chronology of AERA orders with regard to extension of tariff at LGBIA .......................................... 22 Table 4: Sequence of events regarding true up submissions by AAI ................................................................. 23 Table 5: Sequence of events regarding true up and MYTP submissions by GIAL ............................................ 23 Table 6: Services provided to GIAL by related parties ...................................................................................... 25 Table 7: Submission of True up by AAI for the SCP and Pre-COD period ....................................................... 31 Table 8: AAI’s submission for True up of traffic for the Second Control Period for LGBIA ........................... 34 Table 9: Passenger traffic and ATM approved by the Authority for the Second Control Period ....................... 35 Table 10: RAB for Second Control Period and pre COD period as per AAI’s Submission .............................. 36 Table 11: Allocation of assets as per AAI’s submission .................................................................................... 36 Table 12: Allocation ratios as per AAI’s submission ......................................................................................... 37 Table 13: RAB as approved by Authority in the Tariff Order for Second Control Period (Table 33 of the Order) ................................................................................................................................................................. 38 Table 14: Allocation Ratios proposed by the Authority ..................................................................................... 39 Table 15: Opening RAB approved by the Authority in the Second Control Period Tariff Order ...................... 40 Table 16: Capital additions submitted by AAI for the SCP and Pre-COD Period for LGBIA .......................... 40 Table 17: Reconciliation of Additions considered in the Second Control Period Order and Actuals incurred by AAI ..................................................................................................................................................................... 41 Table 18: Reconciliation of Additions allowed in Second Control Period Order and Actuals incurred by AAI ............................................................................................................................................................................ 42 Table 19: Impact due to reclassification of AAI assets proposed by the Authority ........................................... 44 Table 20: Reclassification of assets capitalized in the Second Control Period and Pre-COD Period proposed by the Authority ....................................................................................................................................................... 45 Table 21: Gross Block proposed by the Authority for Second Control Period and Pre COD period ................ 47 Table 22: Impact on depreciation due to reclassification of AAI assets for the SCP and pre-COD period ....... 49 Table 23: Depreciation considered by the Authority for True up of the SCP and Pre-COD Period .................. 49 Table 24: Adjusted RAB submitted by AAI and proposed by the Authority post re-classification for SCP and pre-COD period .................................................................................................................................................. 50 Table 25: Assets transferred by AAI to GIAL as per JARS as on COD ........................................................... 51 Table 26: Determination of Deemed Initial RAB by the Authority ................................................................... 52 Table 27: Pro-rated FRoR for FY’22 considered by the Authority for true up of pre-COD period ................... 53 Table 28: O&M expenses submitted by AAI for True up of the SCP and Pre-COD Period .............................. 53 Table 29: Aeronautical O&M expenses approved by the Authority for Second Control Period ....................... 53 Table 30: CHQ/ RHQ expenses proposed by the Authority as part of True up of O&M expenses for the Second Control Period and pre-COD period ...................................................................................................... 58 Table 31: Impact of proposed reallocation of AAI’s Aeronautical O&M expenses as per the independent study conducted by the Authority ................................................................................................................................ 59 Table 32: Aeronautical O&M expenses considered by the Authority for True up of the Second Control Period and Pre-COD period ........................................................................................................................................... 59 Table 33: Non-aeronautical revenue submitted by AAI for SCP and up to Pre-COD period ............................ 60 Table 34: Comparison of Actual NAR with Projections submitted by AAI for the Second Control Period and Pre-COD period .................................................................................................................................................. 60 Table 35: “Space rentals collected from Airlines” as submitted by AAI ........................................................... 61 Table 36: Total Non-Aeronautical revenue as per Authority for the Second Control Period and Pre-COD period .................................................................................................................................................................. 61 Table 37: Aeronautical revenue as per AAI for the Second Control Period and Pre-COD period .................... 61 Table 38: Comparison of Actual Aeronautical revenue and Projections submitted by AAI for the Second Control Period and Pre-COD Period .................................................................................................................. 62 Table 39: Total Aeronautical revenue as per Authority for the Second Control Period and Pre-COD period ... 63 Table 40: Taxation submitted by AAI for the Second Control Period and Pre-COD period ............................. 63 Table 41: Taxation proposed by the Authority for the Second Control Period and Pre-COD period ................ 64 Consultation Paper No. 01/2024-25 Page 8 of 254LIST OF TABLES Table 42: ARR proposed by the Authority for Second Control Period and Pre-COD Period............................ 65 Table 43: Determination of Adjusted Deemed Initial RAB as on COD by the Authority ................................. 66 Table 44: Determination of Adjusted Deemed Initial RAB as on Specified and Future Payment Dates ........... 67 Table 45: True Up submitted by GIAL from COD till March 31, 2022 ............................................................ 69 Table 46: Additional items included in RAB by GIAL from COD till March 31, 2022 .................................... 70 Table 47: Impact of Reclassification of Asset Additions by GIAL from COD till March 31, 2022 .................. 72 Table 48: Impact on Depreciation post reclassification and revised useful life by the Authority ...................... 72 Table 49: Depreciation impact due to Reclassification of Asset Additions (Post-COD Period)........................ 72 Table 50: Average RAB considered by the Authority from COD till March 31, 2022 ...................................... 73 Table 51: FRoR proposed by the Authority from COD to March 31, 2022 ....................................................... 74 Table 52: O&M expenses submitted by GIAL for the period from COD till March 31, 2022 .......................... 74 Table 53: Bank & Finance Charges considered by the Authority for Post COD Period .................................... 74 Table 54: Pre-COD expenses proposed by the Authority for the Third Control Period..................................... 76 Table 55: Impact of proposed reallocation of GIAL’s Aeronautical O&M expenses ........................................ 78 Table 56: Reallocated Aeronautical O&M expenses of GIAL from COD to March 31, 2022 .......................... 78 Table 57: NAR submitted by GIAL for True up from COD till March 31, 2022 .............................................. 79 Table 58: NAR proposed by the Authority for True up from COD till March 31, 2022 ................................... 79 Table 59: Aeronautical Revenue submitted by GIAL for True up from COD till March 31, 2022 ................... 80 Table 60: Aeronautical Revenue proposed by the Authority for True up from COD till March 31, 2022 ........ 80 Table 61: Taxation proposed by the Authority for true up (COD till 31st March 2022) ................................... 80 Table 62: ARR and Shortfall proposed by the Authority (COD till March 31, 2022) ....................................... 81 Table 63: Historical passenger, ATM and Cargo traffic at LGBIA ................................................................... 83 Table 64: Traffic and growth (%) Y-o-Y proposed by GIAL ........................................................................... 83 Table 65: Cargo volumes to be handled by GIAL out of the total cargo traffic during the Third Control Period ............................................................................................................................................................................ 84 Table 66: Traffic growth rates (Y-o-Y) submitted by GIAL, after adjustment of exempt traffic ..................... 84 Table 67: Exempt traffic considered by the Authority for the Third Control Period ......................................... 85 Table 68: CAGR for passenger traffic, ATM, and Cargo .................................................................................. 86 Table 69: Comparison of Passenger, ATM and Cargo traffic at LGBIA of FY2019-20 vs FY 2022-23 .......... 87 Table 70: Forecasted and Actual Passenger, ATM, Cargo traffic submitted by GIAL for FY’24 ..................... 87 Table 71: Traffic proposed to be considered by the Authority for the Third Control Period ............................. 88 Table 72: Asset-wise Aero Capitalisation submitted by GIAL for the Third Control Period ............................ 93 Table 73: Project wise Capital Expenditure submitted by GIAL for the Third Control Period ......................... 94 Table 74: Details of Total CAPEX as submitted by GIAL ................................................................................ 98 Table 75: Inflation Adjusted normative rates computed for the Terminal Building by the Authority ............. 101 Table 76: Inflation adjusted Normative rates computed for runway/taxiway/apron by the Authority ............. 101 Table 77: Details of Change in area proposed by GIAL over previous design ................................................ 105 Table 78: Cost comparison of NITB sanctioned originally, awarded and project by GIAL ............................ 106 Table 79 : Details of cost of Terminal Building proposed by the Authority. ................................................... 108 Table 80: Details of cost for kerbside development ......................................................................................... 109 Table 81: Details of normative cost for Runway/Taxiway/Apron works ......................................................... 111 Table 82: Details of the cost submitted by GIAL and proposed by the Authority towards Apron works ....... 112 Table 83: Authority’s examination of Airside Storm Water Drainage cost ..................................................... 113 Table 84: Authority’s examination of Part Parallel Taxiway and Link Taxiway cost ..................................... 114 Table 85: Authority’s examination of cost pertaining to land development works: ........................................ 115 Table 86: Authority’s examination of widening of Runway Basis Strip .......................................................... 118 Table 87: Authority’s examination of Extension of Runway cost.................................................................... 119 Table 88: Normative cost for Apron (FY’25) .................................................................................................. 120 Table 89: Authority’s examination of Cost towards new isolation bay ........................................................... 121 Table 90: Authority’s examination of cost towards Rapid Exit Taxiway project ............................................ 121 Table 91: Details of other minor works proposed by GIAL and the Authority ................................................ 123 Table 92: Air Cargo demand projections, capacity of LGBIA ......................................................................... 126 Table 93: Cost proposed by GIAL towards ICC Facility ................................................................................. 127 Table 94: Details of Fuel farm capex submitted by GIAL ............................................................................... 127 Consultation Paper No. 01/2024-25 Page 9 of 254LIST OF TABLES Table 95: Cost proposed toward Vehicles by the Authority for the Third Control Period ............................... 129 Table 96: Details of Plant and Machinery submitted by GIAL and proposed by the Authority ...................... 131 Table 97: Cost of administrative building as per GIAL and proposed by the Authority.................................. 133 Table 98: Details of Integrated building submitted by GIAL and proposed by the Authority ......................... 133 Table 99: Capex proposed toward Other Buildings by the Authority for Third Control Period ...................... 134 Table 100: Capex proposed toward IT equipment by the Authority for Third Control Period ........................ 135 Table 101: Details of miscellaneous security equipment ................................................................................. 137 Table 102: Details of sustaining capex for FY'23 ............................................................................................ 138 Table 103: Capital Expenditure proposed by the Authority for the Third Control Period ............................... 138 Table 104: Asset head wise analysis and observation regarding soft cost ....................................................... 148 Table 105: FA and IDC submitted by GIAL .................................................................................................... 149 Table 106: Asset category wise details of Interest During Construction as per the Authority ......................... 150 Table 107: IDC proposed by the Authority for the Third Control Period ........................................................ 151 Table 108: Summary of the CAPEX proposed by the Authority for Third Control Period ............................. 151 Table 109: Asset wise allocation for asset addition proposed in third control period ...................................... 154 Table 110: Capitalization schedule proposed by the Authority for the Third Control Period .......................... 154 Table 111: Year wise details for Aeronautical capex proposed by the Authority for the Third Control Period .......................................................................................................................................................................... 154 Table 112: Depreciation rates determined by GIAL for the Third Control Period .......................................... 157 Table 113: Depreciation submitted by GIAL for the Third Control Period ..................................................... 158 Table 114: Useful Life proposed by the Authority for all the assets in the Third Control Period ................... 160 Table 115: Aeronautical depreciation proposed by the Authority for the Third Control Period ...................... 160 Table 116: Depreciation claimed by GIAL and proposed by the Authority for the Third Control Period....... 161 Table 117: RAB proposed by GIAL for LGBIA for the Third Control Period ................................................ 161 Table 118: RAB proposed by the Authority for LGBIA for the Third Control Period .................................... 162 Table 119: Cost of equity computation as per GIAL’s submission .................................................................. 164 Table 120: Breakdown of all-in External Commercial Borrowing cost of Adani Airport Holdings Limited .. 164 Table 121: FRoR computation submitted by GIAL ......................................................................................... 165 Table 122: Computation of Cost of equity as per IIM Bangalore independent study reports .......................... 165 Table 123: Fair Rate of Return proposed by the Authority for the Third Control Period ................................ 167 Table 124: WPI inflation rate submitted by GIAL ........................................................................................... 169 Table 125: WPI inflation rates as per RBI’s annual forecast ........................................................................... 169 Table 126: Inflation rates proposed by the Authority for Third Control Period ............................................... 169 Table 127: Details of increase in the Terminal Building area projected by GIAL ........................................... 170 Table 128: O&M expenses (category wise) claimed by GIAL for the Third Control Period .......................... 170 Table 129: Segregation of O&M expenses and basis of allocation as per GIAL’s submission ....................... 171 Table 130: Total Aeronautical Operation and Maintenance expenses submitted by GIAL ............................. 171 Table 131: Growth rates for Aeronautical O&M expenses submitted by GIAL for the Third Control Period 172 Table 132: One-time Escalation rates for Aeronautical O&M expenses submitted by GIAL for the Third Control Period .................................................................................................................................................. 173 Table 133: Allocation of O&M expenses submitted by GIAL and proposed by the Authority for the Third Control Period .................................................................................................................................................. 177 Table 134: One-time escalation claimed by GIAL and Increase % Proposed by the Authority ...................... 177 Table 135: Department-wise Select employees of AAI deputed to LGBIA as submitted by GIAL ................ 178 Table 136: Manpower cost of AAI employees claimed by GIAL and proposed by the Authority .................. 179 Table 137: Dept. wise Head Count of Employees as per GIAL’s submission for the Third Control Period ... 181 Table 138: Headcount of Aeronautical employees of LGBIA for the Period from FY’17 to FY’20 ............... 184 Table 139: Estimated Passenger and ATM traffic of LGBIA .......................................................................... 184 Table 140: Employee Head Count of GIAL and revised EHCR proposed by the Authority for the Third Control Period .................................................................................................................................................. 185 Table 141: Manpower cost of Aero employees proposed by the Authority for the Third Control Period ...... 186 Table 142: Utility expenses claimed by GIAL and proposed by the Authority for the Third Control Period . 188 Table 143: IT expense of GIAL as proposed by the Authority for the Third Control Period .......................... 188 Table 144: Rates and Taxes of GIAL as proposed by the Authority for the Third Control Period .................. 189 Consultation Paper No. 01/2024-25 Page 10 of 254LIST OF TABLES Table 145: Security expense of GIAL as proposed by the Authority for the Third Control Period ................. 190 Table 146: Actual Corporate Cost incurred with allocation basis submitted by GIAL for FY’23 ................... 191 Table 147: Corporate Cost Allocation expenses claimed by GIAL and Proposed by the Authority ......... 192 Table 148: Admin expenses claimed by GIAL and proposed by the Authority for the Third Control Period ............................................................................................................................................................... 193 Table 149: Insurance expenses claimed by GIAL and proposed by the Authority for the Third Control Period ............................................................................................................................................................... 194 Table 150: R&M on Opening Net block of Assets claimed by GIAL and Proposed by the Authority for the Third Control Period ......................................................................................................................................... 194 Table 151: Other Opex claimed by GIAL and proposed by the Authority for the Third Control Period 195 Table 152: Fuel O&M expenses claimed by GIAL for each FY for the Third Control Period................. 197 Table 153: Fuel Opex claimed by GIAL and allowed by the Authority for the Third Control Period ............ 198 Table 154: Cargo O&M expenses claimed by GIAL and proposed by the Authority for the Third Control Period ................................................................................................................................................................ 199 Table 155: Working Capital Interest, Annual Fees for PBG and Finance Charges claimed by GIAL and proposed by the Authority for the Third Control Period .................................................................................. 200 Table 156: Total Aeronautical O&M expenses proposed by the Authority for the Third Control Period ....... 201 Table 157: Growth rates in Aeronautical O&M expenses proposed by the Authority for the Third Control Period ................................................................................................................................................................ 202 Table 158: Non-aeronautical revenue submitted by GIAL for the Third Control Period ................................ 205 Table 159: Year wise NAR earned by AAI and projected by GIAL ................................................................ 207 Table 160: Adjustment to Revenue from Non-Aeronautical Services considered by the Authority for FY 2022- 23 ...................................................................................................................................................................... 209 Table 161:Total Non-aeronautical revenues proposed by the Authority for Third Control Period .................. 210 Table 162: Taxation submitted by GIAL for the Third Control Period............................................................ 211 Table 163: Taxation proposed by the Authority for the Third Control Period ................................................. 212 Table 164: ASQ rating for LGBIA ................................................................................................................... 213 Table 165: ARR submitted by GIAL for the Third Control Period ................................................................. 215 Table 166: ARR proposed by the Authority for the Third Control Period ....................................................... 217 Table 167: The ratio of Aeronautical to Non-aeronautical considered by the Study for the period from FY’17 to FY’22 ........................................................................................................................................................... 224 Table 168: Impact due to reclassification of AAI assets as per Study ............................................................. 226 Table 169: Impact on depreciation due to reclassification of AAI assets ........................................................ 226 Table 170: Adjusted RAB derived by the Authority post reclassification ...................................................... 227 Table 171: Impact of Reclassification of Asset Additions by GIAL from COD till March 31, 2022 .............. 229 Table 172: Useful Life proposed by GIAL and the Authority ........................................................................ 229 Table 173: Impact on Depreciation due to Reclassification of Asset Additions by GIAL and Revised Useful Life as per the Authority from COD till March 31, 2022 ................................................................................. 230 Table 174: Total Impact on Depreciation due to Reclassification of Asset Additions from COD till March 31, 2022 .................................................................................................................................................................. 230 Table 175: Average RAB considered by the Authority from COD till March 31, 2022 .................................. 230 Table 176: Revised Gross block of Assets up to COD as per the Study report ................................................ 231 Table 177: Revised Gross block of Assets as on March 31, 2022 as per the Study ......................................... 231 Table 178: Aeronautical O&M expenses of LGBIA for the Second Control Period - Approved vs. Actuals . 233 Table 179: Segregation ratio for O&M expenses as per AAI’s submission .................................................... 235 Table 180: Revised segregation ratio for O&M expenses as per the study ...................................................... 235 Table 181: O&M expenses submitted by AAI and as per Study for the SCP and pre-COD Period ............... 236 Table 182: Impact of proposed reallocation of GIAL’s Aeronautical O&M expenses .................................... 236 Table 183: Year-wise summary of reclassification and other adjustments to Aero O&M expenses ............... 237 Consultation Paper No. 01/2024-25 Page 11 of 254GLOSSARY List of Figures Figure 1: Ownership Structure ........................................................................................................................... 17 Figure 2: Proposed layout for Arrival Floor ..................................................................................................... 103 Figure 3: Proposed layout for Mezannine Floor ............................................................................................... 104 Figure 4: Proposed layout for Departure Floor................................................................................................. 104 Figure 5: Proposed layout for Departure Mezzanine Floor .............................................................................. 105 Figure 6: Proposed layout for Apron 2 at LGBIA ............................................................................................ 111 Figure 7: Existing drainage system at LGBIA ................................................................................................. 113 Figure 8: Low lying area at LGBIA ................................................................................................................. 115 Figure 9: Proposed aircraft movement at part parallel taxiway ........................................................................ 119 Figure 10: Proposed Hydrant System at LGBIA .............................................................................................. 128 Figure 11: Year wise NAR earned by AAI and projected by GIAL ................................................................ 207 Figure 12: Year-wise NAR per passenger earned by AAI and projected by GIAL ......................................... 208 Consultation Paper No. 01/2024-25 Page 12 of 254GLOSSARY GLOSSARY Abbreviation Full Form A&G Administrative & General AAHL Adani Airport Holdings Limited AAI Airports Authority of India AAICLAS AAI Cargo Logistics and Allied Services ACI Airports Council International ADP Automatic Data Processing AERA / The Authority Airports Economic Regulatory Authority of India AERA Act Airports Economic Regulatory Authority of India Act, 2008 AEL Adani Enterprises Limited AFS Air Freight Station AIC Aeronautical Information Circulars ANS Air Navigation Services AO Airport Operator AOCC Airport Operations Control Centre ARFF Aircraft Rescue and Fire Fighting ARR Aggregate Revenue Requirement ASQ Airport Service Quality Asset Allocation Study Study on allocation of assets between Aeronautical and Non-aeronautical assets for Report Lokpriya Gopinath Bordoloi International Airport, Guwahati ATC Air Traffic Control ATF Aviation Turbine Fuel ATM Aircraft Traffic Movement AUCC Airport Users Consultative Committee BCAS Bureau of Civil Aviation Security BDDS Bomb Detection and Disposal Squad BHS Baggage Handling System BIAL Bangalore International Airport Limited BOQ Bill of Quantities BPCL Bharat Petroleum Corporation Limited Cr. crores CA Concession Agreement CAG Comptroller and Auditor General of India CAGR Compounded Annual Growth Rate CAO Chief Airport Officer CAPEX Capital Expenditure CAR Civil Aviation Regulations CBR California Bearing Ratio CFT Crash Fire Tender Consultation Paper No. 01/2024-25 Page 13 of 254GLOSSARY Abbreviation Full Form CGF Cargo Facility, Ground Handling and Supply of Fuel to Aircraft CHQ Corporate Headquarters CIAL Cochin International Airport Limited CISF Central Industrial Security Force CNS Communication, Navigation and Surveillance COD Commercial Operation Date CP Consultation Paper CPWD Central Public Works Department CSR Corporate Social Responsibility CUSS Common User Self Service CUTE Common User Terminal Equipment CWIP Capital Works in Progress DG Sets Diesel Generator Sets DGCA Directorate General of Civil Aviation DIAL Delhi International Airport Limited DSR Delhi Schedule of Rates DVOR Doppler Very High Frequency Omni Range EHCR Employee Head Count Ratio e-PoS Electronic Point of Sale ESS Environmental Support Services ETD Explosive Trace Detectors FA Financing Allowance FAR Fixed Asset Register FCP First Control Period FICCI Federation of Indian Chambers of Commerce and Industry FIDS Flight Information Display System FOD Foreign Object Debris FRoR Fair Rate of Return FTC Fuel Throughput Charge FRoR FY Financial Year GA General Aviation GBR Gross Block Ratio GDP Gross Domestic Product GHA Ground Handling Agent GHIAL GMR Hyderabad International Airport Limited GoI Government of India GSE Ground Support Equipment GST Goods and Services Tax GIAL Guwahati International Airport Limited Consultation Paper No. 01/2024-25 Page 14 of 254GLOSSARY Abbreviation Full Form HIAL Hyderabad International Airport Limited HPCL Hindustan Petroleum Corporation Limited HR Human Resources HVAC Heat Ventilation and Air Conditioning IAF Indian Air Force IATA International Air Transport Association ICAO International Civil Aviation Organization ICD Inland Container Depot ICT Integrated Cargo Terminal IDC Interest During Construction ILHBS Inline Hold Baggage Screening ILS Instrument Landing System IMG Inter-Ministerial Group IOCL Indian Oil Corporation Limited IT Information Technology JARS Joint Asset Reconciliation Statement KL Kilo Litres KLD Kilo Litres per day LED Light Emitting Diode LGBIA Lokpriya Gopinath Bordoloi International Airport LOA Letter of Award MESS Mechanized Environmental Support Services MoCA Ministry of Civil Aviation MoU Memorandum of Understanding MPPA Million Passengers per Annum MYTP Multi-Year Tariff Proposal MIAL Mumbai International Airport Limited MT Metric Tonne NAR Non-aeronautical revenue NITB New Integrated Terminal Building O&M Operation and Maintenance O&M study report Study on Efficient Operations & Maintenance expenses for Lokpriya Gopinath NAR Bordoloi International Airport, Guwahati OMCs Oil Marketing Companies OPEX Operating Expenditure ORAT Operational Readiness and Airport Transfer OWS Oil Water Separator PAX Passenger PBB Passenger Boarding Bridge Consultation Paper No. 01/2024-25 Page 15 of 254GLOSSARY Abbreviation Full Form PBG Performance Bank Guarantee PBT Profit Before Tax PCN Pavement Classification Number PHP Peak Hour Passenger PIDS Perimeter Intrusion Detection System PMC Project Management Consultancy PPP Public Private Partnership PSF Passenger Service Fee PTB Passenger Terminal Building PV Present Value PQCSND Quality and Service Delivery QTR Quarters Ratio R&M Repair and Maintenance RAB Regulatory Asset Base RBI Reserve Bank of India RCS Regional Connectivity Scheme RESA Runway End Safety Area RFP Request for Proposal RHQ Regional Headquarters RIL Reliance Industries Limited Sq.m. Square Metre SCP Second Control Period SITC Supply, Installation, Testing & Commissioning SPV Special Purpose Vehicle STP Sewage Treatment Plant TB Terminal Building TB Ratio Terminal Building Ratio TCP Third Control Period UDF User Development Fees VDGS Visual Docking Guidance System WDV Written Down Value WIP Work In Progress WPI Wholesale Price Index XBIS X-ray Baggage Inspection System YPP Yield per Passenger Y-o-Y Year on Year YTD Year to Date Consultation Paper No. 01/2024-25 Page 16 of 254INTRODUCTION 1 INTRODUCTION 1.1 Background 1.1.1 Lokpriya Gopinath Bordoloi International Airport (LGBIA) (IATA: GAU, ICAO: VEGT), situated about 20 km west of Guwahati City, is an International Airport serving the economic capital of Assam. It is the gateway airport to the state of Assam and the wider North-East Region of India. 1.1.2 LGBIA has a single runway measuring 3103 meters. It is designated to handle aircraft up to Category 4D but can accommodate aircraft up to Category 4E with prior intimation under load penalty. The airport is connected by direct flights to Bhutan and South-East Asia, apart from multiple daily flights to all major cities in India. 1.1.3 LGBIA is currently operated and managed by Guwahati International Airport Limited (GIAL) (Airport Operator), a Special Purpose Vehicle (SPV), promoted and incorporated by Adani Enterprises Limited (AEL). AEL has incorporated a 100% subsidiary named Adani Airport Holdings Limited (AAHL). As on date, AEL holds 100% shareholders equity in GIAL, directly or indirectly through AAHL. The current shareholding pattern of GIAL is shown in the table below: Table 1: Shareholding pattern of GIAL S.no. Name of Shareholder % Shareholding 1 Adani Enterprises Limited (AEL) 51% 2 Adani Airport Holdings Limited (AAHL) 49% TOTAL 100% Figure 1: Ownership Structure 1.2 Profile of LGBIA 1.2.1 Lokpriya Gopinath Bordoloi International Airport, Guwahati (LGBIA) is a major airport as per the definition of Major Airport under section 2(i) of the Airports Economic Regulatory Authority of India Act, 2008 read with AERA Amendment Act, 2019 and AERA Amendment Act, 2021. 1.2.2 Technical and Terminal Building details of LGBIA submitted by GIAL are provided in the table below: Consultation Paper No. 01/2024-25 Page 17 of 254INTRODUCTION Table 2: Technical and Terminal Building details of LGBIA as submitted by GIAL Particulars Details Total airport area 826.243 acres Carved Out approx. 28.4 Acres Demised approx. 797.843 Acres Total covered area of Terminal Building Terminal I - 20,300 Sq.m. (TB) Designated Capacity Existing 2 MPPA Main Runway orientation and length Runway 02/20, dimension 3103m x 45m Apron Apron 1: 09 Code C Stands Apron 2: 11 Code C Stands 1.2.3 LGBIA handled 5.05 MPPA in FY 2022-232 and 5.96 MPPA in FY2023-243. As per the passenger mix, the domestic passengers handled during FY 2022-23 were 5.04 MPPA (99.8% of total passenger traffic) and international passengers handled during FY 2022-23 were 0.01 MPPA (0.2% of total passenger traffic). 1.3 Development of LGBIA through PPP mode 1.3.1 LGBIA was operated by the Airports Authority of India (AAI) which had entered into a Concession Agreement with Guwahati International Airport Limited (Airport Operator) on January 19, 2021, for the Operation, Management and Development of LGBIA for a period of 50 years from the Commercial Operation Date (COD). The COD was achieved on October 8, 2021, in accordance with the terms and conditions mentioned in the Concession Agreement. In consideration for the grant of such concession, the Airport Operator shall pay the AAI a monthly concession fee during the concession period, namely, specified amount of ‘Per Passenger’ fee for both domestic and international passengers (refer to Para 17.3.2 of Annexure 3 in Chapter 17 for the relevant clause of the Concession Agreement). 1.3.2 However, as per the relevant provisions of the Concession Agreement and MoU dated August 25, 2021, only the AAI and other designated GoI agencies, shall be authorized to undertake the ‘reserved services’ at the airport, namely, CNS/ATM services, Security services, Meteorological services, Mandatory health services, Customs control, Immigration services, Quarantine services and any other services as may be notified by GoI (refer to Para 17.3.2 of Annexure 3 of Chapter 17 for the relevant clause of the Concession Agreement). 1.4 Cargo Facility 1.4.1 Currently, the domestic and international air cargo is handled by AAI Cargo Logistics and Allied Services (AAICLAS) through a carved-out facility as per the Concession Agreement, hence, same is retained by AAI. 1.4.2 In accordance with the terms of the Concession Agreement GIAL is required to upgrade, develop, operate and maintain the Cargo Facilities in accordance with the provisions of the Concession Agreement (refer to Para 17.3.5 of Annexure 3 of Chapter 17). 1.4.3 GIAL has commenced domestic cargo operations from an interim facility having annual handling capacity of 2,750 MT. Pursuant to the terms of the Concession Agreement and in order to cater to the 2 As per aai.aero https://www.aai.aero/sites/default/files/traffic-news/rev_Mar2k23Annex3.pdf 3 As per aai.aero https://www.aai.aero/sites/default/files/traffic-news/Mar2k24Annex3.pdf Consultation Paper No. 01/2024-25 Page 18 of 254INTRODUCTION growing cargo demand at the LGBIA, GIAL has planned to develop a new Integrated Cargo Terminal (ICT) with a handling capacity of 43,260 MT p.a., by refurbishing/retrofitting the existing passenger Terminal I post the commissioning of the NITB. The ICT is proposed to be made operational in FY25- 26. 1.4.4 The Authority vide interim Tariff Order No. 41/2023-24 dated March 15, 2024 extended the prevailing tariffs for Guwahati International Airport Limited and AAICLAS till September 30, 2024. 1.5 Ground handling operations 1.5.1 The Clause 19.2 of the Concession Agreement mentions GIAL’s obligations towards provision of infrastructure required for ground handling services at the LGBIA and the extract of the relevant Clause has been provided in Para 17.3.6 of Annexure 3 of Chapter 17. 1.5.2 Further, subject to the provisions of the Concession Agreement GIAL has the right to grant License to any entity for providing Ground Handling Services at LGBIA on such terms and conditions as mentioned in the License Agreement between GIAL and the potential service providers. 1.5.3 Pursuant to above terms of the Concession Agreement GIAL has engaged two ground handling agencies for providing ground handling services at the Airport. (1) Indo Thai Airport Management Services Private Limited, (2) AI Airport Services Limited (AIASL). The revenue share/royalty from both the agencies has been set at 45% on gross revenue from ground handling services. Revenue shall mean and include all revenue, consideration, benefit and amount earned and/or accrued at the Airport, whether invoiced or not. 1.5.4 The Authority vide Tariff Order No. 22/2023-24 dated November 14, 2023 determined the tariffs for Indo Thai Airport Management Services Private Limited till March 31, 2027. 1.5.5 The Authority vide interim Tariff Order No. 41/2023-24 dated March 15, 2024 extended the prevailing tariffs for AI Airport Services Limited (AIASL) till September 30, 2024. 1.6 Fuel Facility Operations 1.6.1 The Clause 19.3. of the Concession Agreement mentions the GIAL’s obligations towards providing aircraft fueling services, which has been provided in Para 17.3.7 of Annexure 3 of Chapter 17. 1.6.2 At present, the fuel facilities are being managed by the Oil Marketing Companies (OMCs) such as, IOCL, RIL, BPCL and HPCL. These OMCs have their own respective fuel tanks and refueling facilities with capacities 800KL, 140KL, 800KL and 200KL respectively. OMCs manage the operations on their own, and currently operating expenditure and other charges are embedded in Aviation Turbine Fuel (ATF) fuel price. Therefore, as on date there is no concept of open access facility at the Airport. 1.6.3 GIAL has proposed to initially purchase the existing assets of IOCL and RIL having fuel storage capacity of 940 KL, and subsequently convert it into Open Access facility by building a new facility of approx. 4,000 KL with hydrant system. Consultation Paper No. 01/2024-25 Page 19 of 254TARIFF DETERMINATION OF LGBIA GUWAHATI 2 TARIFF DETERMINATION OF LGBIA 2.1 Introduction 2.1.1 AERA was established by the Government of India vide notification No. GSR 317(E) dated May 12, 2009. The functions of AERA, in respect of Major Airports, are specified in section 13(1) of The Airports Economic Regulatory Authority of India Act, 2008 (‘AERA Act’ or ‘the Act’) read with AERA (Amendment) Act 2019 and 2021, which are as below: a) To determine the tariff for Aeronautical services taking into consideration – i. the capital expenditure incurred and timely investment in the improvement of airport facilities. ii. the service provided, its quality and other relevant factors. iii. the cost for improving efficiency. iv. economic and viable operation of Major Airports. v. revenue received from services other than the Aeronautical services. vi. the concession offered by the Central Government in any agreement or memorandum of understanding or otherwise; and vii. any other factor which may be relevant for the purpose of the Act. b) To determine the amount of the development fees in respect of Major Airports. c) To determine the amount of the passengers’ service fee levied under Rule 88 of the Aircraft Rules, 1937 made under the Aircraft Act, 1934. d) To monitor the set performance standards relating to quality, continuity and reliability of service as may be specified by the Central Government or any authority authorized by it in this behalf. e) To call for any such information as may be necessary to determine the tariff for Aeronautical services; and f) To perform such other functions relating to tariff, as may be entrusted to it by the Central Government or as may be necessary to carry out the provisions of the Act, 2008. 2.1.2 As per the AERA Act, 2008, the following are the Aeronautical services for which tariff is determined by the Authority: i. Aeronautical services provided by the Airport Operators. ii. Cargo Facility, Ground Handling and Fuel Supply Services; and iii. Air Navigation Services. 2.1.3 AAI shall be handling the Air Navigation Systems (ANS) at LGBIA. Tariff for ANS is presently regulated by the Ministry of Civil Aviation. All the assets, expenses and revenues pertaining to ANS are considered separately by the Ministry while determining tariff for ANS services. Further, the tariff for ANS services is determined at the Central level by the Ministry of Civil Aviation to ensure uniformity across the Airports in the Country. Hence, AERA determines tariff for Aeronautical services of the Airport Operator, by excluding the assets, expenses, and revenues from ANS. Consultation Paper No. 01/2024-25 Page 20 of 254TARIFF DETERMINATION OF LGBIA GUWAHATI 2.2 Authority’s orders applied in tariff proposals in this Consultation Paper 2.2.1 Detailed Guidelines laying down information requirements, periodicity and procedure for Tariff determination have been issued by the Authority. The details of Orders and Guidelines issued in this regard are as under: i. Order No. 13 dated 12.01.2011 (Regulatory philosophy and approach in Economic Regulation of Airport Operators) and Direction No. 5 dated 28.02.2011 (Terms and conditions for determination of tariff for Airport Operators); and ii. Order No. 05 dated 02.08.2010 ((Regulatory philosophy and approach in Economic Regulation of the services provided for Cargo facility, Ground Handling and Supply of Fuel to aircrafts); Order No. 12 dated 10.01.2011 and Direction No. 4 dated 10.01.2011 (Terms and conditions for determination of tariff for services provided for Cargo facility, Ground Handling and Supply of Fuel to aircrafts). iii. Order No. 07/2016-17 dated 13.06.2016 (Normative Approach to Building Blocks in Economic Regulation of Major Airports). iv. Order No. 14/2016-17 dated 12.01.2017 (Aligning certain aspects of AERA’s regulatory approach with the provisions of the National Civil Aviation Policy – 2016). v. Order No. 20/2016-17 dated 31.03.2017 (Allowing concession to RCS flights under Regional Connectivity Scheme (RCS)). vi. Order No. 35/2017-18 dated 12.01.2018 and Amendment No. 01 to Order No. 35/2017-18 dated 09.04.2018 (In the matter of determination of useful life of Airport assets). vii. Order No. 42/2018-19 dated 05.03.2019 (Determination of FRoR to be provided on the cost of Land incurred by various Airport Operators in India). 2.3 Background to tariff determination process of LGBIA 2.3.1 LGBIA is a Major Airport as per the definition of Major Airport under section 2(i) of the Airports Economic Regulatory Authority of India Act, 2008 read with AERA Amendment Act, 2019 and AERA Amendment Act, 2021. 2.3.2 With respect to the First Control Period of LGBIA commencing from FY 2011-12 to FY 2015-16, the Authority had determined the Aeronautical tariff vide its Order No. 34/2013-14, dated November 18, 2013. 2.3.3 With respect to the Second Control Period of LGBIA commencing from FY 2016-17 to FY 2020-21, the Authority had determined the Aeronautical tariff vide its Order No. 38/2017-18, dated February 16, 2018. Also, the Authority had issued Order No. 20/ 2020-21 dated July 1, 2020, with respect to provision of compensation in lieu of discontinuation of Fuel throughput charges at LGBIA. 2.3.4 AAI and Guwahati International Airport Limited (GIAL) entered into a Concession agreement on January 19, 2021 for exclusive right of Operation, Management and Development of LGBIA, for a period of 50 (fifty) years from the Commercial Operations Date (COD). GIAL achieved Commercial Operations Date (COD) on October 8, 2021. 2.3.5 GIAL has been provided an exclusive right to demand, collect and appropriate fees from COD onwards at the rates determined by AERA. As an interim measure, GIAL applied to AERA vide letter with reference no. AGIAL/CO/AERA-IT/2021/1 dated 27th August, 2021 to allow the existing tariff rates at LGBIA from COD till March 31, 2022. Accordingly, AERA from time to time issued multiple orders Consultation Paper No. 01/2024-25 Page 21 of 254TARIFF DETERMINATION OF LGBIA GUWAHATI extending the existing tariff rates: Table 3: Chronology of AERA orders with regard to extension of tariff at LGBIA GIAL application letter and AERA Order and Date Rates Extended up to Date AGIAL/CO/AERA-IT/2021/1 22/2021-22 dated 6th October 2021 31st March 2022 dated 27th August, 2021 GIAL/CO/AERA-IT/2022/1 42/2021-22 dated 14th March 2022 30th September 2022 dated 23rd February 2022 GIAL/CO/AERA-IT/2022/3 22/2022-23 dated 20th September 2022 31st March 2023 dated 1st September 2022 GIAL/CO/AERA-IT/2023/1 41/2022-23 dated 22nd March 2023 30th September 2023 dated 2nd March 2023 GIAL/CO/AERA-IT/2023/4 19/2023-24 dated 20th September 2023 31st March 2024 dated 5th September 2023 GIAL/CO/AERA-IT/2024/1 40/2023-24 dated 15th March 2024 30th September 2024 or till dated 28th February 2024 determination of regular tariffs for the Control Period, whichever is earlier. Control Period 2.3.6 It is to be noted that as per Order no. 38/2017-18 the second control period starts from 1st April 2016 and ends on 31st March 2021. AERA considering the transition phase had vide public notice no. 05/2022-23 dated 20th June 2022, decided to shift the third control period of LGBIA from 1st April 2021 – 31st March 2026 to 1st April 2022 – 31st March 2027. 2.4 Multi Year Tariff Proposal submission 2.4.1 As per the Concession Agreement between AAI and GIAL (clause 28.11.3), the Estimated Deemed Initial RAB as on March 31, 2018, was ₹ 69 crores. Further, it is stated in the Concession Agreement that the amount which was due and payable by the Concessionaire to AAI, is subject to reconciliation, true up and final determination by AERA. The extract of the relevant clauses 28.11.3, 28.11.4 and 28.11.5 from the Concession Agreement have been provided in Para 17.3.8 of Annexure 3 under Chapter 17. 2.4.2 In compliance with the above terms of the Concession Agreement, AAI and GIAL have submitted MYTP to the Authority for the following period: • Submission made by AAI for true up of the period from FY 2016-17 up to COD. • Submission made by GIAL for true up of the period from COD up to March 31, 2022 • Submission made by GIAL for MYTP for the Third Control Period. Tariff determination for Pre- COD and Post-COD period i. Pre-COD period 2.4.3 AAI had submitted initial true up for the Pre-COD period from FY 2016-17 up to COD vide letter dated July 6, 2023. The document is available on the AERA’s website. The Authority based on its preliminary scrutiny of the true up figures submitted by AAI, observed various discrepancies and upon enquiry, AAI provided information from time to time till April 2024. To ensure clarity and understanding, a chronological timeline was established to represent the sequence of events leading up to the issue of Consultation Paper No. 01/2024-25 Page 22 of 254TARIFF DETERMINATION OF LGBIA GUWAHATI Consultation Paper. The timeline captures key milestones such as the submission of the proposal, the preliminary scrutiny, the identification of discrepancies, the commencement of the inquiry, and the subsequent provision of information by AAI which has been presented in the table below: Table 4: Sequence of events regarding true up submissions by AAI S. No. Event Date 1 Submission of original true up proposal of AAI July 6, 2023 Review of true-up submission and documentation provided by 2 July 2023 to September 2023 AAI 3 Additional information on CAPEX and OPEX October 2023 4 Additional information on O&M expenses December 2023 5 Additional information on Capital Expenditure December 2023 6 Additional information on Fixed Asset Register January 2024 7 Additional information on Fixed Asset Register February 2024 8 Additional information on left out assets February 2024 9 Clarification on R&M expenses April 2024 10 Additional information on Capital Expenditure April 2024 11 Additional clarification on space rentals from airlines April 2024 ii. Post COD period 2.4.4 The tariff determination for the post-COD period has been considered for GIAL under the following categories: • True up of the period from COD till March 31, 2022 • Tariff determination for the Third Control Period i.e. from April 1, 2022 to March 31, 2027. 2.4.5 GIAL submitted its MYTP for true up of Post COD period and determination of aeronautical tariff for Third Control Period on July 28, 2023. The document is available on the AERA's website. Table 5: Sequence of events regarding true up and MYTP submissions by GIAL S. No. Events Date 1 Submission of MYTP by GIAL July 28 2023 2 Review of true-up submission and documentation provided by GIAL August – October 2023 3 Additional information on CAPEX and OPEX October 2023 4 Additional information on NITB December 2023 5 Additional information on Fixed Asset Register January 2024 6 Additional information on JARS March 2024 7 Clarification on Cargo and Fuel O&M expenses April 2024 8 Additional information on traffic April 2024 9 Additional information on NAR April 2024 10 Additional information on Utility expenses April 2024 11 Additional information on CAPEX, CWIP April 2024 2.4.6 As the LGBIA was taken over and operated by GIAL from the COD i.e. October 8, 2021, the Authority has considered to true up the necessary building blocks of GIAL for the six month period commencing from October 8, 2021 up to March 31, 2022. 2.4.7 The Authority has appointed an Independent Consultant, M/s Deloitte Touche Tohmatsu India LLP to assess the MYTP submitted by GIAL for the Third Control period. Accordingly, M/s Deloitte Touche Tohmatsu India LLP has assisted the Authority in examining true up submission of AAI and GIAL for the pre and post COD period respectively, the MYTP of GIAL, including verifying the data from various supporting documents such as audited financials, Fixed Asset Register (FAR) submitted by Consultation Paper No. 01/2024-25 Page 23 of 254TARIFF DETERMINATION OF LGBIA GUWAHATI GIAL, examining the building blocks in tariff determination, and ensuring that the treatment given to it is consistent with the Authority’s methodology and approach. 2.4.8 The Authority vide its letter dated July 7, 2023 requested the Airport Operator to undertake a proper due diligence in respect of CAPEX plan and other regulatory building blocks in the MYTP to be submitted in the respect of LGBIA. Further, the Authority has, in this Consultation Paper, assessed the Capital Expenditure based on site visit, available capacities, future traffic estimates, normative and the need to ensure modular development of infrastructure at the Airport, with a view to ensure determination of optimal Aeronautical charges to be levied on the airport users. 2.4.9 In carrying out the analysis of MYTP submitted by GIAL, the Authority, through it’s independent consultant, has carried out review of all details, break up of cost items etc. provided by GIAL together with considering the financials of FY 2022-23 and status of projects as of march 2024. Wherever details have not been provided/ not completely provided, the Authority has carried out appropriate rationalisation of such costs. The Authority also has, in its analysis, indicated certain activities where the costs are proposed to be considered on incurrence basis. These have been elaborated in the relevant paragraphs. 2.4.10 The Authority relies on the information available in the audited financial statements and Fixed Asset Register (FAR) for its analysis. The Authority expects that the Airport Operator would ensure accuracy of the information captured in its Books of Accounts and FAR and that there are no duplication of expenses. It is the sole responsibility of the Airport Operator to maintain proper Books of Accounts and FAR diligently and present accurate information in its submission. 2.4.11 The Authority notes that clause 5.7.1 of Direction 5/ 2010-11 pertaining to Terms and Conditions for determination of Tariff for Airport Operators Guidelines, 2011 states that “ For any service provided by the Airport Operator for (i) ground handling services relating to aircraft, passengers and cargo at an airport; (ii) the cargo facility at an airport and (iii) supplying fuel to the aircraft at an airport, the Authority shall follow the regulatory approach and process for tariff determination as mentioned in the Direction No. 4/ 2010-11 on Terms and Conditions for determination of Tariff for services provided for Cargo facility, Ground Handling and Supply of Fuel to the Aircraft Guidelines, 2011”. Further, clause 1.2 of the Direction No.4/ 2010-11 states that “these Guidelines shall apply to Service Provider(s) for (i) the Cargo facility at a Major Airport, (ii) ground handling relating to aircraft, passengers and cargo at a major airport and for (iii) supplying fuel to the aircraft at a major airport: Provided that Airport Operator providing the Regulated Service(s) as defined herein shall be excluded from the application of these Guidelines. Taking cognizance of the above provisions laid out under Direction 5/ 2010-11 and Direction 4/ 2010- 11 and the fact that the Airport Operator is providing the services on cargo facility and fuel supply to the aircraft, the Authority has examined the Assets, Expenses and Revenues pertaining to Cargo and Fuel farm of GIAL separately under the relevant chapters in this Consultation Paper, for the purpose of determining Aggregate Revenue Requirement of GIAL. Related Party Transactions The Authority, through its Independent Consultant, got details regarding the tendering procedures implemented by GIAL and has examined the associated contract agreements concerning operating expenses and revenues entered into with related parties. The Authority, on a sample review of contracts, notes that GIAL has involved certain Related Parties as detailed hereunder: Consultation Paper No. 01/2024-25 Page 24 of 254TARIFF DETERMINATION OF LGBIA GUWAHATI Table 6: Services provided to GIAL by related parties S. Description of Nature of Services Name of Related Party No. Relationship Master Service Agreement to 1 Adani Airport Holdings Company holding 49% operate and manage Non- Limited shareholding in GIAL Aeronautical Facilities 2 Adani Airport Holdings Company holding 49% Corporate Support Service Limited shareholding in GIAL 3 Corporate Support Service Adani Enterprises Limited Holding Company 4 Adani Airport Holdings Company holding 49% Borrowing Limited shareholding in GIAL The Authority also notes the following from the Concession Agreement signed between GIAL and AAI: “5.6.1 The Concessionaire agrees and undertakes that it shall procure contracts, goods and services for the operations, management and development of the airport in a fair, transparent and efficient manner and without any undue favour or discrimination in this behalf. In pursuance hereof, it shall, within six (6) months from the COD, frame policy specifying the principles and procedures that it shall follow in awarding for supply of goods and services, and shall place the policy on its website for the information of general public and all interested parties, The policy shall: (a) include the principles and procedures followed for sub-leasing, sub-licensing or grant or allocation of any space, building, rights or privileges to private entities in the Airport (b) be approved by the Board of Directors of the Concessionaire 5.6.2 For procurement of goods, works, services, sub-lease(s), sub-license(s) or any other rights or previleges where the consideration (including deposits in any form or respect thereof) exceeds Rs. 25,00,00,000/- (Rupees Twenty Five Crore) in any accounting year (collectively, the contracts) the Concessionaire shall invite offers through open competitive bidding by means of e-tendering and shall select the awardees in accordance with the policy specified under clause 5.6.1 5.6.3 The Parties agree that the Concessionaire should pre-quality and short-list the applicants in a fair and transparent manner for ensuring that only experienced and qualified applicants are finally selected on arm’s length basis in a manner that is commercially prudent and protects interest of users.” 5.6.4 The Concessionaire hereby agrees not to have any subsidiary or joint venture or any other similar form of arrangement with any other party. AERA expects that GIAL and the AAI, (Concession granting Authority) will ensure that the contracts with Related Parties are at arm’s length and that the Related Party has relevant experience of providing similar service to ensure protection of interest of all stakeholders, as per the terms of the Concession Agreement detailed above, which may be followed in letter and spirit. 2.5 Construct of this Consultation Paper This Consultation paper has been developed in the order of the events as explained above. Chapter- wise details have been summarized as follows: i. The background of the Authority’s tariff determination process is explained in this Chapter and in Chapter 3, the framework for determination of tariff is discussed. Consultation Paper No. 01/2024-25 Page 25 of 254TARIFF DETERMINATION OF LGBIA GUWAHATI ii. Chapter 4 lists out the submissions of AAI for true up of the Pre- COD period which is from FY 2016-17 to October 7, 2021. This is followed by the Authority’s examination and proposals on the specific issues regarding the true up for the Period FY 2016-17 till COD. This chapter also discusses the assessment and the outcome of the studies commissioned by the Authority regarding asset allocation ratios between aeronautical and non-aeronautical assets and efficient cost segregation between aeronautical and non-aeronautical operating expenses. The summary of these reports is given under Annexures to this Consultation Paper and the reports have been appended separately to the Consultation Paper. iii. Chapter 5 lists out submission of GIAL for true up of the period from October 8, 2021 (COD) up to March 31, 2022. This is followed by the Authority’s examination and proposals on the specific issues regarding the true up for the said post-COD period. This chapter also discusses the assessment and the outcome of the studies conducted by the Authority regarding asset allocation ratios between aeronautical and non-aeronautical assets and efficient cost segregation between aeronautical and non-aeronautical operating expenses. The summary of these reports is given under Annexures to this Consultation Paper and the reports have been appended separately to the Consultation Paper. iv. Chapter 6 presents the submissions of GIAL regarding Traffic Projections and the Authority’s proposals on the same. v. Chapter 7 includes the submissions of GIAL regarding Capital Expenditure (CAPEX), Depreciation and RAB for the Third Control Period along with the Authority’s detailed examination, adjustments, rationalisation and proposals on the Aeronautical capital expenditure, depreciation, and RAB for the Third Control Period. vi. Chapter 8-13 includes the submissions of GIAL regarding various building blocks pertaining to the Third Control Period including Fair Rate of Return, Inflation, Operating Expenses, Non- aeronautical Revenue, Taxation and Quality of Service along with Authority's examination and proposals on each matter. vii. Chapter 14 presents the Aggregate Revenue Requirement as determined by the Authority based on the proposals for the Third Control Period. viii. Chapter 15 summarizes the Authority’s proposals put forward for consultation. ix. In Chapter 16 the Authority invites views of all the stakeholders regarding proposals put forward for tariff determination for the Third Control Period in the Consultation Paper. x. Chapter 17 contains Annexures: • Annexure 1 – Summary of study on allocation of assets between Aeronautical and Non- aeronautical assets • Annexure 2 – Summary of study on efficient Operation and Maintenance expenses • Annexure 3 – Clauses of the Concession Agreement entered between AAI and GIAL xi. Chapter 18 contains the list of Appendices. 2.6 Studies commissioned by the Authority 2.6.1 The Authority commissioned the following studies through its Independent Consultant for the purpose of tariff determination and the resultant recommendations have been used in this Consultation paper: a) Study on allocation of Assets between Aeronautical and Non-Aeronautical Assets: The Study Consultation Paper No. 01/2024-25 Page 26 of 254TARIFF DETERMINATION OF LGBIA GUWAHATI has carried out a detailed analysis of the Regulatory Asset Base (RAB) of both AAI and GIAL. The study has developed a rationale for classification of assets into Aeronautical, Non- aeronautical, Air Navigation Services (ANS) and Common. It then apportioned the Common assets based on appropriate ratios. Further, the Study has also examined the assets transferred from AAI to GIAL (as on COD) and determined the Deemed Initial RAB as on COD. b) Study on efficient Operation and Maintenance Expenses: The Study examined the historical trends in the O&M expenses of LGBIA and assessed how the Airport has been performing in comparison to the select peers in the industry. The Study verified the classification of the various expenses between Aeronautical, Non-aeronautical, ANS and Common and made revisions wherever necessary. The Common expenses were further apportioned based on appropriate ratios. Further, the Study ascertained the expenses that were unreasonably high and rationalized them based on suitable benchmarks. 2.6.2 The recommendations of these studies have been used in this Consultation Paper. The summary of the Study on Allocation of Assets is given in Annexure 1 of this Consultation Paper and the study is attached as Appendix 1 of this Consultation Paper. The summary of the Study on Efficient Operation and Maintenance Expenses is given in Annexure 2 of this Consultation Paper and the study is attached as Appendix 2 of this Consultation Paper. Consultation Paper No. 01/2024-25 Page 27 of 254FRAMEWORK FOR TARIFF DETERMINATION FOR THE THIRD CONTROL PERIOD FOR LGBIA 3 FRAMEWORK FOR TARIFF DETERMINATION OF LGBIA FOR THE THIRD CONTROL PERIOD 3.1 Methodology 3.1.1 The Methodology adopted by the Authority to determine Aggregate Revenue Requirement (ARR) is based on AERA Act, 2008 read with AERA (Amendment) Act, 2019 and AERA Amendment Act, 2021, the AERA (Terms and Conditions for determination of Tariff for Airport Operators) Guidelines, 2011 and further Guidelines issued by AERA from time to time. 3.1.2 As per the guidelines, the Authority has adopted the Hybrid-Till mechanism for tariff determination for the Third Control Period wherein, 30% of the Non-aeronautical revenues is to be used for cross- subsidizing the Aeronautical charges. The Authority has considered the same methodology in the analysis of true up submission for Second Control Period, pre-COD and post-COD Period. 3.1.3 The ARR under hybrid till for the Control Period (ARR) shall be expressed as under: ARR = (FRoR x RAB) + D + O + T - s x NAR t t t t t t Where,  t is the tariff year in the control period, ranging from 1 to 5  ARR is the Aggregate Revenue Requirement for tariff year ‘t’ t  FRoR is the Fair Rate of Return for the Control Period  RAB is the Aeronautical Regulatory Asset Base for tariff year ‘t’ t  D is the Depreciation corresponding to the Regulatory Asset Base for tariff year ‘t’ t  O is the Aeronautical Operation and Maintenance expenditure for the tariff year ‘t’ t  T is the Aeronautical taxation expense for the tariff year ‘t’ t  s is the cross-subsidy factor for revenue from services other than Aeronautical services. Under the Hybrid Till methodology followed by the Authority, s = 30%.  NAR is the Non-aeronautical revenue in tariff year ‘t’. t 3.1.4 Based on ARR, Yield per passenger (Y) is calculated as per the formula given below: ∑5 𝑃𝑉(𝐴𝑅𝑅 ) 𝑡=1 𝑡 𝑌𝑖𝑒𝑙𝑑 𝑝𝑒𝑟 𝑝𝑎𝑠𝑠𝑒𝑛𝑔𝑒𝑟(𝑌) = ∑5 𝑉𝐸 𝑡=1 𝑡  Where, PV (ARR) is the Present Value of ARR for all the tariff years. All cash flows are assumed t to occur at the end of the year. The Authority has considered discounting cash flows, one year from the start of the Control Period.  VE is the passenger traffic in year ‘t’. t 3.1.5 All the figures presented in this Consultation Paper have been rounded off up to two decimals. 3.1.6 As per the provisions of Section 13(2) of the AERA Act 2008, the tariff so determined under the Tariff Order can be reviewed and revised. 3.2 Revenues from Air Navigation Services (ANS) 3.2.1 GIAL shall be performing Aeronautical services like landing, parking, ground handling, cargo and fuel supply to aircraft services at LGBIA and has submitted revenue projections for the Third Control Period Consultation Paper No. 01/2024-25 Page 28 of 254FRAMEWORK FOR TARIFF DETERMINATION FOR THE THIRD CONTROL PERIOD FOR LGBIA in its MYTP. However, AAI shall be handling the Air Navigation Systems (ANS) at LGBIA and hence the MYTP submitted by GIAL does not consider revenues, expenditure, and assets on account of ANS. 3.2.2 Tariff for ANS is presently regulated by the Ministry of Civil Aviation. All the assets, expenses and revenues pertaining to ANS are considered separately by the Ministry while determining tariff for ANS services. Further, the tariff for ANS services is determined at the Central level by the Ministry of Civil Aviation to ensure uniformity across the Airports in the Country. Hence, AERA determines tariff for Aeronautical services of the Airport Operator, by excluding the assets, expenses and revenues from ANS. Consultation Paper No. 01/2024-25 Page 29 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD 4 TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD AND PRE-COD PERIOD 4.1 Background 4.1.1 AAI had entered into a Concession Agreement dated January 19, 2021, with Guwahati International Airport Limited (the ‘Concessionaire’) for the operations, management, and development of LGBIA for a period of 50 years from the COD, i.e., October 8, 2021. 4.1.2 As per the Concession Agreement between AAI and GIAL (clause 28.11.3), the amount which was due and payable by the Concessionaire to AAI, is subject to reconciliation, true up and final determination by AERA. 4.1.3 Pursuant to the above Concession Agreement, AAI has submitted True up workings for the period April 1, 2016 up to October 7, 2021 4.1.4 The true up workings submitted by AAI covers the following building blocks: i. Traffic ii. Capital Expenditure iii. Aeronautical Depreciation iv. Regulatory Asset Base v. Fair Rate of Return vi. Aeronautical Operation and Maintenance Expenses vii. Non-aeronautical Revenue viii. Aeronautical Taxes ix. Aggregate Revenue Requirement 4.1.5 The Authority has analyzed the AAI’s true up submission in detail. The analysis by the Authority, has been organized as follows: i. Recorded AAI’s submissions for true up under different Regulatory building blocks. ii. Recapped the decisions taken by the Authority in the Tariff Order for the Second Control Period (Order No. 38/ 2017-18 dated February 16, 2018) iii. Provided Authority’s examination through its Independent Consultant on each regulatory building block and put forth its proposals. iv. Authority also examined Pre COD period (1st April’2021 to 7th Oct’2021) and considered amount against each regulatory building block in true up exercise. 4.1.6 The Authority has considered the following documents for determining true up for the Second Control Period and Pre-COD Period: i. Tariff Order for LGBIA (Order No. 38/ 2017-18) dated February 16, 2018. ii. Trial balance figures of AAI for the Second Control Period and Pre-COD Period. iii. AERA Guidelines and Orders. iv. Authority’s decisions on the Regulatory Building Blocks as per previously issued Tariff Orders of other airports. 4.2 AAI’s submission regarding True up for SCP and period from 1st Apr’21 to 7th Oct’21 4.2.1 As mentioned in Para No. 2.4.3 of this Consultation Paper, AAI has submitted its True Up submission dated 6th July 2023. The details of the same have been provided below: Consultation Paper No. 01/2024-25 Page 30 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD Table 7: Submission of True up by AAI for the SCP and Pre-COD period (₹ crores) Total FY’22 Total FY Particulars FY’ 17 FY’18 FY’19 FY’20 till up to till ’21 FY’21 COD COD Opening RAB 84.00 78.85 80.44 154.28 172.29 163.26 Closing RAB 78.85 80.44 154.28 172.29 163.26 166.21 Average RAB 81.43 79.65 117.36 163.29 167.78 609.49 164.74 774.22 Fair Rate of Return 14% 14% 14% 14% 14% 14% (FRoR) Return on Average RAB 11.40 11.15 16.43 22.86 23.49 85.32 12.01 97.33 Depreciation 7.00 7.17 9.93 13.32 13.84 51.27 7.31 58.58 Operating Expenditure 43.50 80.96 94.70 113.17 93.98 426.31 73.89 500.19 Opening RAB - Financing - 0.002 0.02 1.11 2.10 2.75 Allowance Additions - Financing 0.002 0.02 1.10 1.06 0.75 2.94 0.10 3.04 Allowance Depreciation - Financing 0.00 0.001 0.01 0.07 0.10 0.19 0.07 0.26 Allowance Closing RAB - Financing 0.002 0.02 1.11 2.10 2.75 2.78 Allowance Average RAB - Financing 0.001 0.01 0.56 1.60 2.42 4.61 2.76 7.37 Allowance Return on Average RAB - 0.0001 0.002 0.08 0.22 0.34 0.65 0.20 0.85 Financing Allowance Interest on Working - - - - - - 0.51 0.51 Capital Corporate Tax 15.66 10.16 17.99 6.44 - 50.24 - 50.24 Corporate Tax on shortfall 26.95 26.95 (under recovery) to be collected from Concessionaire Shortfall in 1st Control 107.70 - - - - 107.70 - 107.70 Period as on 01.04.2016 Less: Deductions for Non- 8.23 4.69 9.70 15.09 7.26 44.97 3.09 48.06 aeronautical Revenues Total Gross ARR 177.02 104.76 129.43 140.99 124.50 676.71 117.83 794.54 Revenue earned from 97.05 118.91 158.14 156.04 73.65 603.79 41.73 645.52 Aeronautical Services (Excess) / Shortfall 79.97 (14.15) (28.70) (15.05) 50.85 72.92 76.11 149.02 PV Factor 1.81 1.59 1.39 1.22 1.07 1.00 PV of (Excess) / Shortfall 144.60 (22.44) (39.94) (18.36) 54.44 118.29 76.11 194.40 on COD* *COD 8th October 2021 4.3 Authority’s examination of True up submitted by AAI for Second Control Period and pre-COD period The Authority has taken cognizance of the decisions taken at the time of determination of tariff for the Second Control Period and has then proceeded to examine the same as part of the tariff determination for the current Control Period. The decisions taken at the time of determination of tariff for Aeronautical services for the Second Control Period vide Order No. 38/2017-18 dated February 16, 2018, have been reproduced below: Consultation Paper No. 01/2024-25 Page 31 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD • Decision No.1 – True Up for the 1st Control Period 1.a. The Authority decides to true-up the 1st Control Period on the basis of Single Till 1.b. The Authority decides to adopt CHQ/ RHQ overheads apportionment on revenue basis. 1.c. The Authority decides to consider the revenues from Cargo facility, Ground Handling services and Supply of fuel to aircraft including land lease rentals as aeronautical revenue. 1.d. The Authority decides the following depreciation rates. i. For asset types not defined under Companies Act (runway, taxiway and aprons): 3.33% based on useful life of 30 years from FY 2011-12 onwards. ii. For asset types defined under Companies Act: rates prevalent under the Companies Act 1956 till FY 2013-14 and as per the Companies Act 2013 from FY 2014-15 onwards as the effective date of implementation of the Companies Act 2013 is 01.04.2014. The depreciation rates as submitted by AAI and as considered by the Authority are given in Table 30. 1.e. The Authority decides to consider short fall of ₹ 107.7 crores in the 1st control period to be added to ARR for the 2nd Control Period. • Decision No. 2 – Traffic Forecast 2.a. The Authority decides to consider the ATM and passenger traffic as per Table 20. 2.b. The Authority decides to true up the traffic volume (ATM and passengers) based on actual traffic in 2nd Control period while determining tariffs for the 3rd control period. • Decision No. 3 – Allocation of assets between Aeronautical and Non-Aeronautical services 3.a. The Authority decides to allocate assets as on 1st April 2016 between aeronautical and non- aeronautical assets as detailed in Table 24. • Decision No. 4 – Opening Regulatory Asset Base for the 2nd control period 4.a. The Authority decides to consider the opening regulatory base for the 2nd control period under Hybrid Till as ₹ 65.5 crores. • Decision No. 5 – Capital Expenditure 5.a. The Authority decides to consider allowable project cost of ₹ 261.9 crores and accordingly reckon the amount of ₹ 261.9 crores as additions to total assets during the 2nd control period. 5.b. The Authority directs AAI to undertake user stakeholder consultation process for major capital expenditure items as per the Guidelines. 5.c. The Authority decides to true up the Opening RAB of the next control period depending on the capital expenditure incurred and date of capitalization of underlying assets in a given year. • Decision No. 6 – Treatment of Depreciation 6.a. The Authority decides to adopt depreciation rates as per Table 30 and depreciation for the 2nd control period as per Table 31. Consultation Paper No. 01/2024-25 Page 32 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD 6.b. The Authority decides to consider the deprecation rates as per the order No. 35/2017 18 dated 12.01.2018 issued by the Authority, at the time of determination of tariff for the 3rd control period. It shall make necessary adjustments in RAB accordingly. • Decision No. 7 – RAB for 2nd control period 7.a. The Authority decides to consider RAB for 2nd control period as given in Table 33. 7.b. The Authority decides to true up the RAB of 2nd control period based on actual asset addition and consider the depreciation rates as per the order no. 35/2017-18 dated 12.01.2018 issued by the Authority, at the time of determination of tariff for the 3rd control period. Decision No. 8 – FRoR 8.a. The Authority decides to consider the FRoR at 14% for LGBIA for the 1st and 2nd control period. 8.b. The Authority decides to undertake a study to determine FRoR for major AAI airports given the low debt structure of AAI as a whole. • Decision No. 9 – Non-Aeronautical Revenues 9.a. The Authority decides to consider the revenues accruing to AAI on account of the aeronautical services of Cargo facility, Ground Handling Services and Supply of fuel to aircraft (FTC) including land lease rentals and building rent from these activities as aeronautical revenue. 9.b. The Authority decides to consider the Non-Aeronautical revenue as per Table 37. 9.c. The Authority decides that Non-Aeronautical revenues will be trued up if it is higher than the projected revenues. In case there is a shortfall, true up would be undertaken only if the Authority is satisfied that there are reasonably sufficient grounds for not realizing the projected revenues. • Decision No. 10 – Operation and Maintenance Expenditure 10.a. The Authority decides to consider the operational and maintenance expenditure as given in Table 44 above, for the purpose of determination of aeronautical tariffs for the 2nd control period. 10.b. The Authority expects AAI to reduce O&M expenditure over a period of time. 10.c. The Authority decides to true up the O&M expenditure for 2016-17 to 2020-21 of the 2nd control period based on the actuals at the time of determination of tariffs for the 3rd control period. 10.d. The Authority decides the following factors for corrections while determining tariffs for the next control period: (i) Mandated cost incurred due to directions issued by regulatory agencies like DGCA; (ii) Cost of actual operating expenses including electricity; (iii) All statutory levies in the nature of fees, levies, taxes, and other such charges by Central or State Government or local bodies, local taxes, levies directly imposed on and paid by AAI on final product/service provided by AAI will be reviewed by the Authority for the purpose of corrections. Any additional expenditure by way of interest payments, penalties, fines, and such penal levies associated with such statutory levies which AAI has to pay, for either any delay or non-compliance, the same may not be trued up. Consultation Paper No. 01/2024-25 Page 33 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD • Decision No. 11 – Taxation 11.a. The Authority decides the corporate tax for aeronautical activities as per Table 45 for the 2nd control period. 11.b. The Authority decides to true up the difference between the actual/ apportioned corporate tax paid and that estimated by the Authority for the 2nd control period during determination of tariffs for the 3rd control period. • Decision No. 12 – Tariff rate card 12.a. The Authority decides to accept Annual Tariff Proposal as given in Table 49 (and Annexure) for the 2nd control period as the present value of proposed revenues (yield) by AAI is lower than the present value of ARR (yield) as per Authority. The Authority decides to accept the increase in tariffs for subsequent years of the second control period as below: i. Yearly increase of 4% per annum every subsequent year (FY 2018-19 onwards) in UDF per departing passenger ii. Yearly increase of 4% every subsequent year (FY 2018-19 onwards) on landing charges iii. Yearly increase of 5% per annum every subsequent year (FY 2018-19 onwards) in fuel throughput charges 12.b. The Authority decides to continue with waiver of landing charges for (a) aircraft with a maximum certified capacity of less than 80 seats, being operated by domestic scheduled operators (b) Helicopters of all types as approved by Govt. of India vide order no. G.17018/7/2001- AAI dated 9th Feb 2004 in order to encourage and promote intra-regional connectivity at LGBIA. 12.c. The Authority decides to provide waiver of landing and other charges in line with the Order No. 20/2016-17 dated 31.03.2017 of the Authority. 12.d. The Authority decides to merge UDF and PSF (facilitation) charges and only UDF charges to be applicable on each domestic and international embarking passenger w.e.f. 01.03.2018. 12.e. The Authority decides to consider shortfall/ excess in revenues for the 2nd control period based on proposed tariffs by AAI while determining aeronautical tariffs for the 3rd control period. 4.4 True up of Traffic 4.4.1 The actual passenger and ATM traffic of LGBIA for the Second Control Period submitted by AAI is as follows: Table 8: AAI’s submission for True up of traffic for the Second Control Period for LGBIA (in Nos.) Total Domestic International Domestic International Total Financial Year Passenger Passengers Passengers ATM ATM ATM traffic FY’17 3,759,494 30,162 3,789,656 37,383 490 37,873 FY’18 4,636,604 31,449 4,668,053 40,668 504 41,172 FY’19 5,714,561 31,067 5,745,628 49,845 643 50,488 FY’20 5,422,289 35,160 5,457,449 44,539 1,000 45,539 FY’21 2,188,767 368 2,189,135 23,422 20 23,442 Consultation Paper No. 01/2024-25 Page 34 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD Total Domestic International Domestic International Total Financial Year Passenger Passengers Passengers ATM ATM ATM traffic Total 21,721,715 128,206 21,849,921 195,857 2,657 198,514 FY’22 (till COD) 1,163,923 16 1,163,939 14,388 5 14,393 Total (till COD) 22,885,638 128,222 23,013,860 210,245 2,662 212,907 4.4.2 The Authority verified the actual Passenger traffic and ATM (as per Table 8) for the Second Control Period based on the details available on AAI’s website and noted no variances. 4.4.3 The Authority examined the actual passenger traffic and ATM of LGBIA with the traffic projections approved by the Authority in the Tariff Order No. 38/2017-18 dated 16 February 2018, for the Second Control Period, which is as follows: Table 9: Passenger traffic and ATM approved by the Authority for the Second Control Period (in Nos.) Total Domestic International Domestic International Financial Year Passenger Total ATM Passengers Passengers ATM ATM traffic FY’17 3,759,494 30,162 3,789,656 37,383 490 37,873 FY’18 4,622,417 30,775 4,653,192 41,688 502 42,190 FY’19 5,084,659 33,852 5,118,511 44,641 548 45,189 FY’20 5,593,125 37,237 5,630,362 47,803 597 48,400 FY’21 6,152,437 40,961 6,193,398 51,189 651 51,840 Total 25,212,132 172,987 25,385,119 222,704 2,788 225,492 4.4.4 The Authority notes from the above table that the actual Passenger and ATM traffic for the first three tariff years of the Second Control Period (as per Table 8) is same or near to what was approved by the Authority in the Tariff Order for the Second Control Period. 4.4.5 The Authority notes that there has been a decrease in the Passenger and ATM traffic particularly in the FY 2019-20 (pre-COVID year), due to the closure of operations by Jet Airways with no replacement for those vacant slots and the impact of COVID pandemic in the last quarter of the FY 2019-20. 4.4.6 The actual traffic for the 5th tariff year viz., FY 2020-21 is significantly lower than the projections in Tariff order for the Second Control Period, due to the adverse impact of the ongoing COVID-19 pandemic. 4.4.7 Based on the above facts, the Authority proposes to consider the actual passenger and ATM traffic as submitted by AAI (Table 8) for true up of the Second Control Period (up to COD), in line with its decision no. 2.b. of the Tariff Order No. 38/ 2017-18 dated February 16, 2018, which states “The Authority decides to true up the traffic volume (ATM and passengers) based on actual traffic in 2nd Control period while determining tariffs for the 3rd control period.” Consultation Paper No. 01/2024-25 Page 35 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD 4.5 True up of Capital Expenditure (CAPEX) AAI’s submission for true up of RAB for the Second Control Period and Pre-COD Period: 4.5.1 AAI has submitted the details of RAB during the Second Control Period and Pre-COD period as follows: Table 10: RAB for Second Control Period and pre COD period as per AAI’s Submission (₹ crores) FY’22 Particulars FY’17 FY’18 FY’19 FY’20 FY’21 till Total COD Opening RAB (A) 84.00* 78.85 80.44 154.28 172.29 163.26 Additions to RAB during the year (B) 9.77# 8.84 83.77 31.33 4.82 10.26 148.79 Deletions from RAB during the year (C) 7.92 0.08 8.00 Depreciation for the year (D) 7.00 7.17 9.93 13.32 13.84 7.31 58.57 Closing RAB for the year (E=A+B-C-D) 78.85 80.44 154.28 172.29 163.27 166.21 * includes left out assets worth ₹ 16.59 crores and cost apportionment worth 1.90 crores in First Control Period # excludes left out asset and cost apportionment as the same has been included in Opening RAB 4.5.2 AAI has classified the above capital additions into Aeronautical, Non-aeronautical, Common and ANS as shown below: Table 11: Allocation of assets as per AAI’s submission Asset Asset Category Asset Sub-Category / Description Classification Boundary Boundary in CPWD Quarters Aeronautical Operational boundary walls Aeronautical Building Expansion and modification of existing Term. Bldg. Aeronautical (Misc. works) Construction of E&M Workshop Aeronautical Tensile Fabric Canopy for Terminal building Aeronautical Civil and Electrical works for Air link corridors Aeronautical Construction of Dog kennel and associated works at CISF Aeronautical complex Construction of Fire pit and approach road Aeronautical Supply and installation of public toilet Aeronautical Frangible security w/towers Aeronautical Portable shelters Aeronautical SITC of Smoke Cabin indoor type Aeronautical Construction of Child Care room and facelift works Aeronautical Construction of LLZ/ILS Hut ANS Surface Movement Radar Tower and ASMGCS room ANS Furniture & Fixtures 3-seater Airport Terminal chairs Aeronautical Furniture & Fixtures at administrative offices Aeronautical Iron beds Aeronautical Ladies Frisking booth Aeronautical Standing Platform Aeronautical Immigration Counters Aeronautical Rifle racks Aeronautical Furniture and Fixtures for ANS use ANS Office appliances IT assets and other office equipment at the airport, BCAS Aeronautical and CISF offices IT assets and other office equipment at ANS offices ANS Consultation Paper No. 01/2024-25 Page 36 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD Asset Asset Category Asset Sub-Category / Description Classification Plant & Equipment FIDS, CUTE, CUSS Aeronautical CCTV and Access Control System Aeronautical Perimeter Lighting System Aeronautical Escalators and Elevators Aeronautical Passenger boarding bridges and AVDGS Aeronautical Rubber Removal Machine Aeronautical Bomb Suits Aeronautical Hand-Held Metal Detectors and DFMDs Aeronautical Explosive vapour Detector Aeronautical Passenger Baggage Trolleys Aeronautical Signages Aeronautical Equipment at CISF Barracks Aeronautical X-ray Baggage Inspection System Aeronautical SITC of video conferencing system Aeronautical Mini Remote Operating Vehicle Aeronautical SITC for E-Gates for Immigration Aeronautical Human Life Detector Aeronautical SITC of SCCTV system Aeronautical SITC of drinking water fountains Aeronautical Public Address Sound Management System Aeronautical Aadhar based Biometric Machines Aeronautical SITC of Biometric Access Control System Aeronautical Firefighting and protection equipment Aeronautical Air Conditioning at terminal building Aeronautical SITC of sub-station equipment and associated work Common SITC of ground mounted solar plant Common Equipment related to ANS/CNS facilities ANS Runways, Taxiways Strengthening of Existing Runway 02/20 Aeronautical and Apron Construction and strengthening of internal and access Aeronautical roads Car park in front of Cargo and RHQ building Non-Aero Vehicles Fire trucks, ambulances, tractors, SUVs, and other Aeronautical vehicles for airside operations Vehicles for ANS operations ANS Computer Software Software for airport operations Aeronautical Software licences Common 4.5.3 Further, AAI has submitted the following ratios: Table 12: Allocation ratios as per AAI’s submission Particulars FY 2016- FY 2017- FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 17 18 till COD Employee Ratio 98.65:1.35 98.08:1.92 98.84:1.16 98.10:1.90 98.03:1.97 98.60:1.40 (Aeronautical : Non- aeronautical) Terminal Building ratio 89.67:10.33 90.50:9.50 90.60:9.40 92.32:7.68 92.81:7.19 92.58:7.42 (Aeronautical : Non- aeronautical) Consultation Paper No. 01/2024-25 Page 37 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD Particulars FY 2016- FY 2017- FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 17 18 till COD Electricity ratio 84.79: 84.76: 84.74: 84.77: 84.75: 84.52: (Aeronautical : ANS : 15.00: 15.05: 15.08: 15.08: 15.05: 15.19: Non-aeronautical) 0.21 0.19 0.18 0.16 0.20 0.29 Staff Quarters ratio 49.11:50.89 52.94:46.08 60.83:38.33 65.81:33.33 64.85:35.42 59.21:40.79 (Aeronautical : ANS) Vehicle Ratio 74.07: 75.86: 77.14: 82.61: 83.33: 80.00: (Aeronautical : ANS : 18.52: 17.24: 17.14: 13.04: 12.50: 15.00: Non-aeronautical) 7.41 6.90 5.71 4.35 4.17 5.00 Recap of decision taken by the Authority for RAB at the time of tariff determination for the Second Control Period 4.5.4 The Authority vide its decision no. 4, 5 and 7 of Order no. 38/2017-2018 dated February 16, 2018 decided the following with respect to Opening Aeronautical RAB, Additions and RAB for Second Control Period: • Decision no. 4.a. The Authority decides to consider the opening regulatory base for the 2nd control period under Hybrid Till as ₹ 65.5 crores. • Decision no. 5.a. The Authority decides to consider allowable project cost of ₹ 261.9 crores and accordingly reckon the amount of ₹ 261.9 crores as additions to total assets during the 2nd control period. • Decision no. 5.b. The Authority directs AAI to undertake user stakeholder consultation process for major capital expenditure items as per the Guidelines. • Decision no. 5.c. The Authority decides to true up the Opening RAB of the next control period depending on the capital expenditure incurred and date of capitalization of underlying assets in a given year. • Decision no. 7.a. The Authority decides to consider RAB for 2nd control period as given in Table 33. • Decision no. 7.b. The Authority decides to true up the RAB of 2nd control period based on actual asset addition and consider the depreciation rates as per the order no. 35/2017-18 dated 12.01.2018 issued by the Authority, at the time of determination of tariff for the 3rd control period. Table 13: RAB as approved by Authority in the Tariff Order for Second Control Period (Table 33 of the Order) (₹ crores) Particulars FY 17 FY 18 FY 19 FY 20 FY 21 Total Opening RAB (A) 65.50 66.30 71.20 102.00 269.70 Addition (B) 6.90 11.20 37.80 178.00 28.00 261.90 Sales/Disposals/Transfers (C) - - - - - - Depreciation (D) 6.10 6.30 7.00 10.30 13.30 43.00 Closing RAB (E = A + B – C – D) 66.30 71.20 102.00 269.70 284.40 Average RAB [(A + E) ÷ 2] 65.90 68.80 86.60 185.90 277.10 Authority’s examination regarding CAPEX, Depreciation and RAB as part of tariff determination for the Second Control Period and Pre-COD Period: 4.5.5 The Authority had undertaken the “Study on Allocation of Assets between Aeronautical and Non- Aeronautical Assets” to carry out a detailed analysis of the Regulatory Assets, apportion the common assets based on appropriate ratios, and examine the assets transferred from AAI to GIAL. Consultation Paper No. 01/2024-25 Page 38 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD 4.5.6 Allocation Ratios a. Terminal Building ratio: It was observed that as per AAI’s True up submission for the period up to October 8, 2021, LGBIA had an average terminal building ratio of 91.41:8.59 based on actual utilization. The Authority in its order 38/2017-18 for SCP of LGBIA, had decided to adopt 89.02% as aeronautical area based on terminal area ratio calculations submitted by AAI for FY 2015-16. This is also consistent with the IMG norms, which has recommended the Non-Aeronautical area within the terminal building for airports having passenger traffic less than 10 MPPA to be in the range of 8% to 12% of the total terminal area and for airports having passenger traffic greater than 10 MPPA to be up to 20%. The Authority had commissioned an independent study on the Allocation of Assets (summary of the study is given in Annexure 1 and the study is attached as Appendix 1 of this Consultation Paper). Based the outcome of the study, the Authority proposes to consider the Terminal Building ratio of 89.02:10.98 (Aeronautical: Non-Aeronautical) as was approved by the Authority in the Tariff Order for the Second Control Period. The same has been explained in para 4.3.1 of the Asset Allocation study report. b. Staff Quarters ratio: The Authoirty proposes to consider staff quarters ratio as submitted by AAI. c. Employee Headcount ratio: The Authority proposes to consider the five-year average Employee Head Count Ratio of AAI, i.e. 90.45:9.55 (Aeronautical: Non-aeronautical) for the purpose of allocation of assets during the period from FY 2016-17 up to COD, as the Authority considers the same to be a reasonable basis for allocation of assets. The same has been explained in para 4.4.3 of the O&M Study report and the same is presented in the table below: Table 14: Allocation Ratios proposed by the Authority FY22 till Average Particulars FY 17 FY 18 FY 19 FY 20 FY 21 COD Ratio Employee Ratio 90.35:9. 89.53:10.4 91.56: 90.59: 90.59: 90.10: 9.90 90.45:9. (Aero : Non-Aero) 65 7 8.44 9.41 9.41 55 Terminal Building Ratio 89.02% : 10.98% (Aero : Non-Aero) Staff Quarters 49.11: 52.94: 60.83: 65.81: 64.58: 59.21: Ratio 50.89: 46.08: 38.33: 33.33: 35.42: 40.79: (Aeronautical : 0 0.98 0.83 0.85 0 0 ANS: Non Aeronautical) 4.5.7 The Authority notes the following while comparing the RAB as submitted by AAI for true up (Table 10) and that approved in Second Control Period tariff order (Table 13): • There is a difference between Opening RAB as on 1st April 2016 as submitted by AAI and that approved by AERA in the Second Control Period Order. This variation has been discussed in para 4.5.9. • The capital expenditure incurred by AAI vis a vis approved by the Authority for the Second Control Period is lower by ₹ 123.37 crores. Additionally, AAI has incurred ₹ 10.26 crores during FY’22 till COD i.e. 8th October, 2021. The same has been discussed in para 4.5.14. 4.5.8 The Authority notes that at the time of determination of tariff for the Second Control Period, in the Tariff Order, the Opening RAB for FY 2016-17 was determined to be ₹ 65.50 crores (Decision No. 4a, Tariff Order No. 38/2017-18 dated February 16, 2018). The details are as follows: Consultation Paper No. 01/2024-25 Page 39 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD Table 15: Opening RAB approved by the Authority in the Second Control Period Tariff Order (₹ crores) Particulars Ref. Amount Original Cost of Aeronautical Assets excluding CNS/ATM related A 162.0 assets as on 01.04.2011 Aeronautical asset addition during the First Control Period B 21.5 Cost of Aeronautical Assets as on 31.03.2016 C = A + B 183.5 Accumulated Depreciation as on 31.03.2016 D 117.9 Closing RAB as on 31.03.2016 E = C – D 65.5 Opening RAB as on 01.04.2016 F = E 65.5 4.5.9 For true-up, AAI has considered an amount of ₹ 84.00 crores for Opening RAB for FY 2016-17 which is at variance from what was approved by the Authority in the Tariff Order for LGBIA for the Second Control Period. The opening RAB submitted by AAI as part of the true up proposal submission is ₹ 84.00 crores which includes left out assets of ₹ 16.59 crores at the time of finalization of Tariff for the Second Control Period and hence, these assets have been added to the True up of Second Control Period. Further, AAI has added an amount of ₹ 1.90 crores shown as ‘Cost Apportionment’ or Improvement cost to the Opening RAB of Second Control Period. 4.5.10 Based on the information/details provided by AAI and the comparison of the left-out assets and Cost Apportionment (the list of left out assets and improvements are detailed in Annexure II of Asset Allocation Study Report) with the fixed asset register, it is noted that these assets exclusively belong to LGBIA. Hence, the Authority proposes to include these assets as part of the Opening RAB for FY 2016- 17 of the Second Control Period. 4.5.11 The Authority, based on the above facts, proposes to consider the opening RAB for true-up of the Second Control Period as submitted by AAI i.e., ₹ 84.00 crores (₹ 65.5 crores + ₹ 16.59 crores + ₹ 1.90 crores). Capital additions submitted by AAI for Second Control Period and Pre-COD Period 4.5.12 The Authority notes variance between the approved CAPEX in the Tariff Order for the Second Control Period and the actual capitalization of aeronautical assets. The Tariff Order for the Second Control period had projected a capitalization of aeronautical assets amounting to ₹ 261.9 crores for SCP, but as per AAI's submission, ₹ 148.78 crores of aeronautical assets have been capitalized (56.8% of approved CAPEX) (refer Table 18) until the COD (Commercial Operation Date). 4.5.13 The Authority reviewed the actual capital additions to RAB during the Second Control Period, which is explained as follows: Table 16: Capital additions submitted by AAI for the SCP and Pre-COD Period for LGBIA (₹ crores) FY’17 FY’18 FY’19 FY’20 FY’21 Total FY’22 Total S. Particulars till till till No FY’21 COD COD 1 Runway 0.00 1.08 49.71 1.78 0.38 52.94 0.00 52.94 3 Roads Bridges &Culverts 0.61 0.00 0.00 0.00 0.00 0.61 0.00 0.61 4 Terminal Building 0.00 2.76 11.96 5.14 0.00 19.86 1.82 21.68 5 Temp. Building 0.00 0.09 0.05 0.18 0.18 0.50 0.00 0.50 6 Residential Building 0.00 0.00 0.30 0.00 0.00 0.30 1.10 1.40 7 Operational B/Wall 0.00 0.00 7.07 0.00 0.15 7.22 6.05 13.26 8 Residential Security Fencing 0.00 0.00 0.00 0.00 0.22 0.22 0.00 0.22 Consultation Paper No. 01/2024-25 Page 40 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD FY’17 FY’18 FY’19 FY’20 FY’21 Total FY’22 Total S. Particulars till till till No FY’21 COD COD 9 Computer & Peripherals 0.04 0.03 0.17 0.09 0.40 0.73 0.00 0.73 10 Software 0.02 0.01 0.00 0.00 0.00 0.03 0.00 0.03 11 Plant & Machinery 7.29 2.68 9.50 8.23 2.68 30.38 1.23 31.61 12 Tools & Equipment 1.73 1.20 4.23 6.01 0.60 13.77 0.06 13.83 13 Furniture-Office 0.01 0.62 0.47 1.41 0.08 2.58 0.00 2.58 14 Vehicles 0.05 0.38 0.22 0.73 0.00 1.38 0.00 1.38 15 Office Eqpt 0.01 0.00 0.10 0.10 0.13 0.33 0.00 0.33 16 X-Ray 0.00 0.00 0.00 2.38 0.00 2.38 0.00 2.38 17 CFT/Fire Fighting 0.00 0.00 0.00 5.29 0.00 5.29 0.00 5.29 Equipments Total 9.77 8.84 83.77 31.33 4.82 138.53 10.26 148.78 4.5.14 The Authority compared the total capital additions provided by AAI with the capital additions approved in the Second Control Period order as detailed below: Table 17: Reconciliation of Additions considered in the Second Control Period Order and Actuals incurred by AAI (₹ crores) Total FY22 Particulars FY’17 FY’18 FY’19 FY’20 FY’21 up to till Total FY21 COD* Amount approved as per 6.90 11.20 37.80 178.00 28.00 261.90 - 261.90 Tariff Order (A) Actual additions to RAB 9.77 8.84 83.77 31.33 4.82 138.53 10.26 148.79 (B) Difference (B-A) 2.87 (2.36) 45.97 (146.67) (23.18) (123.37) 10.26 - * up to October 8, 2021 4.5.15 The Authority has analyzed the reasons for such differences which are detailed below as mentioned in Table 18: • Out of the total CAPEX of ₹ 261.90 crores approved in SCP, ₹ 177.56 crores CAPEX was deferred due to the anticipated concessioning out of LGBIA to GIAL. • The cost of assets commissioned by AAI as compared to the approved amount in SCP order resulted in a cost overrun of ₹ 10.29 crores due to actual tendered costs being marginally higher than the estimates. • AAI capitalized assets worth ₹ 54.16 crores, which were not approved in the SCP Order. These assets were commissioned mainly for enhancing passenger facilitation (such as installation of air conditioners, passenger chairs etc.), improving security (procurement of bomb suit, X ray machines, dog squad vehicles, mobile command post, SCCTV systems etc.), and maintaining the overall operational efficiency of the airport like provision of additional PBB, provision of CUTE, CUSS and scanner, procurement of rubber removal vehicles, various electrical works, PA System etc. Consultation Paper No. 01/2024-25 Page 41 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD Table 18: Reconciliation of Additions allowed in Second Control Period Order and Actuals incurred by AAI Particulars Reference Amount Additions as per SCP Tariff Order A 261.90 Capital Expenditure proposed in SCP but later deferred due to consideration for B 177.56 handing over of LGBI Airport, Guwahati under PPP Variance in cost between additions approved and incurred due to cost overun C 10.29 Capital additions capitalized in the SCP but not approved in SCP Tariff Order D 54.16 Total additions proposed by AAI in its True-up of SCP E=A-B+C+D 148.79 4.5.16 Based on the above analysis, the Authority proposes to allow the actual capital expenditure submitted by AAI till COD as per Table 18. Reclassification and Reallocation of assets submitted by AAI for the Second Control Period and Pre-COD Period 4.5.17 The Authority has commissioned an independent study through the Consultant appointed by AERA on allocation of assets between Aeronautical and Non-aeronautical services for LGBIA for the Second Control Period and FY 2021-22 (Pre and Post COD of AAI and GIAL respectively) (summary of the study is given in Annexure 1 and the Study is attached as Appendix 1) and used the recommendation of the study, while truing up the RAB till COD for AAI. 4.5.18 The Authority notes that the Independent Study has provided a broad framework for allocation of various classes of airport assets into Aeronautical, Non-aeronautical and Common. The process followed by the Study is as follows: • The assets responsible for/ used exclusively for the provision of aeronautical (as defined in section 2 (a) of the AERA Act, 2008) services have been classified as ‘Aeronautical’ for the purposes of Study. Additionally, the decisions of AERA on allocation of certain assets in the previous control periods and in the case of other airports have also been taken into consideration for this exercise. • Assets which are solely used for the provision of services other than aeronautical services are classified as ‘Non-Aeronautical’. • If any asset is not exclusively used for the provision of either Aeronautical service or Non- Aeronautical service, it has been classified as ‘Common’. • Apart from being an airport operator, AAI is also responsible for the provision of Air Navigation Services (ANS) over the Indian airspace. Therefore, certain ANS assets also form part of the books of AAI. However, since this service is managed separately by AAI and the tariff for the same are presently regulated by Ministry of Civil Aviation (MoCA), the assets related to the same are not considered under the RAB of AAI. Therefore, such assets have been excluded from the Aeronautical Gross Block of AAI. • However, certain ANS related assets were also transferred to GIAL as on COD. As per the terms of the Concession Agreement, AAI would continue to provide ANS services at LGBIA. As mentioned in Schedule Q of Clause 20.2.1 of the Concession Agreement, GIAL is required to make available all necessary civil infrastructure and necessary support to AAI for providing ANS services. Therefore, the ANS related assets, when transferred to the books of the GIAL, would be considered as aeronautical in nature considering that GIAL is not providing or charging for ANS services at LGBIA whereas it is required to provide the supporting infrastructure. • Aeronautical assets (e.g. aerobridges, runway, apron etc.) are directly added to RAB and assets identified to be Non-Aeronautical (e.g. commercial complex) are excluded from it. The assets that have been classified as Common assets need to be further bifurcated into aeronautical and non- Consultation Paper No. 01/2024-25 Page 42 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD aeronautical based on a suitable ratio. This ratio has been determined based on the underlying proportion of their expected utilization for Aeronautical and Non-aeronautical services and activities at the Airport. • Assets have been analysed on a case-to-case basis and in case of any misclassification identified in allocation, appropriate reclassification has been made for such assets. 4.5.19 Reclassification of assets transferred by AAI to GIAL The Authority has conducted an independent study on allocation of assets for the period FY 2016-17 till COD and used the outcome of the study to true up the RAB as on COD for AAI. The Authority has considered the opening RAB submitted by AAI, Capital additions and corresponding depreciation based on the results of the Asset Allocation Study report (refer Annexure 1 for the Summary of the report and Appendix 1 for the detailed report on Study on allocation of assets between Aeronautical and Non-aeronautical assets for Guwahti International Airport.) The asset allocation study report reviewed the various asset categories and developed a basis for segregation of various assets into Aeronautical, Non-aeronautical and Common. Based on the same, the Authority has reclassified some portion of assets submitted by AAI for true up of the Pre-COD Period. (i) Terminal building: Details of Asset: Expansion and Modification of Existing Terminal Building Allocation proposed by AAI: Aeronautical Observation: The assets pertaining to development of terminal building have been considered as Aeronautical assets by AAI. However, as these assets are within / pertaining to the terminal building, wherein both Aeronautical and Non-aeronautical activities are carried out, the same is reclassified as Common asset and segregated in the Terminal Building ratio (89.02:10.98). Allocation proposed by the Authority: Common Impact: Reclassifying these assets from Aeronautical to Common reduces the Capital Additions to the extent of ₹ 0.91 crores. (ii) Plant & Machinery: Details of Asset: VRV System, Solar plant, AC plant, Water Softening plant, Allocation proposed by AAI: Aeronautical Observation: The assets pertain to various machinery at several locations in the airport terminal have been classified as Aeronautical assets by AAI. As these assets are used for servicing both Aeronautical and Non-aeronautical activities within the terminal building, these are reclassified as Common assets and have been reallocated in the ratio of the Terminal Building (89.02:10.98). Allocation proposed by the Authority: Common Impact: Reclassifying these assets reduces the Capital Additions to the extent of ₹ 0.57 crores. (iii) Furniture & Fixtures: Details of Asset: Furniture and Fixtures at Administrative offices Allocation proposed by AAI: Aeronautical Observation: The furniture at the administrative offices in the terminal building have been Consultation Paper No. 01/2024-25 Page 43 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD classified as Aeronautical assets by AAI. As these assets are used by staff who perform both Aeronautical and Non-aeronautical activities, these assets are reclassified as Common assets and have been reallocated using the Employee ratio. Allocation proposed by the Authority: Common Impact: Reclassifying these assets reduces the Capital Additions to the extent of ₹ 0.09 crores. (iv) Tools and Equipment: Details of Asset: Sub-station equipment, DG set, Split AC, Lights, Fan, Baggage disinfectant system, Radio communication equipment, Breath analyzer. Allocation proposed by AAI: Aeronautical Observation: The assets pertaining to the various equipment at several locations in the airport have been classified as Aeronautical assets by AAI. As these assets are used for servicing both Aeronautical and Non-aeronautical activities within the terminal building, these are reclassified as Common assets and have been reallocated in the ratio of the Terminal Building (89.02:10.98). Radio communication equipment and Breath analyzer equipment at ATC Building have been classified as Aeronautical asset by AAI. However, since these assets are for ANS staff use, they have been reclassified as ANS assets. Allocation proposed by the Authority: Common / ANS Impact: Reclassifying these assets reduces the Capital Additions to the extent of ₹ 0.10 crores. (v) Office Appliances: Details of Asset: Computer, Printer, Scanner, DVD, Fox screen, DSLR Camera, Xerox machine, Handheld Multimeter Allocation proposed by AAI: Aeronautical Observation: Computers, Laptop, Printers, and DVD used in the terminal building have been classified as Aeronautical asset by AAI. As these assets are used by staff who perform both Aeronautical and Non-aeronautical activities, these assets are reclassified as Common assets and have been reallocated using the Employee ratio. Computers, Scanner, Fox screen, Xerox machine, DSLR Camera, DVD, and Handheld multimeter at the ATC tower and CNS section have been classified as Aeronautical assets by AAI. As these assets are for CNS use, the assets have been reclassified as ANS assets. Allocation proposed by the Authority: Common, ANS Impact: Reclassifying these assets reduces the Capital Additions to the extent of ₹ 0.05 crores. The following table presents the impact of adjustments in Asset Addition/WIP Capitalization values due to reclassification of assets of AAI for the period April 1, 2016 to COD. Table 19: Impact due to reclassification of AAI assets proposed by the Authority (₹ crores) Additions - WIP FY22 till Total FY17 FY18 FY19 FY20 FY21 Capitalization COD Terminal - - (0.91) - - - (0.91) Building Consultation Paper No. 01/2024-25 Page 44 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD Additions - WIP FY22 till Total FY17 FY18 FY19 FY20 FY21 Capitalization COD Computers (0.01) - - (0.03) - - (0.04) Machinery (0.03) (0.03) (0.05) (0.03) (0.43) - (0.57) Tools & - - (0.06) - (0.03) - (0.10) Equipment Furniture-Office - (0.08) (0.01) - - - (0.09) Office - - - - (0.01) - (0.01) Equipment Total Impact on (0.04) (0.11) (1.03) (0.07) (0.47) - (1.71) Additions Table 20: Reclassification of assets capitalized in the Second Control Period and Pre-COD Period proposed by the Authority (₹) Asset No. Asset Description Classification Revised Aero Impact on Aero as per Study Value Value 50011157 Modification & Expansion of Existing TB (Alluminium & Common TB 73,461,474.11 (9,060,963.67) misc work) 150010556 L/OP HP-440(i5/4GB/500GB/14 INCH/DVD RW/WIN8.1) ANS - (55,125.00) 150010562 DESKTOP COMPUTER HP406G1 Common ER 36,776.78 (3,927.22) (i3/4GB/500GB/18.5TFT/DVD 150010563 DESKTOP COMPUTER HP406G1 Common ER 36,776.78 (3,927.22) (i3/4GB/500GB/18.5TFT/DVD 150012891 Printer Epson LX-310 dotmatrix impact printer 04 n Common ER 22,012.19 (2,574.57) 150014097 Proc of IT Item. Multifunctional Machines 17 nos. Common ER 178,283.57 (16,438.46) 150014098 Note Book Computer Laptop 2 nos. Common ER 85,296.36 (7,864.66) 150015980 All in One PC-VERITON Z4660G 01 no. Common ER 36,807.12 (3,822.88) 150015981 All in One PC-VERITON Z4660G 01 no. Common ER 36,807.12 (3,822.88) 150015982 All in One PC-VERITON Z4660G 01 no. Common ER 36,807.12 (3,822.88) 150015983 All in One PC-VERITON Z4660G 01 no. Common ER 36,807.12 (3,822.88) 150015984 All in One PC-VERITON Z4660G 01 no. ANS - (40,630.00) 150015985 All in One PC-VERITON Z4660G 01 no. ANS - (40,630.00) 150015986 All in One PC-VERITON Z4660G 01 no. ANS - (40,630.00) 150015987 All in One PC-VERITON Z4660G 01 no. ANS - (39,858.54) 150015988 All in One PC-VERITON Z4660G 01 no. ANS - (39,858.54) 150015989 All in One PC-VERITON Z4660G 01 no. Common ER 36,807.12 (3,051.42) 150015990 All in One PC-VERITON Z4660G 01 no. Common ER 36,807.12 (3,051.42) 150016019 HP ScanJet Pro 3000 s3 Sheet-feed Scanner 01 No. ANS - (20,701.03) 150016022 HP ScanJet Pro 3000 s3 Sheet-feed Scanner 01 No. ANS - (21,101.70) 150016023 HP ScanJet Pro 3000 s3 Sheet-feed Scanner 01 No. ANS - (21,101.70) 150016033 HP ScanJet Pro 3000 s3 Sheet-feed Scanner 01 No. ANS - (20,701.03) 90033679 SITC of 250 KW Ground mounted solar plant Common TB 13,149,700.69 (95,346.33) 90033597 REPLACEMENT OF 8X10TR A/C PLANT AT SHA AT Common TB 4,168,889.98 (30,227.94) LGBI AIR 90040146 PROVISION OF VRV/VRF AC SYSTEM FOR Common TB 18,088,242.89 (131,154.89) PROPOSED EXTENS 90035062 SITC of LED Luminaries & allied works at TB Common TB 3,148,913.36 (22,832.26) 90034972 PROVISION OF WATER SOFTENING PLANT FOR Common TB 528,778.80 (3,834.09) 3X225TR AC Consultation Paper No. 01/2024-25 Page 45 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD Asset No. Asset Description Classification Revised Aero Impact on Aero as per Study Value Value 90034870 PROVISION OF COMPOUND LIGHTING FOR 250 KWP Common TB 846,188.03 (6,135.57) SOLAR 90036286 Provision of Air Conditioners and Water Coolers at Common ER 1,098,449.87 (104,881.40) 90037005 Terminal Expansion Internal Electrification Interi Common TB 893,235.58 (14,849.45) 90040027 SITC OF 8.5TR AIR COOLED DUCTABLE SPLIT UNIT. Common TB 973,170.71 (120,033.86) 90036984 SITC OF SPLIT AC UNIT AT FIRST FLOOR AT TB Common TB 1,118,484.73 (18,594.07) 90038012 Provision of HVLS fan, 03 nos Common TB 2,323,664.06 (38,629.38) 90039608 SITC of sub station Eqpt and associated work. Common TB 13,748,741.50 (244,103.64) 90040833 IMPROVEMENT OF EXISTING CENTRAL AC Common TB 4,153,074.10 (73,736.24) SYSTEM AT LGBI 90039841 Provision of 750KVA DG Set and LT Panel at LGBI Ai Common TB 8,040,374.14 (142,753.76) 90040774 SUPPLY LAYING STANDBY 33KV HT CABLE AT Common TB 2,113,981.91 (37,532.94) GUWAHTI AIR 90042644 Wall mounted split AC 1.5TR 5 star 25 nos. Common TB 855,614.42 (31,748.46) 90042645 Wall mounted split AC 2.00TR Inverter ty 2 nos. Common TB 78,157.09 (2,900.10) 90042646 Floor mounted 3.00 ty Interter Type 1 nos. Common TB 62,352.47 (2,313.65) 90042649 Replacement of Old AC, Ater Cooler (Installation) Common TB 397,496.98 (14,749.54) 90045216 R/o existng panels, cables & AHU of central AC sys Common TB 2,607,730.52 (96,762.54) 90043436 PROV OF 25 KVA TROLLEY MOUNTED DG SET AT Common TB 363,246.87 (13,478.65) LGBI AIRP 90045724 S/o 15 nos wall mounted split AC 1.5 TR 3star Common TB 738,540.19 (91,093.81) 90045725 S/o 02 nos wall mounted split AC 3TR 5star Common TB 150,586.23 (18,573.77) 90045272 SITC 08 nos 1.5 Tr (4500 K Cal/hr) s/type AC 5star Common TB 313,350.40 (38,649.60) 90047968 Capacity 2 x 20000 BTU/hr A/Cool Refr. 02 units Cargo - (1,330,628.00) 90048239 Capacity 2 x 10000 BTU/hr A/Cool Refr. 01 unit Cargo - (650,372.00) 90047039 Standalone Type UV Based Baggage Disinfectant Sys. Common TB 617,798.80 (26,311.92) 90049569 RADIO COMMUNICATION TEST SET - 1173.2000K18- ANS - (2,290,188.92) 102497 90039840 SITC OF WALK IN COLD ROOM BEHIND OLD RED ANS - (627,119.00) BLDG. 90045208 BREATH ALCOHOL ANALIZER 01 NO ANS - (48,000.00) 90047150 Touch Screen Kiosk & Network items for FB/LB Proj. Common TB 379,336.34 (16,155.85) 90047538 10 PAIR PIJF CABLE - FIBRE CABLE FOR ANS - (288,374.65) NETWORKING 90049831 PROCUREMENT OF SCANNER CANON DR- F120 3 Common ER 55,030.95 (5,719.05) NOS 110012784 Chair PCH 7001D Common ER 15,060.74 (1,608.26) 110012785 Chair PCH 7001D Common ER 15,060.74 (1,608.26) 110012781 TableT104 Common ER 21,107.98 (2,254.02) 110012782 TableT104 Common ER 21,107.98 (2,254.02) 110012783 TableT104 Common ER 21,107.98 (2,254.02) 110014798 Storewell minor plain 3 nos Common ER 34,531.19 (4,038.81) 110014799 Executive Table 2 nos Common ER 32,258.06 (3,772.94) 110014800 High Back Chair PCH-7001D 2 NOS Common ER 23,009.75 (2,691.25) 110014801 SOFA SET PARTO SOFA 1 SET Common ER 39,463.32 (4,615.68) 110014802 STEEL ALMIRAH STOREWEL PLAIN 2 NOS Common ER 25,376.89 (2,968.11) 110014792 PROC. OF EGRESS TABLE & OTHER ACESSORIES Common ER 1,614,021.00 (188,778.00) 110014813 Workstation for ASMGCS ANS - (176,573.40) 110014772 Supply of Furniture Sofa 6nos, Centre Table 3 nos Common ER 358,114.46 (41,885.54) Consultation Paper No. 01/2024-25 Page 46 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD Asset No. Asset Description Classification Revised Aero Impact on Aero as per Study Value Value 110014640 SUPPLY OF 3 SEATER CHAIRS 124 NOS Common ER 3,214,763.07 (376,002.89) 110015460 PLU 4D PRE GREY METAL 5 NOS Common TB 45,608.51 (809.76) 110015505 Executive Table 1 nos. Common ER 31,028.09 (2,860.91) 110015506 Ex Chair 6 nos. Common ER 76,910.54 (7,091.46) 110015507 Visitor Chair 12 Nos. Common ER 84,294.69 (7,772.31) 110015508 Computer Table. Common ER 48,740.89 (4,494.11) 110015509 Ex Table T-3 nos. Common ER 41,462.03 (3,822.97) 110015511 ALMIRAH BIG STOREWEL PLAIN. 4 NOS Common ER 59,375.36 (5,474.64) 110015512 STEEL RACK 6 PANEL 9 NOS. Common ER 83,624.49 (7,710.51) 110015513 4DR FILLING CABINET. Common ER 57,066.26 (5,261.74) 110015514 EXECUTIVE TABLE T-8. Common ER 26,259.75 (2,421.25) 110015515 PERSONEL LOCKER 4DR 5 NOS. Common ER 50,219.56 (4,630.44) 110015516 ALMIRAH SMALL 1 NOS. Common ER 12,199.19 (1,124.81) 110015517 NON-EX CHAIR 3 NOS. Common ER 32,411.53 (2,988.47) 110015518 COMPUTER CHAIR 3 NOS. Common ER 11,632.76 (1,072.59) 110015519 SOFA PARTO SOFA. 2 NOS Common ER 85,237.74 (7,859.26) 110016936 COMPANION C 11 COMPUTER TABLE. 1 NO Common ER 7,139.52 (741.53) 110016937 REGENCY HIGH BACK 700 1 D 2 NOS. Common ER 25,027.68 (2,599.44) 110016938 PARTO 2 SEATER SOFA 2 NOS. Common ER 40,067.33 (4,161.49) 110016939 GODREJ MINOR PLAIN ALMIRAH 1 NOS. Common ER 11,277.81 (1,171.34) 110016940 PARTO 1 SEATER 4 NOS. Common ER 24,563.96 (2,551.28) 110016941 GODREJ STOREWEL PLAIN 11 NOS. Common ER 159,735.71 (16,590.55) 110016942 GODREJ T-8 TABLE 9 NOS. Common ER 76,280.67 (7,922.70) 110016943 GODREJ 4 DRAWER VERTIFAL FILING CABINET. 1 Common ER 14,640.43 (1,520.59) NOS. 150013808 Fox screen 8 feet*6 feet. 2 nos ANS - (14,152.54) 150016046 DSLR Camera Model-D-3500-18-55PVR ANS - (30,504.00) 150016148 SUPPLY OF KYOCERA MFPS Xerox Machine at Ghy ANS - (42,500.00) 150016879 FLUKE HAND HELD DIGITAL MULTIMETER ANS - (9,048.27) Total (17,145,377.25) 4.5.20 Based on the revision of asset allocation methodology adopted for assets of LGBIA as discussed above, a revision in the Aeronautical Gross block has been proposed. The year-wise revised value of assets from FY 2016-17 to FY 2020-21 has been summarized in the tables below: Table 21: Gross Block proposed by the Authority for Second Control Period and Pre COD period (₹ crores) Particulars FY 17 FY 18 FY 19 FY 20 FY 21 FY22 till COD As per AAI Submission Aeronautical Gross Block (A) 273.23 281.99 365.76 397.09 401.91 412.17 Non-Aeronautical Gross Block (B) 25.35 23.97 24.51 25.08 25.08 25.47 Total Gross Block (C = A + B) 298.58 305.96 390.27 422.17 426.99 437.64 Percentage Aeronautical (D = A ÷ C) 91.51% 92.17% 93.72% 94.06% 94.13% 94.18% Proposed by the Authority as per the Independent Study Aeronautical Gross Block (E) 273.19 281.84 364.58 395.84 400.19 410.44 Non-Aeronautical Gross Block (F) 25.39 25.53 27.04 27.64 27.65 28.04 Consultation Paper No. 01/2024-25 Page 47 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD Particulars FY 17 FY 18 FY 19 FY 20 FY 21 FY22 till COD Total Gross Block (G = E + F) 298.58 307.37 391.61 423.48 427.84 438.48 Percentage Aeronautical (H = 91.50% 91.70% 93.10% 93.47% 93.54% 93.61% (E/G)*100) 4.5.21 Financing Allowance The Authority notes that AAI has claimed financing allowance amounting to ₹ 84.66 lakhs, as part of RAB. The Authority has the following views on the aspect of Financing Allowance: a. Providing return on capital expenditure from the very beginning of construction will significantly lower the risks for an airport operator and may require revisiting the return on equity allowed to airport operators as the investment in the asset class will then be equated to risk free rate of return. b. Further, provision of Financing Allowance will disincentivize the Airport Operators from ensuring timely completion of projects and delivery of services to the users. Therefore, a return should be provided only when the assets are made available to the airport users except in the case of certain costs like IDC that will have to be incurred if debt is used for funding projects. c. Furthermore, the future returns from the project should generate adequate returns to cover the cost of equity during the construction stage. The airport operator is adequately compensated for the risks associated with the equity investments in a construction project once the project is capitalized by means of a reasonable cost of equity. d. Developments at greenfield airports inherently take longer durations to commission and operationalize. Thus, airport operators would have to wait for a considerable duration before getting returns on large capital projects. Keeping this in view, financing allowance was provisioned in the initial stages to such airports. It may be further noted that financing allowance was never provided in the case of brownfield airports like MIAL, DIAL and other AAI airports. Further, financing allowance for greenfield airports of BIAL, HIAL, CIAL etc. was allowed only for the initial stages of their development, after which IDC was permitted on the debt portion of the proposed capital expenditure. e. It is pertinent to note that in case of a greenfield airport, investment in regulatory blocks by the Airport Operator would not make the airport facilities available to the passengers. Brownfield and Greenfield airports can’t be equated on this issue. In greenfield airports, the tariff is not applicable, and no revenue is available to the Airport Operator till the aeronautical services have been created and put to use. However, in the case of brownfield airports, where Airport Operator brings in additional investments, the airport facilities are mobilized and enabled to other functional parts of the airport, which remains functional, and Airport Operator keeps on enjoying the charges from the users. In the case of LGBIA, the Airport is a brownfield airport, which would not be eligible for an allowance on the equity portion of newly funded capital projects. f. Financing Allowance is a notional allowance and different from interest during construction. Therefore, the provision of Financing Allowance on the entire capital work in progress would lead to a difference between the projected capitalization and actual cost incurred, especially when the Airport Operator funds the projects through a mix of equity and debt. g. AERA Guidelines, 2011 does not specifically state that Financing Allowance is to be provided on equity portion of the capital expenditure. The proviso to Section 13 (1) (a) of the AERA Act states that “different tariff structures may be determined for different airports having regard to all or any of the above considerations specified at sub-clauses (i) to (vii) of Section 13 (1) (a)”. Consultation Paper No. 01/2024-25 Page 48 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD In view of above, the Authority proposes not to consider any expense related to financing allowance as a part of ARR. 4.6 True up of Depreciation 4.6.1 The Authority notes that while submitting the True up for the Pre-COD period for LGBIA, AAI has taken cognizance of the rates of depreciation approved by the Authority in its order (Order No. 35/2017- 18 dated January 12, 2018 and Amendment No. 01 to Order No. 35 on ‘Determination of Useful Life on Airport Assets’). Accordingly, the depreciation order has been applied by AAI for LGBIA from FY 2018-19 onwards. For the FY 2016-17 and FY 2017-18, AAI has computed depreciation as per its Accounting Policy. 4.6.2 For the additions to RAB, AAI has calculated the depreciation during year of capitalization based on number of days, the asset was put to use. The Authority proposes to consider the same. 4.6.3 Accordingly, the year-wise impact on depreciation on asset additions as determined by the independent study conducted by the Authority (due to reclassification and other adjustments) is summarized in the table below: Table 22: Impact on depreciation due to reclassification of AAI assets for the SCP and pre-COD period (₹ crores) Depreciation on FY 17 FY 18 FY 19 FY 20 FY 21 FY22 till Total Additions during COD the Year Terminal Building - - - (0.03) (0.03) (0.02) (0.08) Computers (0.001) (0.001) (0.002) (0.004) (0.011) (0.006) (0.03) Machinery (0.001) (0.003) (0.006) (0.008) (0.022) (0.020) (0.06) Tools & Equipment - - (0.004) (0.004) (0.005) (0.003) (0.02) Furniture-Office - (0.001) (0.012) (0.013) (0.013) (0.007) (0.05) Office Equipment - - - - (0.002) (0.001) (0.003) Total Impact of (0.002) (0.005) (0.025) (0.060) (0.083) (0.052) (0.23) Adjustments on Depreciation on Additions 4.6.4 The Authority has computed depreciation for the Second Control Period and Pre-COD period, after making necessary adjustments to the assets excluded from RAB and the same is presented as below: Table 23: Depreciation considered by the Authority for True up of the SCP and Pre-COD Period (₹ crores) FY’17 FY’18 FY’19 FY’20 FY’21 Total FY’22 Total Particulars till till till FY’21 COD COD Depreciation as per AAI (A) 7.00 7.17 9.93 13.32 13.84 51.27 7.31 58.57 Depreciation impact on (0.002) (0.005) (0.025) (0.060) (0.083) (0.175) (0.052) (0.23) reclassification (B) Depreciation as per the independent 7.00 7.17 9.90 13.26 13.76 51.09 7.26 58.34 study conducted by the Authority (C=A-B) Reference: Table 11 of the Study on Allocation of assets between Aeronautical and Non-aeronautical assets for LGBIA The Authority, based on this examination and recommendation of the independent study on asset allocation proposes to consider depreciation as per Table 23 for true up of the pre-COD period. Consultation Paper No. 01/2024-25 Page 49 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD 4.7 True up of RAB 4.7.1 The Authority compared the year-wise additions to RAB submitted by AAI to the Aeronautical capital expenditure approved by it in the Tariff Order for the Second Control period and the same is summarized in Table 17. 4.7.2 Subsequent to the reclassifications and revisions in asset allocation ratios, the adjusted RAB has been derived by the Authority as under: Table 24: Adjusted RAB submitted by AAI and proposed by the Authority post re-classification for SCP and pre-COD period (₹ crores) FY’22 Particulars FY’17 FY’18 FY’19 FY’20 FY’21 till Total COD As per AAI Opening RAB (A) 84.00* 78.85 80.44 154.28 172.29 163.26 Additions to RAB during the year (B) 9.77# 8.84 83.77 31.33 4.82 10.26 148.79 Deletions from RAB during the year (C) 7.92 0.08 8.00 Depreciation for the year (D) 7.00 7.17 9.93 13.32 13.84 7.31 58.57 Closing RAB for the year (E=A+B-C- 78.85 80.44 154.28 172.29 163.27 166.21 D) As per Authority Opening RAB (F) 84.00* 78.81 80.30 153.13 171.13 161.73 Reclassification adjustments - Reclassification impact (0.04) (0.11) (1.03) (0.07) (0.47) (1.71) (other than depreciation) (G) - Depreciation impact on reclassification (0.00) (0.01) (0.03) (0.06) (0.08) (0.05) (0.23) (H) Total reclassification impact (I=G+H) (0.04) (0.12) (1.06) (0.13) (0.55) (0.05) (1.95) Additions as per Study^ (J=B+G) 9.73 8.73 82.74 31.26 4.35 10.26 147.07 Deletions as per Study (K=C) 7.92 0.08 0.00 0.00 0.00 0.00 8.00 Depreciation as per Study^ (L=D+H) 7.00 7.17 9.91 13.26 13.76 7.26 58.34 Closing RAB (M=F+J-K-L) 78.81 80.30 153.13 171.13 161.73 164.73 Average RAB (N=(F+M)/2 81.41 79.55 116.71 162.13 166.43 163.23 * includes left out assets worth ₹ 16.59 crores and cost apportionment worth 1.90 crores in First Control Period # excludes left out asset and cost apportionment as the same has been included in Opening RAB ^As per the independent asset allocation study conducted by the Authority 4.7.3 Deemed Initial RAB a. The extract of the Concession Agreement with respect to determination of “Deemed Initial RAB” has been provided hereunder: Clause 28.11.3 states that: i. “It is agreed by the Parties that the Concessionaire shall be liable to pay to the Authority an amount equivalent to the investments made by the Authority in the Aeronautical assets as of the COD and considered by the Regulator as part of the Regulatory Asset Base, subject to requisite reconciliation, true-up and final determination by the Regulator of the quantum of such investment (“Deemed Initial RAB”). ii. The estimated depreciated value of investments made by the Authority in the Aeronautical assets at the Airport as on March 31, 2018, is ₹ 69,00,00,000 (Rupees Sixty Nine crores) (“Estimated Deemed Initial RAB”). It is agreed by the Parties that the Estimated Deemed Consultation Paper No. 01/2024-25 Page 50 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD Initial RAB shall be due and payable by the Concessionaire to the Authority within 90 (ninety) days of COD.” Clause 28.11.4 states that: “Pursuant to the payment of the Estimated Deemed Initial RAB, and upon the reconciliation, true- up and final determination by the Regulator of the quantum of the investment under 28.11.3(a). any surplus or deficit in the Estimated Deemed Initial RAB with respect to the Deemed Initial RAB shall be adjusted as part of the Balancing Payment that becomes due and payable as per Clause 31.4 after the expiry of 15 (fifteen) days from such final determination by the Regulator, with due adjustment for the following ("Adjusted Deemed Initial RAB'"): (a) reduced to the extent of over-recoveries, if any, of Aeronautical Revenues by the Authority until the COD, that the Regulator would provide for as a downward adjustment while determining Aeronautical Charges for the next Control Period; or (b) increased to the extent of under-recoveries, if any, of Aeronautical Revenues by the Authority until the COD, that the Regulator would provide for as an upward adjustment while determining Aeronautical Charges for the next Control Period. The amount(s) to be paid by the Authority or Concessionaire shall be the present value of Adjusted Deemed Initial RAB calculated using the fair rate of return as determined by the Regulator for the time period from the COD to the date of actual payment of the Adjusted Deemed Initial RAB.” Clause 28.11.5 states that: “Upon reimbursement of such amount by the Concessionaire to the Authority, the Deemed Initial RAB will, in addition to the investments made by the Concessionaire, be considered for the purpose of determination of Aeronautical Charges by the Regulator. (a) The Authority undertakes to make any required supporting submissions to the Regulator towards such consideration and determination by the Regulator. (b) The Parties shall submit to and request the Regulator to separately identify the Deemed Initial RAB in future determinations of Aeronautical Charges with regard to consideration of depreciation, required returns, etc.” Joint Asset Reconciliation Statement (JARS) b. The Authority notes that in June 2023, both the AAI and GIAL had collaborated to conduct a physical verification of the assets. Following this verification, they jointly signed the joint asset reconciliation statement (JARS) to confirm the assets transferred as on COD. GIAL has accepted that the value of aeronautical assets transferred by AAI as on COD was ₹ 156.60 crores and that the value of ANS related assets transferred was ₹ 3.16 crores as detailed in Joint Asset Reconciliation Statement. Table 25: Assets transferred by AAI to GIAL as per JARS as on COD (₹ crores) S. No. Particulars No. of Assets Net Asset Value as on COD* A1 Aeronautical assets handed over to GIAL 957 156.60 A2 Non-Aeronautical assets handed over to GIAL 132 6.74 A3 ANS assets handed over to GIAL 52 3.16 Total (A1 + A2 + A3) 1141 166.50 Consultation Paper No. 01/2024-25 Page 51 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD *8th October 2021 c. Taking cognizance of the above clauses in the Concession Agreement and adjustments & reclassification proposed by the Authority based on the outcome of the independent study conducted by the Independent Consultant appointed by AERA on allocation of assets for LGBIA, including disallowance of Financing Allowance, inclusion of IDC and the left out assets, reclassification of assets and the resulting change in depreciation, the Authority has determined the Deemed Initial RAB as on COD, as follows: Table 26: Determination of Deemed Initial RAB by the Authority (₹ crores) Non- Aeronautical ANS assets Total Particulars aeronautical assets (A) (C) D = (A + B + C) assets (B) Net block value of assets handed over 156.60 6.74 3.16 166.50 by AAI on COD as per JARS Impact due to reclassification of RAB (0.96) 0.96 - on transferred assets* Net assets transferred by AAI to GIAL 155.64 7.70 3.16 166.50 as on COD* Deemed Initial RAB as on COD for 158.80 GIAL (Aero + ANS) * Refer Annexure III of Study on Allocation of assets between Aeronautical and Non-aeronautical for LGBIA d. The Authority examined that GIAL in their submission has considered all assets including non- aeronautical, as part of Deemed Initial RAB. However, as per the allocation methodology adopted as part of the independent study commissioned by the Authority, the Deemed Initial RAB considers only Aeronautical and ANS assets. e. The deemed initial RAB as on COD is thus subsequently determined by including only Net Aeronautical (₹ 155.64 Cr.) and ANS assets (₹ 3.16 Cr.) transferred by AAI to GIAL as on COD; and derived to be ₹ 158.80 crores. 4.8 True up of Fair Rate of Return 4.8.1 AAI had considered the FRoR at 14% in line with the decision taken by the Authority for Chennai, Kolkata, Guwahati and Lucknow airports for the First Control Period. 4.8.2 The Authority notes that AAI had not availed any debt during second control period till COD. 4.8.3 At the time of determination of tariff for the Second Control Period, the Authority had decided to consider FRoR for LGBIA as 14%. In line with its decision of second control period order no. 10/2017- 18, the Authority proposes to consider the FRoR at 14% for true up of second control period till COD. 4.8.4 However, it is to be noted that AAI has operated the Airport in FY 2021-22 only till October 7, 2021. Therefore, AAI is eligible to claim return on RAB only till COD. Hence, for FY 2021-22, the Authority proposes to pro-rate the FRoR for 190 days during which AAI operated the Airport. The pro-rated FRoR for FY 2021-22 (till COD-190 days) has been computed as follows: FRoR = FRoR* n/ 365 COD Where, FRoR is the fair rate of return for entire FY 2021-22, FRoR is the pro-rated FRoR for the COD period till COD and n is the number of days in operation in FY 2021-22. Based on the above approach the pro-rated FRoR for FY 2021-22 has been computed as follows: Consultation Paper No. 01/2024-25 Page 52 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD Table 27: Pro-rated FRoR for FY’22 considered by the Authority for true up of pre-COD period Particulars Value (%) FRoR for FY’22 (A) 14% Number of days of operations in FY’22 (B) 190 Pro-rated FRoR for FY’22 (till COD) (A*B/365) 7.29% 4.8.5 Based on the above analysis, the Authority proposes to consider FRoR as 14% for the FYs 2016-17 to 2020-21 and as 7.29% for FY 2021-22 (up 7th Oct’2021) for true up of the pre-COD period. 4.9 True up of Aeronautical Operation and Maintenance (O&M) expenses 4.9.1 The component wise break up of Aeronautical Operation and Maintenance expenses submitted by AAI for the Second Control Period and Pre-COD period is as follows: Table 28: O&M expenses submitted by AAI for True up of the SCP and Pre-COD Period (₹ crores) Particulars FY FY FY FY FY Total FY Total 2016-17 2017-18 2018-19 2019-20 2020-21 up to 2021-22* for FY21 SCP till COD Employee benefit 16.64 24.02 32.05 32.41 26.70 131.82 14.80 146.62 expenses Administrative and 13.95 35.44 42.92 59.69 49.82 201.82 48.43 250.25 other expenses Repairs & 7.72 15.56 12.90 13.97 12.26 62.42 7.57 69.98 Maintenance expenses Utilities and 4.46 5.03 6.05 6.16 5.12 26.81 3.00 29.81 Outsourcing expenses Other Outflows 0.73 0.91 0.78 0.94 0.09 3.44 0.08 3.53 Total 43.50 80.96 94.70 113.17 93.98 426.31 73.89 500.19 *Up to COD (Date- 08th October 2021) 4.9.2 The Authority notes that in the Tariff Order of the Second Control Period vide Order No. 38/2017-18, it had approved the O&M expenses of ₹ 363.80 crores for LGBIA, which is as follows: Table 29: Aeronautical O&M expenses approved by the Authority for Second Control Period (₹ crores) Particulars FY FY FY FY FY Total 2016-17 2017-18 2018-19 2019-20 2020-21 Employee benefit expenses 21.00 28.60 35.20 36.90 38.80 160.50 Administrative & Other expenses 15.70 16.40 18.20 19.30 20.50 90.10 Repairs & Maintenance expenses 6.00 19.00 20.50 21.30 22.20 89.00 Utility and Outsourcing expenses 3.80 3.90 4.70 4.80 4.80 22.00 Other outflows 0.30 0.40 0.40 0.40 0.50 2.00 TOTAL 46.90 68.30 79.00 82.80 86.80 363.80 4.9.3 On comparing the actual expenses incurred by AAI for the second control period till FY2020-21, with the expenses approved in the Tariff Order for the Second Control Period, the Authority observed the following: Consultation Paper No. 01/2024-25 Page 53 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD a. Payroll Expenditure: For FY 2017-18 - there was an increase of 44% as against 36.19% approved in the tariff order of Second Control Period. The Authority further noted that for FY 2018-19 – there was an increase of 33% as against 23% Y-o-Y approved in the tariff order of Second Control Period. The Authority sought clarification from AAI in this regard. AAI clarified that the variance is due to pay revision as per 7th Pay Commission Report which was implemented from Jan 2017 and payment of arrears were paid to Executives in December 2017 (FY’18) and to Non-Executives in FY’19. The Authority also noted that the total Employee benefit expenses of ₹ 131.82 crores incurred by AAI is lower than the approved amount of ₹ 160.50 crores for the Second Control period. Based on the above factors, the Authority considers the payroll expenditure of LGBIA, as submitted by AAI for the Second Control Period to be reasonable and allow the same. b. Administrative and General Expenses: The Authority notes that the Administrative and General expenses of ₹ 201.82 crores claimed by AAI for Second Control Period are significantly higher than the amount approved by the Authority for the Second Control Period. The Authority on analysis observed that variance is mainly on account of the increase in CHQ & RHQ expenses. The amount of CHQ & RHQ expenses as per the Tariff Order of Second Control Period was ₹ 67.90 crores whereas the actual expenses allocated by AAI up to FY21 was ₹ 172.90. Based on the above factors, the Authority is of the view that the CHQ/ RHQ expenses need to be rationalized and the same is explained in para 4.9.5 of this Consultation Paper. c. Repairs and Maintenance (R&M): The Authority notes that the total Repairs & Maintenance expenses of ₹ 62.42 crores claimed by AAI for the Second Control Period (till FY21) is significantly lower than the amount approved in the tariff order for the Second Control Period and hence considered reasonable. d. Utilities and Outsourcing Expenses: The Authority notes that the Utility and Outsourcing expenses of ₹ 26.81 crores claimed by AAI is higher than the approved expenses of ₹ 22.00 crores as per the Tariff Order for the Second Control Period. The overall variation works out to 22 % on the total Utility expenses. It is also observed that the actual electricity expenses of ₹ 23.86 crores incurred till FY21, is higher than the approved amount of ₹ 19.1 crores (i.e., an increase of approx. 25%). The Authority sought clarification from AAI in this regard. AAI as part of its response submitted that the increase in electricity expenses is attributed to the increased load due to addition of new facilities at the airport and due to the increase in per unit cost of power supplied by third party utility vendors. Considering the same, the Authority proposes to consider the actual expense towards Utility and Outsourcing expenses for true up of the pre-COD period. e. Other Outflows: Expenses related to Other Outflows comprises of collection charges on UDF, PSF(F), and charges paid to IATA. The Authority in its order for Second Control Period approved ₹ 2.00 crores for other outflows mainly towards collection charges on UDF. AAI as part of its true up submission stated that the actual expense incurred was ₹ 3.44 crores under this head. This comprised of ₹ 3.32 crores towards collection charges on PSF(F) (till FY20), and UDF. The remaining ₹ 0.12 crores was on account of collection charges paid to IATA (facilitating collection of airline charges on behalf of AAI). The Authority notes that prior to Second Control Period IATA Collection Charges were included as part of CHQ/RHQ expense allocation. However, Second Control Period onwards, expenses related to IATA collection charges have been allocated as per actuals to LGBIA. Since these expenses were not included in “Other Outflows” prior to SCP, the same was not envisaged as part of Tariff Order for SCP and thus correspondingly the projections were lower. Accordingly, basis the aforementioned reasons, the higher expense on account of Consultation Paper No. 01/2024-25 Page 54 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD “Other Outflows” found in order and has been considered by the Authority. 4.9.4 Reallocation of Common O&M expenses by the Authority The Authority has commissioned an independent study through the Consultant appointed by AERA to determine efficient Aeronautical Operation and Maintenance costs for the Second Control Period and FY2021-22. The Authority used the outcome of the study to true up the O&M expenses for the pre- COD period for AAI. The common O&M expenses have been segregated by AAI between Aeronautical and Non- aeronautical expenses based on a suitable ratio. This ratio has been determined based on the underlying proportion of their expected utilisation for Aeronautical and Non-aeronautical services and activities at the Airport. The Authority has analyzed the submission made by AAI on allocation of Common expenses into Aeronautical and Non-aeronautical on a case-to-case basis and applied appropriate re-classification and re-allocation of the expenses, wherever it noted any discrepancies in the allocation of expenses by AAI (refer Table 13 for Allocation of O&M expenses of AAI as per the Study on Efficient Operation and Maintenance Expenses for Lokpriya Gopinath Bordoloi International Airport). Accordingly, the following common expenses have been re-allocated by the Authority by using appropriate ratios such as Employee Head Count ratio, Terminal Building ratio, Gross Fixed Assets ratio and Electricity ratio (Refer para 4.5 to of the Study report on Efficient Operation and Maintenance Expenses for Lokpriya Gopinath Bordoloi International Airport regarding the ratios used by the Authority for allocation of common expenses.) a) Employee benefit/Payroll expenses b) Administrative and General expenses c) Utility expenses d) Repairs and Maintenance expenses The total impact on re-allocation of each of the above expenses and other adjustments have been summarised in the following paragraphs. a) Employee Benefit expenses Observation: The Authority noted that in the case of AAI, the costs directly pertaining to ANS employees have been excluded from the O&M expenses, but the cost for ANS employees involved in support services have not been excluded from Common expenses. Accordingly, the Authority has considered the common expenses allocated to ANS employees as deemed Non-aeronautical employees and has re-worked the Employee Head Count ratio. The Authority further noted that for non-aeronautical allocation of ‘Retirement benefits of Guwahati Employees (Provisions made at CHQ)’, AAI has not provided any direct bifurcation as part of its submission for payroll expenditure and provisions. However, AAI has considered the applicable employee ratios for all years in their calculations. Also, for the year FY2021-22 up to COD, AAI had not segregated non-aeronautical portion and assumed full amount as aeronautical. This expense was eventually segregated into Aeronautical: Non-Aeronautical basis the ratio of 95:5, as per clause 14.8 of Order No. 38/2017-18 in respect of LGBIA for Second Control Period, by the Authority. Impact: The impact of the reallocation of Employee Benefit expenses based on revised Employee Headcount ratio and based on other adjustment described above, results in reduction of the aforementioned expenses by ₹ 0.18 crores for the Second Control Period till COD. Consultation Paper No. 01/2024-25 Page 55 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD Reference: Para 4.6.1 and Table 25 of the Study on Efficient Operation and Maintenance Expenses for Lokpriya Gopinath Bordoloi International Airport. b) Administrative and General expenses Observation: The submissions by AAI have been analyzed and it has been observed that the Administrative and General expenses include certain expenses such as tender, rent and rates and taxes, which directly relate to the Aeronautical activity and certain expenses such as insurance of vehicles, manpower hiring, printing & stationery, conveyance, employee training etc., which are linked to Common expense. Therefore, each component of the Administrative and General expenses has been examined and subsequently allocated as per suitable ratio. Impact: The impact of the reallocation results in reduction of Administrative and other expenses by ₹ 1.35 crores for the Pre- COD period. Reference: Para 4.6.2 of the Study on Efficient Operation and Maintenance Expenses for Lokpriya Gopinath Bordoloi International Airport. c) Utility expenses Observation: AAI’s submission has been analyzed for expenses related to electricity and water charges. It was noted that AAI had made recoveries from concessionaires and the same had been netted off from the total expenses. Expenses under the head of ‘Consumption of Stores and Spares’ included petrol for vehicles and other usage, tyres, paper glass, m-fold papers, cuss roll papers, fire foam, PPE items, electrical spares, and other consumable items. Certain expenses among them directly relate to Aeronautical activities while some are linked to Common expense. Therefore, each component of these expenses have been examined and subsequently allocated as per suitable ratio. Impact: The impact of the reallocation results in reduction of Utility expenses by ₹ 0.11 crores for the Pre- COD period. Reference: Para 4.6.3 of the Study on Efficient Operation and Maintenance Expenses for Lokpriya Gopinath Bordoloi International Airport. d) Repairs and Maintenance expenses Observation: AAI’s true up submission was analyzed, and it was observed that certain Repair & Maintenance expenses such as repair of runway and maintenance of AOCC pertain only to Aeronautical activity, while some such as repair of furniture for terminal building and maintenance of IT hardware are related to the terminal building and airport employees respectively. Hence, a detailed scrutiny of all expenses was undertaken, and as per norms allocation of such expenses was done in the ratio of Gross Fixed Assets/ Terminal Building/ revised Employee ratio depending on the nature of each ledger. Further, it was observed that the expense related to Furniture & Fixtures for Terminal Building was allocated as 100% Aeronautical. Since the furniture and fixtures are primarily used within the terminal building, this expense has been revised by the Authority basis the Terminal Building ratio. Impact: The impact of the reallocation results in reduction of Repairs and Maintenance expenses by ₹ 0.99 crores for the period FY 2016-17 till COD. Reference: Para 4.6.4 of the Study on Efficient Operation and Maintenance Expenses for Lokpriya Gopinath Bordoloi International Airport. 4.9.5 Rationalization of Aeronautical O&M expenses Consultation Paper No. 01/2024-25 Page 56 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD a. Based on the Internal benchmarking analysis performed for O&M expenses through the Study on Efficient Operation and Maintenance Expenses for Lokpriya Gopinath Bordoloi International Airport, the Authority proposes to rationalize the CHQ/ RHQ expense allocation (included under Administrative and General expenses) as below: CHQ/ RHQ expense allocation (included under Administrative and General expenses) The Authority reviewed the basis adopted by AAI for allocation of CHQ and RHQ expenses to LGBIA and other airports and noted the following: • All expenses incurred by CHQ and RHQ (like staff costs, Admin and Gen. expenses, Repairs and Maintenance, utilities, outsourcing expenses etc.) are allocated to all the AAI airports, in the ratio of revenues earned by each Airport. • Expenses such as legal costs, interest/ penalties are related to some specific airports. However, these have been allocated to the common pool and apportioned to all the AAI airports. The Authority is of the view that the above process followed by AAI for allocating the expenses is not correct and necessitates adoption of a scientific/ rational approach for justifiable allocation of expenses to the Airports. Towards this objective, the Authority has examined the major expense components of CHQ and RHQ for the FY’17 to FY’21 submitted by AAI and has proposed the following views on allocation of CHQ/ RHQ expenses: i. Pay and Allowances of CHQ and RHQ: • AAI has considered pay and allowances of Commercial department at CHQ and RHQ as Aeronautical expenses, whereas such expenses are Non-aeronautical in nature. • AAI has excluded pay and allowances of employees involved in ATM, CNS and Cargo departments at CHQ and RHQ while working out the allocation to the airport. However, no exclusion has been done for support services of the departments relating to HR, Finance, Civil, Terminal Management (Housekeeping), etc. • Manpower of CHQ and RHQ also provide services to Non-aeronautical activities, ATC, and CNS cadres at respective airports. Hence, pay and allowances need to be adjusted accordingly. Considering all the facts and figures as stated above, the Authority is of the view that 20% of pay and allowances of CHQ and RHQ is to be excluded towards the following: • Support services to ANS, Cargo and Commercial at CHQ, RHQ and Airports • Officials of Directorate and Commercial Balance 80% of pay and allowances of CHQ and RHQ can be allocated to Airports. ii. Administration & General Expenses of CHQ and RHQ: • AAI has incurred Legal & Arbitration Expenses at both CHQ and RHQ level. The Authority is of the view that this expense should be analyzed and distributed to stations on a case-to- case basis. As the above details have not been provided by AAI, the same has not been allocated to the stations. • AAI has paid interest/penalties to Government of India at both CHQ and RHQ levels. The Authority is of the view that the stakeholders should not be burdened with interest/penalties paid to Government of India, due to various lapses/delays on the part of the Airport Consultation Paper No. 01/2024-25 Page 57 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD Operator. Hence such expenses have not been allocated to the airports. Additionally, it was observed that the CHQ/RHQ overhead expense for FY21-22 was determined through escalation of 5% over the previous year value and the same was considered for full year. The CHQ/RHQ overhead expense for FY21-22 up to COD was thus recomputed through suitable ratio determined as per the actual number of days. Based on the above methodology, the Authority has derived the revised CHQ and RHQ expenses for the Second Control Period and Pre-COD period, which is proposed to be allocated to LGBIA, as part of True up of the Second Control Period and Pre-COD period. Table 30: CHQ/ RHQ expenses proposed by the Authority as part of True up of O&M expenses for the Second Control Period and pre-COD period (₹ crores) Particulars FY FY FY FY FY Total FY Total 2016-17 2017-18 2018-19 2019-20 2020-21 till 2021- till FY21 22* COD As per AAI CHQ/RHQ Overhead 11.13 32.28 40.22 55.83 42.54 182.00 44.67 226.67 expenses as per AAI (A) Aeronautical component as 10.57 30.67 38.21 53.04 40.41 172.90 42.43 215.33 per AAI (95%) (B) As per Study Total CHQ/RHQ Overhead 20.31 25.23 30.83 45.73 34.86 156.96 19.15 176.11 expenses after rationalisation as per Study (C) Total Impact (D = C – B) 9.74 (5.43) (7.38) (7.31) (5.55) (15.94) (23.28) (39.22) * Up to COD (8th OCtober 2021) Reference: Para 4.6.2 of the Study on Efficient Operation and Maintenance Expenses for Lokpriya Gopinath Bordoloi International Airport. The Authority is of the view that the users should pay only for the services availed by them. Further, in line with section 13 of the AERA Act, 2008 the Authority has a scope of determining tariff in respect of Aeronautical services provided/ capital expenditure incurred only by that particular airport. This view is also consistent with ICAO’s principle of ‘Cost-relatedness’. Based on the above principles, the Authority has rationalized the CHQ/ RHQ expenses being allocated to Lokpriya Gopinath Bordoloi International Airport. The Authority feels that the allocation of CHQ & RHQ expenses by AAI on the basis of revenue is high, as it brings large variation in such expenses Year on Year, due to change in revenue and is against the basic principle of cost relatedness in tariff determination. Further, as the revenue from these airports goes up due to higher tariffs, it further leads to higher allocation of CHQ/RHQ expenses with chain of cascading effect. The Authority, therefore, expects AAI to examine these issues in detail and devise an effective and efficient method for allocation of CHQ & RHQ expenses on priority. Further, the Authority feels that AAI should exploit the potential of its non-aeronautical avenues fully so that 30% of the same, by cross subsidisation can be used to cover Aeronautical expenses. 4.9.6 The total year-wise adjustment of AAI’s Aeronautical O&M expenses as a result of the adjustments and reallocations proposed by the Authority in previous sections have been summarized below: Consultation Paper No. 01/2024-25 Page 58 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD Table 31: Impact of proposed reallocation of AAI’s Aeronautical O&M expenses as per the independent study conducted by the Authority (₹ crores) O&M expenses FY FY FY FY FY Total FY Total 2016-17 2017-18 2018-19 2019-20 2020-21 till 2021- till FY21 22* COD Employee benefit (0.02) (0.02) (0.00) (0.05) (0.07) (0.16) (0.02) (0.18) / Payroll Administrative 9.60 (5.73) (7.56) (7.64) (5.79) (17.12) (23.45) (40.57) and General Repairs & (0.09) (0.20) (0.09) (0.16) (0.23) (0.76) (0.23) (0.99) Maintenance Utilities & (0.01) (0.01) (0.02) (0.04) (0.02) (0.09) (0.01) (0.10) Outsourcing Other Outflows 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Total 9.48 (5.96) (7.67) (7.89) (6.11) (18.13) (23.71) (41.84) * Up to COD (October 8, 2021) 4.9.7 Based on the recommendations, with respect to reclassification and changes in allocation ratio, of the independent study commissioned by the Authority through Independent Consultant, the proposed Aeronautical O&M expenses for the period FY 2016-17 up to COD is summarized in the table below: Table 32: Aeronautical O&M expenses considered by the Authority for True up of the Second Control Period and Pre-COD period (₹ crores) O&M expenses FY FY FY FY FY Total FY Total 2016-17 2017- 2018- 2019-20 2020-21 till 2021- till 18 19 FY21 22* COD O&M Expenses as per AAI Employee benefit / 16.64 24.02 32.05 32.42 26.69 131.82 14.80 146.62 Payroll Administrative and 13.95 35.45 42.92 59.68 49.81 201.82 48.43 250.25 General Repairs & 7.72 15.56 12.90 13.97 12.26 62.42 7.57 69.98 Maintenance Utilities & 4.46 5.03 6.05 6.16 5.12 26.81 3.00 29.81 Outsourcing Other Outflows 0.73 0.91 0.78 0.94 0.09 3.44 0.08 3.52 Total 43.49 80.97 94.70 113.17 93.97 426.29 73.88 500.19 O&M Expenses as per Study Employee benefit / 16.62 24.00 32.05 32.37 26.62 131.66 14.78 146.44 Payroll Administrative and 23.56 29.71 35.36 52.05 44.03 184.70 24.99 209.69 General Repairs & 7.63 15.37 12.82 13.81 12.03 61.66 7.33 68.99 Maintenance Utilities & 4.45 5.02 6.03 6.12 5.10 26.72 2.99 29.71 Outsourcing Other Outflows 0.73 0.91 0.78 0.94 0.09 3.44 0.08 3.52 Total 52.97 75.01 87.03 105.28 87.86 408.16 50.17 458.34 Impact 9.48 (5.96) (7.67) (7.89) (6.11) (18.13) (23.71) (41.84) Consultation Paper No. 01/2024-25 Page 59 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD * Up to COD (October 8, 2021) 4.10 True up of Non-aeronautical revenue 4.10.1 AAI as part of true up submission vide letter dated 6th July’2023 submitted actual Non-aeronautical revenue earned by LGBIA for the Second Control Period and Pre-COD period. The details of head wise Non Aeronautical Revenue achieved are as follows: Table 33: Non-aeronautical revenue submitted by AAI for SCP and up to Pre-COD period (₹ crores) Particular FY’17 FY’18 FY’19 FY’20 FY’21 Total FY’22 Total till till till FY’21 COD COD Trading Concessions Restaurant/Snack Bar 1.22 1.17 7.14 16.47 4.41 30.41 0.49 30.89 TR Stalls 2.05 2.96 5.48 10.98 3.23 24.70 0.93 25.63 Hoarding & Displays 2.08 2.75 3.49 4.93 1.50 14.75 0.93 15.68 Sub Total 5.35 6.89 16.11 32.38 9.13 69.86 2.35 72.21 Rent & Services Building Residential 0.02 0.02 0.04 0.08 0.03 0.19 0.01 0.21 Building Non-Residential 8.08 (3.06) 7.13 7.73 6.80 26.67 5.27 31.94 Hanger Rent 8.74 5.81 1.48 2.39 1.83 20.26 0.62 20.88 Land Lease 0.03 0.04 0.01 0.01 0.01 0.10 0.02 0.22 Sub Total 16.87 2.82 8.66 10.20 8.67 47.22 5.92 53.15 Miscellaneous Car Parking 2.27 3.98 5.03 5.27 0.79 17.35 0.60 17.95 Admission ticket 0.32 0.59 0.33 0.16 0.08 1.49 0.07 1.56 Flight Catering 0.33 0.49 0.80 0.51 0.23 2.36 0.07 2.43 Interest Income 0.12 0.15 0.19 0.22 0.16 0.84 0.10 0.94 Other Misc Receipts 1.88 0.63 0.94 1.08 4.84 9.36 0.82 10.19 Sale of Scrap 0.31 0.08 0.26 0.49 0.29 1.42 0.38 1.81 Sub Total 2.96 1.94 2.53 2.46 5.59 15.48 1.44 16.92 Total 27.45 15.63 32.33 50.31 24.19 149.91 10.31 160.21 4.10.2 The Authority compared the actual Non-aeronautical revenue submitted by AAI as per Table 33 with the projections given in the Tariff Order for the Second Control Period and the same is as follows: Table 34: Comparison of Actual NAR with Projections submitted by AAI for the Second Control Period and Pre-COD period (₹ crores) Total FY’22 Total Particulars FY’17 FY’18 FY’19 FY’20 FY’21 till till till FY’21 COD COD NAR Projections as 12.20 13.30 14.50 15.80 17.30 73.10 - 73.10 per Tariff Order for the Second Control Period (A) Actual NAR as per 27.45 15.63 32.33 50.31 24.19 149.91 10.31 160.21 AAI’s submission (B) Variance (B-A) 15.25 2.33 17.83 34.51 6.89 76.81 - - 4.10.3 The Authority notes that the Non-Aero Revenue in Second Control Period is 105.10% higher than the Consultation Paper No. 01/2024-25 Page 60 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD Non-Aero Revenue approved by the Authority as part of Second Control Period Order. In this respect, the Authority recalls its decision no. 9.c vide Tariff No. 38/ 2017-18 which states as follows: “The Authority decides that Non-Aeronautical revenues will be trued up if it is higher than the projected revenues. In case there is a shortfall, true up would be undertaken only if the Authority is satisfied that there are reasonably sufficient grounds for not realizing the projected revenues”. 4.10.4 The Authority vide email dated April 10, 2024, requested AAI to share the details regarding “Space rentals collected from Airlines”. AAI, in its response dated April 22, 2024, has provided the following details: Table 35: “Space rentals collected from Airlines” as submitted by AAI (₹ crores) SCP Pre- Total Particulars FY17 FY18 FY19 FY20 FY21 Total COD (A+B) (A) (B) Space Rent from Airlines 0.79 1.28 1.39 1.41 1.01 5.89 0.29 6.18 4.10.5 The Authority is of the view that space rentals from agencies providing aeronautical services should be treated as Aeronautical Revenue. Hence, the Authority proposes to consider “Space rentals collected from Airlines” amounting to ₹ 6.18 crores as Aeronautical Revenue. 4.10.6 Based on its analysis, the Authority proposes to consider the actual Non-aeronautical Revenue as given in the table below for true up of AAI for the Second Control Period and Pre-COD period. Table 36: Total Non-Aeronautical revenue as per Authority for the Second Control Period and Pre-COD period (₹ crores) Particular FY’17 FY’18 FY’19 FY’20 FY’21 Total till FY’22 Total FY’21 till COD till COD Actual NAR as per AAI 27.45 15.63 32.33 50.31 24.19 149.91 10.31 160.21 submission Less Space Rentals collected 0.79 1.28 1.39 1.41 1.01 5.89 0.29 6.18 from Airlines (B) (refer Para 4.11.5) Total Non-Aero Revenue (A- 26.66 14.35 30.94 48.90 23.18 144.02 10.02 154.03 B) 4.11 True up of Aeronautical Revenue 4.11.1 AAI as part of true up submission vide letter dated 6th July’2023 submitted actual Aeronautical revenue earned by LGBIA for Second Control Period and the Pre-COD period, following are the details of actual Aeronautical Revenue as per AAI for true up period: Table 37: Aeronautical revenue as per AAI for the Second Control Period and Pre-COD period (₹ crores) Particulars FY’17 FY’18 FY’19 FY’20 FY’21 Total FY’22 Total till till till FY’21 COD COD Landing Charges -Domestic (A1) 30.30 36.56 40.74 37.88 21.56 167.05 12.73 179.78 Landing Charges- Intl. (A2) 0.60 0.40 0.55 0.63 0.02 2.20 (0.01) 2.20 Total Landing Charges (A=A1+A2) 30.90 36.97 41.29 38.52 21.58 169.25 12.72 181.97 Housing & Parking Charges (B) 0.12 0.28 0.57 0.60 1.56 3.14 0.56 3.69 Consultation Paper No. 01/2024-25 Page 61 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD Particulars FY’17 FY’18 FY’19 FY’20 FY’21 Total FY’22 Total till till till FY’21 COD COD PSF-Domestic (C1) 0.06 0.00 0.00 0.00 0.00 0.06 0.00 0.06 PSF-Intl.(C2) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Total PSF (C=C1+C2) 0.06 0.00 0.00 0.00 0.00 0.06 0.00 0.06 Fuel Throughput (D) 1.17 1.22 1.68 1.23 0.00 5.30 0.00 5.30 Extn. Of Service Hours (E) 0.11 0.10 0.00 0.00 0.12 0.32 0.10 0.42 Ground Handling Services (F) 1.47 1.60 1.89 1.54 2.64 9.14 0.60 9.74 UDF-Domestic (G1) 59.29 74.98 106.40 107.32 44.15 392.14 25.16 417.30 UDF-Intl. (G2) 0.39 0.26 0.47 0.31 0.07 1.50 0.04 1.55 Revenue from AAICLAS (H) 0.00 0.18 0.52 0.61 0.51 1.81 0.40 2.21 Cargo Revenue (I) 0.29 0.00 0.00 0.00 0.00 0.29 0.00 0.29 Land Lease from Oil Companies (J1) 1.02 1.02 1.02 1.02 1.02 5.11 1.03 6.14 Land Lease from GHA (J2) 0.12 0.07 0.01 0.25 0.17 0.62 0.13 0.75 Cute Charges (K) 2.11 2.23 4.29 4.65 1.83 15.10 0.99 16.10 Total Revenue 97.05 118.91 158.14 156.04 73.65 603.79 41.73 645.52 4.11.2 Table 37 is compared with the Aeronautical revenue considered in the Tariff Order for the Second Control Period and the same is as follows: Table 38: Comparison of Actual Aeronautical revenue and Projections submitted by AAI for the Second Control Period and Pre-COD Period (₹ crores) Particulars FY’17 FY’18 FY’19 FY’20 FY’21 Total FY’22 Total till till till FY’21 COD COD Aeronautical revenue 96.00 122.80 140.70 161.30 184.80 705.60 - - Projections as per Tariff Order for the Second Control Period (A) Actual Aeronautical 97.05 118.91 158.14 156.04 73.65 603.79 41.73 645.52 revenue (B) Variance (B-A) 1.05 (3.89) 17.44 (5.26) (111.15) (101.81) - - 4.11.3 The Authority notes that the Actual Aeronautical revenue in FY 2020-21 is at a significant variance from the projected Aeronautical revenue, which is attributable to lower passenger traffic and ATM due to the adverse impact of the COVID-19 pandemic on the Aviation sector. 4.11.4 Further, the Authority recalls its decision no. 12.e in the Tariff Order No. 38/ 2017-18, which states that “The Authority decides to consider shortfall/ excess in revenues for the 2nd control period based on proposed tariffs by AAI while determining aeronautical tariffs for the 3rd control period.” 4.11.5 As observed in para 4.10.5, the Authority proposes to make certain adjustments to the aeronautical revenue by reclassifying “Space rentals collected from Airlines” as aeronautical revenue. Hence, the Authority proposes to recompute and consider the Aeronautical Revenue for true up of AAI for the Second Control Period and Pre COD period as shown in the following table. Consultation Paper No. 01/2024-25 Page 62 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD Table 39: Total Aeronautical revenue as per Authority for the Second Control Period and Pre-COD period (₹ crores) Particulars FY’17 FY’18 FY’19 FY’20 FY’21 Total FY’22 Total till till till FY’21 COD COD Actual Aeronautical 97.05 118.91 158.14 156.04 73.65 603.79 41.73 645.52 Revenue (A) Add: Space Rentals 0.79 1.28 1.39 1.41 1.01 5.89 0.29 6.18 collected from Airlines (B) Total Aeronautical 97.84 120.19 159.53 157.45 74.66 609.68 42.02 651.70 revenue (A+B) 4.11.6 Based on the above, the Authority proposes to consider Aeronautical revenue inclusive of space rentals collected from airlines for true up of the Second Control Period and pre-COD period. 4.12 True up of Taxation 4.12.1 AAI as part of true up submission submitted detail of aeronautical taxation for the Second Control Period and Pre-COD period, same is as follows: Table 40: Taxation submitted by AAI for the Second Control Period and Pre-COD period (₹ crores) Particular FY’17 FY’18 FY’19 FY’20 FY’21 Total FY’22 Total till till till FY’21 COD COD Aeronautical Revenues 97.84 120.19 159.53 157.45 74.66 609.69 42.02 651.70 O&M 52.97 75.01 87.03 105.28 87.86 408.16 50.17 458.34 Interest on Working Capital - - - - - - 0.51 0.51 Depreciation as per IT Act 8.32 8.59 11.95 17.30 17.85 64.01 16.50 80.51 PBT 45.24 29.35 51.49 25.57 (38.17) 113.48 145.23 258.71 Tax for Aeronautical 15.66 10.16 17.99 6.44 0.00 50.24 0.00 50.24 Services Corporate Tax on shortfall - - - - - - 26.95 26.95 (under recovery) to be collected from Concessionaire Total Tax 77.19 a. The Authority notes that AAI claimed tax of ₹ 26.95 crores on the shortfall amount of ₹ 194.40 crores which is the present value of difference between Target Revenue and Actual Aeronautical revenue i.e. under recovery for Second Control Period and Pre-COD period (refer Table 7). Further,in case of Jaipur International Airport, the Authority sought clarification from AAI relating to the basis of consideration of such tax liability, AAI has provided following clarification in this regard: Under recovery of ARR till COD approved by AERA and thereafter recoverable from Concessionaire will be treated as Revenue receipts and will be liable to income tax. Jaipur Airport is one of the unit/station of AAI (Airports across India). Since AAI is dealt with single PAN No., the tax liability of Jaipur Airport will be merged in common pool of AAI as whole and thereafter tax liability will be paid by AAI as whole considering Income and expenses of Airports across India including Jaipur Airport. Tax liability / tax paid computed for AAI as a whole are not allocated to Airports. Consultation Paper No. 01/2024-25 Page 63 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD In view of the above, the Authority observed that the AAI will be liable to pay income tax over the under recovery reimbursed by GIAL. Since, the recovery will be of aeronautical nature, Authority considers the same as part of ARR calculation for the true up exercise undertaken for Second Control Period and Pre-Control Period. In corollary, the Authority also proposes to consider the reimbursement of under recovery by the GIAL as revenue expenditure while calculating tax liability for GIAL for the Third Control Period. 4.12.2 The Authority vide order no. 38/2017-18 dated February 16, 2018 had decided the following for taxation in second control period: Decision no 11.a. The Authority decides to consider the corporate tax for aeronautical activities as per Table 45 for the 2nd Control Period. Decision no 11.b. The Authority decides to true up the difference between the actual/ apportioned corporate tax paid and that estimated by the Authority for the 2nd control period during determination of tariffs for the 3rd control period. 4.12.3 In view of above, the Authority re-computed taxation amount and the same is presented in the table below: Table 41: Taxation proposed by the Authority for the Second Control Period and Pre-COD period (₹ crores) Total FY’22 Total Particulars FY’17 FY’18 FY’19 FY’20 FY’21 till up to till FY’21 COD COD Revenue (A) Aeronautical Revenue 97.84 120.19 159.53 157.45 74.66 609.68 42.02 651.70 (refer Table 39) Total (A) 97.84 120.19 159.53 157.45 74.66 609.68 42.02 651.70 Shortfall (B) Shortfall/ under recovery 144.31 144.31 proposed to be collected as on COD (B) - (refer Table 41) Expenses (C) O&M expenses (refer Table 52.97 75.01 87.03 105.28 87.86 408.16 50.17 458.34 32) Depreciation (as per Income 8.31 8.58 11.88 17.17 17.69 63.64 16.33 79.97 Tax Act, 1961) Total (C) 61.28 83.59 98.91 122.45 105.55 471.79 66.50 538.29 Profit /Loss D= (A+B-C) 36.56 36.60 60.62 35.00 (30.89) 137.88 119.83 257.71 Carry forward of prior (30.89) (30.89) period loss (E) Net loss/profit after setting 36.56 36.60 60.62 35.00 (30.89) 137.88 88.94 226.82 off prior period losses* (D+E) Tax Rates 34.61% 34.61% 34.94% 25.17% 25.17% 25.17% Tax 12.65 12.67 21.18 8.81 0.00 55.31 22.39 77.70 * The set off of prior period loss has been computed only for the purpose of determining taxes. 4.12.4 As per table above the unadjusted losses of FY’21 is adjusted while arriving taxable profit for FY’22. The Authority proposes to consider tax as per Table 41 for True up of Second Control Period and Pre- COD period. Consultation Paper No. 01/2024-25 Page 64 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD 4.13 True up of Aggregate Revenue Requirement (ARR) for Second Control Period and the Pre-COD period 4.13.1 Based on its analysis of the various building blocks, the Authority has revised the Aggregate Revenue Requirement (ARR) of LGBIA for Second Control Period and Pre-Control Period and eventually arrived at under recovery/over recovery for LGBIA for the same period. The detailed ARR calculation is presented in the table below: Table 42: ARR proposed by the Authority for Second Control Period and Pre-COD Period (₹ crores) Total FY’22 Total Particulars Ref FY’17 FY’18 FY’19 FY’20 FY’21 till up to till FY’21 COD COD Average RAB (Refer 81.41 79.55 116.71 162.13 166.43 163.23 Table 24) Fair Rate of Return 14% 14% 14% 14% 14% 7.29%# (FRoR) Return on Average RAB A 11.40 11.14 16.34 22.70 23.30 84.87 11.90 96.77 @14% Depreciation (refer Table B 7.00 7.17 9.91 13.26 13.76 51.08 7.26 58.34 24) Operating Expenditure C 52.97 75.01 87.03 105.28 87.86 408.16 50.17 458.34 (Table 32) Taxation (Refer Table 41) D 12.65 12.67 21.18 8.81 0.00 55.31 22.39 77.70 Carry forward of shortfall E 107.7 107.70 107.70 of First Control Period** ARR (Sum A: E) F 191.72 105.98 134.46 150.05 124.92 707.13 91.71 798.84 Non-aeronautical revenue G 26.66 14.35 30.94 48.90 23.18 144.02 10.02 154.03 (NAR) (Refer Table 36) Less: 30% of NAR H 8.00 4.31 9.28 14.67 6.95 43.21 3.01 46.22 Net ARR (F-H) I 183.72 101.68 125.18 135.38 117.97 663.92 88.71 752.63 Revenue from J 97.84 120.19 159.53 157.45 74.66 609.68 42.02 651.70 Aeronautical Services (refer Table 39) (Over recovery) / Under K 85.88 (18.51) (34.35) (22.07) 43.31 54.25 46.69 100.94 recovery (I-J) Discount factor (@ 14%) L 1.81 1.59 1.39 1.22 1.07 1 as on October 7, 2021 PV of (Over recovery) / M 155.40 (29.38) (47.83) (26.96) 46.40 97.63 46.69 144.31 Under recovery as on October 7, 2021* (K*L) Discount factor @ 14% as N 1.067 on March 31, 2022 PV of (Over recovery) / O 154.00 Under recovery as on March 31, 2022 (M*N) Discount factor @ 12.21% P 1.122 as on March 31, 2023* PV of (Over recovery) / Q 172.80 Under recovery as on March 31, 2023 (O*P) * PV factor has been derived for the FYs from FY 2016-17 till COD, by assuming the discount factor as 1 on COD # FRoR for FY 2021-22 has been computed as 7.29% for the period up to COD ** Shortfall obtained from Tariff Order of the Second Control Period. Consultation Paper No. 01/2024-25 Page 65 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD 4.13.2 The ARR proposed by the Authority is ₹ 752.63 crores (refer Table 42), as against Rs. 794.54 crores submitted by AAI. The variance is on account of the following: i. Re-classification of assets, due to which there is reduction in the Return on RAB and Depreciation derived by the Authority. ii. Rationalization of O&M expenses, based on O&M Study report. iii. Non-consideration of financing allowance in RAB and depreciation on financing allowance 4.14 Adjusted Deemed Initial RAB Clause 28.11.4 of the CA states the following with respect to Adjusted Deemed Initial RAB: “Pursuant to the payment of the Estimated Deemed Initial RAB, and upon the reconciliation, true-up and final determination by the Regulator of the quantum of the investment under 28.11.3(a), any surplus or deficit in the Estimated Deemed Initial RAB with respect to the Deemed Initial RAB shall be adjusted as part of the Balancing Payment that becomes due and payable as per Clause 31.4 after the expiry of 15 (fifteen) days from such final determination by the Regulator, with due adjustment for the following ("Adjusted Deemed Initial RAB'"): (a) reduced to the extent of over-recoveries, if any, of Aeronautical Revenues by the Authority until the COD, that the Regulator would provide for as a downward adjustment while determining Aeronautical Charges for the next Control Period; or (b) increased to the extent of under-recoveries, if any, of Aeronautical Revenues by the Authority until the COD, that the Regulator would provide for as an upward adjustment while determining Aeronautical Charges for the next Control Period. The amount(s) to be paid by the Authority or Concessionaire shall be the present value of Adjusted Deemed Initial RAB calculated using the fair rate of return as determined by the Regulator for the time period from the COD to the date of actual payment of the Adjusted Deemed Initial RAB.” The Authority has derived the Adjusted Deemed Initial RAB as on COD which is as follows: Table 43: Determination of Adjusted Deemed Initial RAB as on COD by the Authority (₹ crores) Particulars Ref. Amount A. Deemed Initial RAB as on COD Table 26 158.80 B. Estimated Deemed Initial RAB Clause 28.11.3 (69.00) (b) of CA C. Difference (C=A-B) 89.80 D. PV of Under-recovery of AAI as on COD Table 42 144.31 E. Adjusted Deemed Initial RAB as on COD E= (C+D) 234.11 COD – 8th Oct’2021 4.14.1 In accordance with the provisions of clause 28.11.4 of the CA, AERA has computed the Adjusted Deemed Initial RAB as on COD i.e. ₹ 234.11 crores (shown in Table 43) and derived the future value of such Adjusted Deemed Initial RAB by applying the compounding factor of FRoR and assuming a future expected date of payment by the Concessionaire (GIAL) to the Airports Authority of India as follows: i. The Authority has assumed future expected date of payment of Adjusted Deemed Initial RAB as August 31, 2024, based on the assumption that the Tariff Order for LGBIA (wherein the Deemed Initial RAB is finally determined by the Regulator) is issued on or before August 20, 2024. Consultation Paper No. 01/2024-25 Page 66 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD ii. The Authority has applied a compounding factor to determine future value of the Under- recovery as on COD by applying: • FRoR @ 14% from COD up to March 31, 2022 and • FRoR @ 12.21% from April 1, 2022 up to July 31, 2024 (based on the FRoR determined by AERA for the Third Control Period for LGBIA, as discussed under Chapter 8 of this Consultation Paper). iii. The Adjusted Deemed Initial RAB computed as on COD, March 31, 2022, March 31, 2023, March 31, 2024 and August 31, 2024 has been presented in the table below: Table 44: Determination of Adjusted Deemed Initial RAB as on Specified and Future Payment Dates (₹ crores) Mar 31, Mar 31, Mar 31, August 31, Particulars As on COD 2022* 2023# 2024# 2024# Adjusted Deemed Initial RAB 234.11 249.82 280.33 314.56 330.66 * Compounding for the period from COD up to March 31, 2022 has been done using FRoR of 14%. # Compounding for period beyond March 31, 2022 has been done using FRoR of 12.21%, determined by AERA for LGBIA for the First Control Period. 4.14.2 It is likely that the actual date of payment is different from August 31, 2024 as presented in the above table. In that scenario, following formula may be used for determining the Adjusted Deemed Initial RAB on a particular payment date: 𝐭 𝑨𝒅𝒋𝒖𝒔𝒕𝒆𝒅 𝑫𝒆𝒆𝒎𝒆𝒅 𝑰𝒏𝒊𝒕𝒊𝒂𝒍 𝑹𝑨𝑩= 𝑨 𝐱 (𝟏+𝒓 𝐱 ) 𝟑𝟔𝟓 where, A = Adjusted Deemed Initial RAB computed as on March 31, 2024 r = FRoR for First Control Period, computed as 12.21% (refer Chapter 8). t = Number of days elapsed between actual date of payment and March 31, 2024 The projection of Adjusted Deemed Initial RAB on a particular payment date is illustrated through the following example: Assuming that the actual date of payment is September 10, 2024, then A = ₹ 314.56 crores r = 12.21% or 0.1221 t = 163 days (Number of days between March 31, 2024 and September 10, 2024) The Adjusted Deemed Initial RAB based on the above example is: ₹ 314.56 𝐱 (1+0.1221*163/ 365) = ₹ 331.71 crores. 4.14.3 The Authority has proposed the Adjusted Deemed Initial RAB as explained above and requests the Stakeholders to provide their comments on the same. 4.14.4 The Authority proposes to consider Under recovery of ₹ 172.80 crores as on 31st March 2023 (as per Table 41) for True up of AAI for the Pre-COD period and readjust the same in the ARR computation of LGBIA for the Third Control Period. The under-recovery has arisen mainly on account of reduction in aeronautical revenue resulted on account of lesser traffic due to COVID-19 pandemic in FY 2020-21 and higher allocation of CHQ/RHQ cost. Consultation Paper No. 01/2024-25 Page 67 of 254TRUE UP OF AAI FOR THE SECOND CONTROL PERIOD FROM FY’17 TILL COD 4.15 Authority’s proposals regarding true up for SCP and pre-COD period (FY17 up to COD) Based on the material before it and its examination, the Authority proposes the following with respect to True up of the Pre-COD period for LGBIA: 4.15.1 To consider Deemed Initial RAB as ₹ 158.80 crores on October 8, 2021, as per Table 26 4.15.2 To consider true up of RAB for the pre-COD period as per Table 24. 4.15.3 To consider true up of depreciation for the pre-COD period as per Table 23. 4.15.4 To consider true up of FRoR for the pre-COD period as per para 4.8. 4.15.5 To consider true up of Aeronautical O&M expenses for the pre-COD period as per Table 32. 4.15.6 To consider true up of Non-aeronautical revenue for the pre-COD period as per Table 36. 4.15.7 To consider true up of Aeronautical revenue for the pre-COD period as per Table 39. 4.15.8 To consider true up of Aeronautical Taxation for the pre-COD period as per Table 41. 4.15.9 To consider true up of ARR for the pre-COD period as per Table 42. 4.15.10 To consider the present value of under recovery of ₹ 172.80 crores for True up of AAI for the Pre-COD period as per Table 42 and readjust the same in the ARR for the Third Control Period. 4.15.11 To consider Adjusted Deemed Initial RAB as per Table 44 or based on formula provided in paragraph 4.14.2 as appropriate for actual date of payment. Consultation Paper No. 01/2024-25 Page 68 of 254TRUE UP OF GIAL FOR THE PERIOD FROM COD TILL MARCH 31, 2022 5 TRUE UP OF GIAL FOR THE PERIOD FROM COD TILL MARCH 31, 2022 5.1 Background 5.1.1 AAI had entered into a Concession Agreement dated January 19, 2021, with Guwahati International Airport Limited (the ‘Concessionaire’) for the Operations, Management and Development of LGBIA for a period of 50 years from the COD, i.e. October 8, 2021. As per the Concession Agreement between AAI and GIAL (clause 28.11.3), the amount which was due and payable by the Concessionaire to AAI, is subject to reconciliation, true up and final determination by AERA. 5.1.2 Pursuant to the above Concession Agreement, GIAL has submitted True up workings for the period from COD up to March 31, 2022. 5.1.3 The true up workings submitted by GIAL covers the following building blocks: i. Traffic ii. Capital Expenditure iii. Aeronautical Depreciation iv. Regulatory Asset Base v. Fair Rate of Return vi. Aeronautical Operation and Maintenance Expenses vii. Non-aeronautical Revenue viii. Aeronautical Taxes ix. Aggregate Revenue Requirement 5.1.4 The Authority has examined GIAL’s true up submission in detail and has performed the following analysis: i. Recorded GIAL’s submissions for True up under different Regulatory building blocks. ii. Provided the Authority’s examination and proposals regarding the True up calculation of each building block of GIAL. 5.2 GIAL’s submission regarding True up for the period from COD till March 31, 2022 5.2.1 GIAL has submitted true up for the period from COD till March 31, 2022 as follows: Table 45: True Up submitted by GIAL from COD till March 31, 2022 (₹ crores) Particulars Amount Opening RAB 154.77 Addition During the year 2.33 Financing Allowance - Depreciation during the year (16.81) Closing RAB 140.28 Average RAB 147.52 FRoR on Average RAB (@ 14% for 6 months) (A) 9.90 Operating expenses (B) 47.87 Depreciation (C) 16.81 Bank and Finance Charges (D) 0.50 Working Capital Loan Interest (E) 0.26 Independent Engineer Fee (F) - Pre-COD Expenses (G) 9.85 Tax (H) 1.32 Consultation Paper No. 01/2024-25 Page 69 of 254TRUE UP OF GIAL FOR THE PERIOD FROM COD TILL MARCH 31, 2022 Particulars Amount Gross ARR (Sum A:H) = (I) 86.51 Non-aeronautical Revenue 9.96 Less: 30% of Non-aeronautical revenue (J) (2.99) Net ARR (I-J) = K 83.53 Actual Aero Revenues earned (L) 59.95 Shortfall/ under-recovery (K-L) = M 23.57 PV of Under-recovery 28.81 5.3 Authority’s examination of the true up submitted by GIAL for the period from COD till March 31, 2022 The Authority has examined the true up submitted by GIAL for the period from COD till March 31, 2022 as part of the tariff determination for the current Control Period. 5.4 True up of Capital Expenditure (CAPEX) 5.4.1 As part of the Concession Agreement, the Regulatory Asset Base held by AAI as on COD were transferred to GIAL. The Authority proposes to consider the value of RAB in the hands of AAI as on COD as Opening RAB for GIAL as per the outcome of the asset allocation study undertaken by the Authority for Second Control Period and Pre-COD period. 5.4.2 The Authority has derived the deemed initial RAB of GIAL as on COD as ₹ 158.80 crores (refer Table 26). 5.4.3 The Authority notes that GIAL has added following additional items in RAB amounting to ₹ 2.33 crores during the period COD till March 31, 2022: Table 46: Additional items included in RAB by GIAL from COD till March 31, 2022 (₹ crores) Details Amount Software - IT equipment 1.78 Plant and Machinery - Furniture & fixtures 0.04 Vehicles - Office Equipment 0.51 Total 2.33 5.4.4 Reclassification of assets of GIAL The Authority has conducted an independent study on allocation of assets for the Second Control Period and FY2022, and used the outcome of the study to true up the RAB for the post COD period i.e. as on March 31, 2022 for GIAL. The Authority has considered the adjusted RAB of GIAL as on COD (which is ₹ 158.80 crores), Capital additions and corresponding depreciation based on the results of the Asset Allocation Study report (refer Appendix 1 for Study on allocation of assets between Aeronautical and Non-aeronautical assets for LGBIA). The asset allocation study reviewed the various asset categories and developed a basis for segregation of various assets into Aeronautical, Non-aeronautical and Common assets. Authority noted that GIAL also procured employee related asset which needs to be allocated as per Employee Ratio. The Authority considers the employee ratio derived as part of the Study on Efficient Operation and Maintenance Consultation Paper No. 01/2024-25 Page 70 of 254TRUE UP OF GIAL FOR THE PERIOD FROM COD TILL MARCH 31, 2022 Expenses for LGBIA. As per para 5.2.3. of the said study the Employee Head Count Ratio for GIAL is 95:5 (Aeronautical: Non-aeronautical). The Authority has reclassified assets addition made by GIAL for the period from COD till March 31, 2022, based on applicable allocation ratio. The allocation basis is detailed hereunder: i. Furniture Details of Asset: MS Framework and Flax Allocation proposed by GIAL: Aeronautical Observation: The assets such as MS Framework and Flax, have been classified as Aeronautical assets by GIAL. However, since these assets are for the use of employees of GIAL, the same have been reallocated in the ratio of Employee Head Count of GIAL (95:5). Allocation proposed by the Authority: Employee Head Count Ratio Impact: Reclassifying these assets from Aeronautical to Common decreases the RAB to the extent of ₹ 0.002 crores. Reference: Para 4.9 of the Asset Allocation Study report ii. IT Equipment Details of Asset: Laptop, Desktop, Printer, Display, Server and Storage data center, other IT equipment, Software license and support, SITA license and project implementation Allocation proposed by GIAL: Aeronautical Observation: The assets such as laptops, desktops, printers, servers and storage, software license, have been classified as Aeronautical assets by GIAL. However, since these assets are for both aero and non-aeronautic activities of GIAL, the same have been reallocated in the ratio of Employee Head Count of GIAL (95:5). In addition, SITA License and Project Implementation which was classified as Aeronautical by GIAL is allowed to be considered as Aeronautical asset. Allocation proposed by the Authority: Employee Head Count Ratio / Aeronautical Impact: Reclassifying these assets from Aeronautical to Common decreases the RAB to the extent of ₹ 0.05 crores. Reference: Para 4.9 of the Asset Allocation Study report iii. Office Equipment Details of Asset: Video Controller, Telephone, IP Phone, Mobile, Security and Safety related equipment and accessories, Document Tray, and other Office equipment. Allocation proposed by GIAL: Aeronautical Observation: All office equipment has been classified as Aeronautical assets by GIAL. However, since these assets are for both aero and non-aeronautic activities of GIAL, the same have been reallocated in the ratio of Employee Head Count of GIAL (95:5). Allocation proposed by the Authority: Employee Head Count Ratio Impact: Reclassifying these assets from Aeronautical to Common decreases the RAB to the extent of ₹ 0.03 crores. Reference: Para 4.9 of the Asset Allocation Study report Consultation Paper No. 01/2024-25 Page 71 of 254TRUE UP OF GIAL FOR THE PERIOD FROM COD TILL MARCH 31, 2022 The following table illustrates the impact of adjustments in Asset Addition/WIP Capitalization values due to reclassification of assets of GIAL between COD and March 31, 2022. Table 47: Impact of Reclassification of Asset Additions by GIAL from COD till March 31, 2022 (₹ crores) Asset Category as per MYTP Reclassification Impact Furniture & fixtures (0.002) IT equipment (0.05) Office equipment (0.03) Software - Grand Total (0.08) 5.5 True up of Depreciation 5.5.1 For the purposes of True up submission, GIAL had calculated depreciation for the period from COD up to March 31, 2022, based on their determination of remaining useful life. 5.5.2 The Authority has proposed to consider the same rates of depreciation as applied by AAI for the period up to COD, on the assets transferred by AAI to GIAL for the period from COD to March 31, 2022. Further, the assets added by GIAL have been depreciated based on the useful life prescribed under Order No. 35/ 2017-18 dated January 12, 2018, of AERA. The Authority has proposed the useful life for all the assets of LGBIA post COD as per Table 114 5.5.3 Depreciation has not been computed on the Intangible asset and Notional Lease Asset as the same is excluded from the RAB. 5.5.4 Accordingly, the depreciation on Aeronautical assets of ₹ 0.33 crores as submitted by GIAL has been revised (post reclassification) to ₹ 0.32 crores, thereby resulting a reduction in depreciation of ₹ 0.01 crores. The following table illustrates the impact on depreciation due to reclassification adjustments in Asset Addition/WIP Capitalization values of GIAL between COD and March 31, 2022. Table 48: Impact on Depreciation post reclassification and revised useful life by the Authority (₹ crores) Asset Category as per MYTP Reclassification Impact (Period: COD till March 31, 2022) Furniture & fixtures (0.0001) IT equipment (0.008) Office equipment (0.002) Grand Total (0.010) 5.5.5 Adjustments were also made in the depreciation of the assets handed over to GIAL by AAI for the post COD period, as per the asset reclassification carried out in the independent study conducted by the Authority and the revised useful life as per Table 114. The total impact on depreciation in post COD period due to reclassification of assets has been summarized in the table below. Table 49: Depreciation impact due to Reclassification of Asset Additions (Post-COD Period) (₹ crores) Particulars Values Impact Depreciation on pre-COD assets as per GIAL 16.48* Depreciation on pre-COD assets after reclassification and revised useful life as 8.83 per the independent study conducted by the Authority Consultation Paper No. 01/2024-25 Page 72 of 254TRUE UP OF GIAL FOR THE PERIOD FROM COD TILL MARCH 31, 2022 Particulars Values Impact Impact on Depreciation for pre-COD Assets due to reclassification (7.65) Depreciation on post-COD assets as per GIAL 0.33* Depreciation on post-COD assets after reclassification 0.32 Impact on Depreciation for post-COD Assets due to reclassification and (0.01) revised useful life as per the independent study conducted by the Authority (Table 48) Total Impact on Depreciation for all Assets in post-COD period (7.66) *Total Depreciation of ₹ 16.81 crores split between pre-COD and post-COD assets (₹ 16.48 crores + ₹ 0.33 crores respectively) 5.5.6 The Adjusted RAB and Depreciation determined by the Authority for the period from COD till March 31, 2022, post reclassifications and other adjustments are as follows: Table 50: Average RAB considered by the Authority from COD till March 31, 2022 (₹ crores) Particulars Amount Adjusted RAB as on COD, transferred to Guwahati International Airport Limited (A) (refer 158.80 Table 26) Additions to RAB from COD to March 31, 2022, proposed by GIAL (Refer Table 46) 2.33 Sub-total (C = A + B) 161.13 Reclassifications on asset additions Furniture & fixtures (D) (0.002) IT equipment (E) (0.05) Office equipment (F) (0.03) Software (G) - Total reclassifications (H) Sum (D : G) (0.08) Adjusted RAB (I = C + H) 161.05 Depreciation on RAB from COD to March 31, 2022, proposed by GIAL (J) 16.81 Adjustment in Depreciation for the period from COD to March 31, 2022 (K) (Table 49) (7.66) Total Adjusted Depreciation for the period from COD to March 31, 2022 (L=J+K) 9.15 Opening RAB as on 1st April’2022 for Third Control Period M=I –L 151.90 Average RAB M=(A+M)/2 155.35 Based on its analysis, the Authority proposes to consider CAPEX, depreciation and RAB as per Table 50 for true up of the period from COD till March 31, 2022. 5.6 True up of FRoR 5.6.1 GIAL has submitted FRoR @14% p.a. for true up of the period from COD till March 31, 2022. The Authority proposes to consider the same, in line with the Authority’s proposal for true up of AAI from FY 2017 to FY 2022 (up to COD) and also as approved for other similar airports. From the next Control Period for GIAL, AERA will consider FRoR, in line with other PPP airports. 5.6.2 However, it is to be noted that GIAL has operated the Airport in FY 2021-22 only for the period from COD till March 31, 2022. Therefore, GIAL is eligible to claim return on RAB only for the period from COD till March 31, 2022. Hence, for FY 2021-22, the Authority proposes to pro-rate the FRoR for 175 days during which GIAL operated the Airport. The pro-rated FRoR for FY 2021-22 has been computed as follows: FRoR = FRoR* n/ 365 post COD Consultation Paper No. 01/2024-25 Page 73 of 254TRUE UP OF GIAL FOR THE PERIOD FROM COD TILL MARCH 31, 2022 Where, FRoR is the fair rate of return for the entire FY 2021-22, FRoR is the pro-rated FRoR post COD for the period from COD till March 31, 2022 and n is the number of days in operation in FY 2021-22. Based on the above approach the pro-rated FRoR for FY 2021-22 has been computed as follows: Table 51: FRoR proposed by the Authority from COD to March 31, 2022 Particulars Value (%) FRoR for FY’22 (A) 14% Number of days of operations in FY’22 (B) 175 Pro-rated FRoR for FY’22 (from COD till March 31, 2022) 6.71% (A*B/365) 5.6.3 The Authority proposes to consider FRoR for true up of the period from COD till March 31, 2022 as 6.71%, as shown in Table 51. 5.7 True up of Aeronautical O&M expenses 5.7.1 The component-wise break up of Aeronautical Operation and Maintenance expenses submitted by GIAL for the period from COD till March 31, 2022 is as follows: Table 52: O&M expenses submitted by GIAL for the period from COD till March 31, 2022 (₹ crores) Expense Category Amount Manpower expenses - AAI employees 14.19 Manpower expenses - GIAL employees 4.72 Utility expenses 2.62 IT expenses 1.49 Rates & taxes 0.32 Security expenses 1.37 Corporate Allocation 4.24 Administrative Expenses - Collection Charges on UDF 0.09 Administrative Expenses - Others 3.60 Insurance 0.99 R&M 9.71 Others 2.83 Independent Engineer Fees 1.69 Total 47.86 5.7.2 True up of Bank and Finance Charges It is observed that GIAL has considered Bank charges as entirely Aeronautical. However, the Authority proposes to consider the same as Common and reallocate it on Gross Fixed Assets ratio of 95.39:4.61 (Table 23 of Asset Allocation Study Report) based on the nature of expense and in line with other similar airports. The impact of such difference is downward adjustment of ₹ 0.02 crores. Table 53: Bank & Finance Charges considered by the Authority for Post COD Period (₹ crores) Consultation Paper No. 01/2024-25 Page 74 of 254TRUE UP OF GIAL FOR THE PERIOD FROM COD TILL MARCH 31, 2022 Particular Aero Expense Bank and Finance Charges considered by GIAL (A) 0.50 Bank and Finance Charges considered by Authority (B) 0.48 Impact (B-A) (0.02) 5.7.3 True up of Working Capital Loan Interest It is observed that GIAL has included Working Capital Loan Interest amount of ₹ 0.26 crores for ARR computation as Aeronautical. As per GIAL, the working capital interest has been calculated on best estimation basis since the ICD loan is a mix of working capital and other debt. Since, GIAL has not provided calculations for the working capital interest, the Authority therefore proposes that cost towards working capital loan interest cannot be considered at this stage. 5.7.4 True up of pre-COD Expenses The Authority notes that GIAL has submitted pre-COD expenses amounting to ₹ 9.85 crores for true- up of the post-COD period. This expense included ₹ 1.08 crores related to payroll costs. The Authority takes cognizance of the fact that AAI deputed its staff and management personnel to the Airport which was already in operation (being a brownfield airport) during the transition period, including prior to the COD to ensure that the relevant knowledge and experience of the operation and management of LGBIA is transferred to GIAL. Therefore, the deputation of such staff is relevant towards the objective of smooth transition of the airport from AAI to GIAL, and fulfilment of the terms of the CA. Furthermore, the Authority also notes that as per Clause 15.1.2 of the Concession Agreement, the Concessionaire is mandated to achieve COD within 180 days from the date of the Concession Agreement. Further, the Authority notes that as per clause 16.5 of the Concession Agreement, the Concessionaire team had to work in tandem for a period of sixty (60) days prior to COD with AAI’s team to understand the airport operations. Based on the above factors, the Authority notes that AAI deputed its staff and management personnel to the Airport during the transition period, including prior to the COD and the cost of such personnel was paid by the Airport Operator. Additionally, Adani Group also deputed its own manpower from other group entities. The Authority has accordingly decided to consider salary expenses pertaining to such Adani Group entities for the period of six months prior to COD, i.e., from 8th April 2021 to 7th October 2021. Further, the salary costs of GIAL’s employees for the period 8th August 2021 to 7th October 2021 has been considered for the purpose of tariff determination. The Authority proposes to consider only this manpower cost for true-up based on the following: • The Authority, after making a detailed study on the provisions of the Concession Agreement, decided that there is no provision in the Concession Agreement to include in the true up, the remaining costs incurred by GIAL prior to Letter of Award (LoA). It is to be noted that the bid expenses incurred prior to the date of LoA cannot be considered as pass-through expense by the Authoirty. • The Authority proposes that the bid expenses incurred prior to the date of Letter of Award of GIAL, and expenses incurred between the date of Concession Agreement and COD (other than as specifically considered above), as submitted by GIAL are not considered for tariff determination. Consultation Paper No. 01/2024-25 Page 75 of 254TRUE UP OF GIAL FOR THE PERIOD FROM COD TILL MARCH 31, 2022 Based on the above considerations, the total costs pertaining to manpower cost prior to COD, as allowed for the purpose of true-up of LGBIA is as follows: Table 54: Pre-COD expenses proposed by the Authority for the Third Control Period (₹ crores) Particular Nature of expense Total % Proposed Pre- Allowable COD Expense Expense till Letter of Award- Corporate Cost Allocation 1.72 NIL - setting up Airport business Project Cost for setup for Airport Corporate Cost Allocation 1.86 NIL - Business - Allocation by parent companies Other Preliminary expense prior Incurred by GIAL 5.19 NIL - to COD Pre-COD Payroll Cost On roll employee cost 1.08 100% 1.08 Total 9.85 1.08 5.7.5 Reallocation of O&M expenses The Authority has conducted an independent study to determine efficient Aeronautical Operation and Maintenance costs for the period FY 2016-17 till FY 2021-22 and used the outcome of the study to true up the O&M expenses for the period from COD till March 31, 2022 for GIAL. All O&M expenses have been allocated as Aeronautical by GIAL. The Authority has analyzed the submission made by GIAL on a case-to-case basis and applied appropriate re-classification and re- allocation of the expenses, wherever it noted any discrepancies in the allocation of expenses by GIAL (refer Table 41 for Allocation of O&M expenses of Airport Operator as per the Study on Efficient Operation and Maintenance Expenses for Lokpriya Gopinath Bordoloi International Airport). Accordingly, the following expenses have been re-allocated by the Authority by using appropriate ratios such as Terminal Building ratio, Gross Fixed Assets ratio, Employee Head Count ratio and Electricity ratio (Refer para 5.3 of the Study report on Efficient Operation and Maintenance Expenses for Lokpriya Gopinath Bordoloi International Airport regarding the ratios used by the Authority for allocation of common expenses.) i. Manpower expenses Manpower expenses – AAI employees Observation: The Authority notes that pursuant to Clause 6.5 of the Concession Agreement read with Clause 28.4.3 entered into between AAI and Guwahati International Airport Limited, the cost of AAI employees deputed at LGBIA shall be eligible for pass-through in the determination of Aeronautical charges. The Authority notes that GIAL has considered the Manpower expenses as 100% Aeronautical. However, the Authority proposes to re-allocate the same in the ratio of Employee Head Count of AAI employees (99.19:0.81), resulting in a downward adjustment of ₹ 0.11 crores. Impact: The impact of the re-allocation results in reduction of Manpower expenses by ₹ 0.11 crores for the period from COD till March 31, 2022. Reference: Para 5.4.1 of the Study on Efficient Operation and Maintenance Expenses for Lokpriya Gopinath Bordoloi International Airport. Manpower expenses – GIAL employees Consultation Paper No. 01/2024-25 Page 76 of 254TRUE UP OF GIAL FOR THE PERIOD FROM COD TILL MARCH 31, 2022 Observation: It is observed that the total manpower expenses of the employees of GIAL have been considered as 100% Aeronautical. However, the Authority proposes to allocate the total manpower expenses of GIAL based on GIAL’s Employee Ratio of 95:5. The impact of such difference is downward adjustment of ₹ 0.24 crores. Impact: The impact of the re-allocation results in reduction of Manpower expenses by ₹ 0.24 crores for the period from COD till March 31, 2022. Reference: Para 5.4.1 of the Study on Efficient Operation and Maintenance Expenses for Lokpriya Gopinath Bordoloi International Airport. ii. Corporate Allocation Cost Observation: It is observed that the Aeronautical Corporate Allocation Cost of ₹ 4.24 crores had been incurred by GIAL towards Corporate Support Services received from the Companies, namely, Adani Enterprises Limited (AEL) and Adani Airports Holding Limited (AAHL) for the period from Post-COD till March 31, 2022. This cost includes ₹ 2.07 crores from AAHL and ₹ 2.17 Crore from AEL. AAHL has been referred as one of the Concessionaire for all NAR activites and the services provided by AAHL & AEL are mainly in the nature of provided specialised resources and knowledge which benefits the whole airport ecosystem, therefore the cost needs to be allocated in the same ratio as the employee cost of GIAL manpower cost has been allocated. The impact of such difference is a decrease of ₹ 0.21 crores Further, it is noted that the Corporate Allocation Cost claimed by GIAL includes an amount of ₹ 0.03 crores allocated towards In-house Legal department, which is in addition to the cost of one (01) employee of Legal department, already considered under the manpower expenses of GIAL and is not justified. Hence, the Study proposes to exclude this ₹ 0.03 crores from the Corporate Allocation cost submitted by GIAL. Impact: The impact of the reallocation results in reduction of Corporate Allocation expenses by ₹ 0.24 crores for the period from COD till March 31, 2022. Reference: Para 5.4.2 of the Study on Efficient Operation and Maintenance Expenses for Lokpriya Gopinath Bordoloi International Airport. iii. Administrative Expenses - Others Observation: GIAL has submitted administrative expenses of ₹ 3.58 crores incurred towards Professional & Consultancy, Travelling & Conveyance, Auditing and Miscellaneous expenses and has considered these expenses as 100% Aeronautical. The Authority proposes to reallocate these expenses based on Gross Fixed Asset ratio (95.39:4.61) / revised Employee Head Count Ratio (95:5) / revised Terminal Building ratio (89.02:10.98) depending upon the nature of expenses and also consider AOCC services as Aeronautical, in line with the ratio allocation followed for AAI up to COD. Impact: The impact of such reallocation is a decrease of ₹ 0.16 crores for the period from COD till March 31, 2022. Reference: Para 5.4.3 of the Study on Efficient Operation and Maintenance Expenses for Lokpriya Gopinath Bordoloi International Airport. Consultation Paper No. 01/2024-25 Page 77 of 254TRUE UP OF GIAL FOR THE PERIOD FROM COD TILL MARCH 31, 2022 iv. Repair and Maintenance Expenses Observation: GIAL has incurred an amount of ₹ 9.71 crores towards Repairs & Maintenance which includes maintenance of various assets and has considered these expenses as 100% Aeronautical. The Authority proposes to reallocate these expenses based on Gross Fixed Asset ratio (95.39:4.61) / revised Employee Head Count Ratio (95:5) / revised Terminal Building ratio (89.02:10.98) depending upon the nature of expenses. Impact: The impact of such reallocation is a decrease of ₹ 0.42 crores for the period from COD till March 31, 2022. Reference: Para 5.4.4 of the Study on Efficient Operation and Maintenance Expenses for Lokpriya Gopinath Bordoloi International Airport. v. Other Operating Expenses such as IT, Rates & Taxes, Insurance etc. Observation: It is observed that the Other Operating expenses totalling to ₹ 7.59 crores includes amount incurred towards IT expenses, Rates & Taxes, Security expenses, Collection Charges, Insurance, Outsource manpower, Housekeeping, Bank & Finance Charges. GIAL has considered Other Operating expense as 100% Aeronautical. The Authority proposes to reallocate these expenses based on the Gross Fixed Asset ratio (95.39:4.61) / revised Employee Head Count Ratio (95:5) / revised Terminal Building ratio (89.02:10.98) depending upon the nature of expenses. Impact: The impact of the reallocation results in reduction of Other Operating Expenses by ₹ 0.45 crores for the period from COD till March 31, 2022. Reference: Para 5.4.5 of the Study on Efficient Operation and Maintenance Expenses for Lokpriya Gopinath Bordoloi International Airport. vi. The impact on the Aeronautical O&M expenses of GIAL on account of the proposed reallocation of expenses is as follows: Table 55: Impact of proposed reallocation of GIAL’s Aeronautical O&M expenses (₹ crores) Particular Net Impact Manpower expenses - AAI employees (0.11) Manpower expenses - GIAL employees (0.24) Corporate Allocation (0.24) Administrative Expenses – Others (0.16) R&M (0.42) Other Operating Expenses (0.45) Total (1.65) 5.7.6 Based on the above adjustments and reclassification, the revised Aeronautical O&M expenses considered by the Authority for the period from COD to March 31, 2022 is summarized in the table below: Table 56: Reallocated Aeronautical O&M expenses of GIAL from COD to March 31, 2022 (₹ crores) Particular Aero Expense Manpower expenses - AAI employees 14.08 Manpower expenses - GIAL employees 4.48 Utility expenses 2.62 Consultation Paper No. 01/2024-25 Page 78 of 254TRUE UP OF GIAL FOR THE PERIOD FROM COD TILL MARCH 31, 2022 Particular Aero Expense IT expenses 1.41 Rates & taxes 0.31 Security expenses 1.37 Corporate Allocation 4.00 Administrative Expenses - Collection Charges on UDF 0.09 Administrative Expenses - Others 3.42 Insurance 0.94 R&M 9.29 Others 2.52 Independent Engineer Fees 1.69 Total 46.22 5.8 True up of Non-aeronautical revenue (NAR) 5.8.1 GIAL has submitted the following components of NAR for the period from COD till March 31, 2022, which the Authority has verified with the Books of Account of GIAL. Table 57: NAR submitted by GIAL for True up from COD till March 31, 2022 (₹ crores) Particulars Revenue Car parking 0.34 Lounge - Building rent 1.99 Other Income 0.63 Revenue from other than master concessionaire - Master Concessioner 7.00 Total Non-aero revenue 9.96 5.8.2 The Authority, on verification of the NAR of GIAL, notes that ₹ 0.16 crores relate to space rentals from airlines. The Authority is of the view that space rentals from agencies providing aeronautical services should be treated as aeronautical revenue. The authority, therefore, proposes to exclude Space Rentals from airlines providing aeronautical services from the NAR for the post-COD period. 5.8.3 The Authority proposes to consider NAR for the period from COD till March 31, 2022 as per table below: Table 58: NAR proposed by the Authority for True up from COD till March 31, 2022 (₹ crores) Particulars Amount Actual Non-Aeronautical Revenue as submitted by GIAL (A) 9.96 Less: Revenue from space rentals from airlines (B) 0.16 Non-Aeronautical Revenue as per the Authority (A-B) 9.80 5.9 True up of Aeronautical Revenue 5.9.1 GIAL has submitted the following components of Aeronautical Revenue for the period from COD till March 31, 2022, which the Authority through its independent consultant has verified with the Books of Consultation Paper No. 01/2024-25 Page 79 of 254TRUE UP OF GIAL FOR THE PERIOD FROM COD TILL MARCH 31, 2022 Account of GIAL and noted the same to be in order. The same is presented in the Table below: Table 59: Aeronautical Revenue submitted by GIAL for True up from COD till March 31, 2022 (₹ crores) Particulars Revenue Landing revenue 16.49 Parking & housing revenue 0.28 Ground handling charges 0.78 Passenger UDF revenue 40.17 CUTE Revenue 1.71 CGF rentals 0.52 Cargo/Fuel/Other - Total Aero revenues 59.95 5.9.2 The Authority proposes to include space rental from airlines amounting to ₹ 0.16 crores as aeronautical revenue. (refer para 5.8.2). 5.9.3 The Authority proposes to consider revised Aeronautical Revenue for the period from COD till 31st March 2022 as per table given below: Table 60: Aeronautical Revenue proposed by the Authority for True up from COD till March 31, 2022 (₹ crores) Particulars Amount Actual Aeronautical Revenue as submitted by GIAL (A) 59.95 Add: Revenue from space rentals from airlines (B) 0.16 Aeronautical Revenue as per the Authority (A+B) 60.11 5.10 True up of Taxation GIAL has submitted Aeronautical Tax of ₹ 1.32 crores for the period from COD till March 31, 2022. Based on the proposals on various building blocks, revised calculation of taxation is presented in the table below: Table 61: Taxation proposed by the Authority for true up (COD till 31st March 2022) (₹ crores) Particulars Ref. Amount Aero Revenues (refer Table 60) A 60.11 Aero O&M Expenses (refer Table 56) B 46.22 Bank & Finance Charges (refer Table 53 ) C 0.48 Interest Expense D 2.55 Depreciation as per IT Act E 9.25 Aero Profit Before Tax G=A-(B+C+D+E) 1.61 Previous loss adjustment H - Taxable Profit I=MAX (0, (G-H)) 1.61 Tax rate (%) J 25.17% Aeronautical Tax K=I*J 0.41 Consultation Paper No. 01/2024-25 Page 80 of 254TRUE UP OF GIAL FOR THE PERIOD FROM COD TILL MARCH 31, 2022 5.11 True up of Aggregate Revenue Requirement (ARR) for period from COD till March 31, 2022 5.11.1 Based on its analysis of the various building blocks, the Authority has determined the ARR and Shortfall (Under recovery) for True up of the Pre-COD period and same is presented in the table below: Table 62: ARR and Shortfall proposed by the Authority (COD till March 31, 2022) (₹ crores) Particulars Ref. Amount Average RAB (refer Table 50) 155.35 FRoR on Average RAB (@ 14% for 175 days) A 10.43 Operating expenses (Refer Table 56) B 46.22 Bank and Finance Charges (refer Table 53) C 0.48 Pre COD Expenses (refer Table 54) D 1.08 Depreciation (refer Table 50) E 9.15 Tax F 0.41 ARR (Sum (A:F)) G 67.76 Non-aeronautical revenue (refer Table 58) H 9.80 Less: 30% of Non-aeronautical revenue I 2.94 Net ARR (G-I) J 64.82 Actual Aeronautical Revenue (refer Table 60) K 60.11 Shortfall/ under-recovery (J-K) L 4.71 Discount factor as on March 31, 2022 M 1 PV of (Under) / Over recovery as on March 31, 2022 N 4.71 (L*M) Discount factor (@ 12.21%) as on March 31, 2023 O 1.122 PV of (Under)/Over recovery as on March 31, P 5.29 2023= O*N 5.11.2 The Authority proposes to consider under recovery of ₹ 5.29 crores for the post-COD period. The Authority also proposes to consider the same as a post-COD true up while calculating ARR of LGBIA for the Third Control Period. 5.11.3 The net ARR proposed by the Authority is ₹ 64.82 crores (refer Table 62), as against ₹ 83.53 crores (refer Table 45) submitted by GIAL. The variance is on account of the following i. Re-classification of assets, due to which there is reduction in the Return on RAB and Depreciation derived by the Authority. ii. Revision in Useful Life of Assets considered by the Authority, iii. Rationalization of O&M expenses claimed by GIAL, iv. Exclusion of certain expenses such as working capital loan interest and Pre-COD expenses 5.12 Authority’s proposal regarding True up for the period from COD till March 31, 2022 Based on the material before it and its examination, the Authority proposes the following with respect to True up of the period from COD till March 31, 2022 for LGBIA: 5.12.1 To consider true up of CAPEX, depreciation and RAB for the period from COD till March 31, 2022 as per Table 50. 5.12.2 To consider true up of FRoR for the period from COD till March 31, 2022 as per Table 51. Consultation Paper No. 01/2024-25 Page 81 of 254TRUE UP OF GIAL FOR THE PERIOD FROM COD TILL MARCH 31, 2022 5.12.3 To consider true up of Aeronautical O&M expenses for the period from COD till March 31, 2022 as per Table 56. 5.12.4 To consider true up of Non-aeronautical revenue for the period from COD till March 31, 2022 as per Table 58. 5.12.5 To consider true up of Taxation for the period from COD till March 31, 2022 as per Table 61. 5.12.6 To consider true up of Aeronautical revenue for the period from COD till March 31, 2022 as per Table 60. 5.12.7 To consider under recovery of ₹ 5.29 crores as per Table 62 for Post-COD period to be considered while calculating the ARR for the Third Control Period. Consultation Paper No. 01/2024-25 Page 82 of 254TRAFFIC PROJECTIONS FOR THE THIRD CONTROL PERIOD 6 TRAFFIC PROJECTIONS FOR THE THIRD CONTROL PERIOD 6.1 GIAL’s submission regarding Traffic projections for the Third Control Period 6.1.1 The historical passenger traffic4 and ATM at the Airport has been shown in the table below: Table 63: Historical passenger, ATM and Cargo traffic at LGBIA Passenger (in Nos.) ATM (in Nos.) Cargo (in MT) Year Domestic Internatio Combined Domestic Internatio Combined Domestic Internatio Combined nal nal nal Traffic 2010-11 1,920,227 14,523 1,934,750 26,715 226 26,941 8,520 - 8,520 2011-12 2,217,820 26,864 2,244,684 27,636 452 28,088 7,761 - 7,761 2012-13 2,055,128 21,810 2,076,938 26,522 416 26,938 5,919 94 6,013 2013-14 2,171,912 25,721 2,197,633 26,604 494 27,098 7,871 36 7,907 2014-15 2,206,037 27,564 2,233,601 26,397 474 26,871 10,445 15 10,460 2015-16 2,752,418 31,897 2,784,315 28,913 512 29,425 15,617 11 15,628 2016-17 3,759,494 30,162 3,789,656 37,383 490 37,873 17,283 3 17,286 2017-18 4,636,604 31,449 4,668,053 40,668 504 41,172 22,343 2 22,345 2018-19 5,714,561 31,067 5,745,628 49,845 643 50,488 23,813 27 23,840 2019-20 5,422,289 35,160 5,457,449 44,539 1,000 45,539 21,267 3 21,270 2020-21 2,188,767 368 2,189,135 23,422 20 23,442 15,933 18 15,951 2021-22 3,148,940 16 3,148,956 33,564 8 33,572 21,814 44 21,858 2022-23 5,039,315 12,165 5,051,480 45,701 208 45,909 22,823 - 22,823 6.1.2 The passenger traffic, ATM and cargo traffic along with their expected annual growth rates, as submitted by GIAL for the Third Control Period are as given in the table below: follows: Table 64: Traffic and growth (%) Y-o-Y proposed by GIAL Passenger (in Nos.) ATM (in Nos.) Cargo (in MT) Year Domestic Internati Combined Domestic International Combined Domestic International Combined onal Traffic 2022-23 5,039,315 12,165 5,051,480 45,701 208 45,909 22,823 0 22,823 2023-24 6,473,222 69,797 6,543,019 58,773 1,197 59,970 24,293 3 24,296 2024-25 6,596,891 67,022 6,663,913 59,356 1,171 60,527 23,699 1,300 24,999 2025-26 7,430,971 113,091 7,544,062 66,498 1,552 68,050 27,126 1,400 28,526 2026-27 8,958,026 136,180 9,094,207 80,216 1,893 82,109 33,301 1,500 34,801 Total 34,498,425 398,255 34,896,681 310,544 6,021 316,565 131,242 4,203 135,445 Growth rates 2022-23 - - - - - - - - - 2023-24 28.45% 473.75% 29.53% 28.60% 475.48% 30.63% 6.44% - 6.45% 2024-25 1.91% -3.98% 1.85% 0.99% -2.17% 0.93% -2.44% - 2.89% 2025-26 12.64% 68.74% 13.21% 12.03% 32.54% 12.43% 14.46% 7.69% 14.11% 2026-27 20.55% 20.42% 20.55% 20.63% 21.97% 20.66% 22.76% 7.14% 22.00% 6.1.3 GIAL has also submitted that it expected to process certain cargo volumes out of the total volume at its own cargo facility. The following table summarizes the total cargo volumes proposed to be handled by GIAL out of the total cargo traffic at LGBIA during the Third Control Period. 4 Source: Traffic News from AAI website Consultation Paper No. 01/2024-25 Page 83 of 254TRAFFIC PROJECTIONS FOR THE THIRD CONTROL PERIOD Table 65: Cargo volumes to be handled by GIAL out of the total cargo traffic during the Third Control Period Particulars (in MT) FY 23 FY 24 FY 25 FY 26 FY 27 Domestic - Interim Facility - 3,500 4,500 5,500 - International – Interim Facility - - - - - New Integrated Cargo Terminal - - - - 30,000 Total by GIAL (A) - 3,500 4,500 5,500 30,000 Total Cargo Traffic at LGBIA (B) - 24,296 24,999 28,526 34,801 % Share (A/B)*100 - 14% 18% 19% 86% 6.1.4 GIAL had engaged an independent agency – M/s Mott Macdonald for assessing passenger traffic, aircraft movement and cargo traffic for LGBIA. Based on its analysis, Mott Macdonald has provided high, base, and low estimate scenarios of projected traffic for the Third Control Period. The traffic projections submitted by GIAL in Table 64 is adopted from Mott Macdonald’s ‘base case scenario’. 6.1.5 The Passenger traffic and ATM projected above has been adjusted by GIAL to account for billable passenger traffic (excluding certain categories of passengers such as Transit/transfer passengers, Children below 2 years, Diplomatic passport holders, Airline Crew etc. for whom UDF charges are not leviable) and billable domestic ATMs (other than ATMs pertaining to less than 80-seater capacity flights, and flights operating under Regional Connectivity Scheme (RCS); that are exempted from landing charges). Based on the historical trends, the exempt traffic has been submitted by GIAL as 10% of the total passengers, and 18% of total ATMs for the Third Control Period, as shown in the table below. Table 66: Traffic growth rates (Y-o-Y) submitted by GIAL, after adjustment of exempt traffic Passenger (in Nos.) ATM (in Nos.) Year Domestic International Combined Domestic International Combined Traffic 2022-23 4,535,384 7,907 4,543,291 37,475 208 37,683 2023-24 5,825,900 45,368 5,871,268 48,194 1,197 49,391 2024-25 5,937,202 43,564 5,980,766 48,672 1,171 49,843 2025-26 6,687,874 73,509 6,761,383 54,528 1,552 56,080 2026-27 8,062,224 88,517 8,150,741 65,777 1,893 67,670 Total 31,048,583 258,866 31,307,449 254,646 6,021 260,667 Growth rates 2022-23 - - - - - - 2023-24 28.45% 473.75% 29.23% 28.60% 475.48% 31.07% 2024-25 1.91% -3.98% 1.86% 0.99% -2.17% 0.92% 2025-26 12.64% 68.74% 13.05% 12.03% 32.54% 12.51% 2026-27 20.55% 20.42% 20.55% 20.63% 21.97% 20.67% 6.2 Authority’s examination regarding Traffic projections for the Third Control Period 6.2.1 The Authority notes that GIAL appointed Mott Macdonald as its Consultant who has derived traffic forecast based on Regression forecast methodology, developed through econometric analysis of historical data combined with projections of key demand drivers as given below:  Passenger forecasts were derived basis Gross Domestic Product (GDP) growth forecasts from the International Monetary Fund (IMF) World Economic Outlook April 2021, as well as the US Department of Agriculture (USDA) and the Organization for Economic Co-Operation and Development (OECD). Consultation Paper No. 01/2024-25 Page 84 of 254TRAFFIC PROJECTIONS FOR THE THIRD CONTROL PERIOD  The aircraft movement forecasts for the Airport were derived based on the historical development of both domestic and international average passengers per ATM.  For cargo forecasts, the historical development of both domestic and international average cargo per ATM metrics, along with the potential cargo-carrying capacity of aircraft using the airports were considered. 6.2.2 The Authority notes that GIAL has assumed the ‘base case scenario’ estimates of traffic forecasts submitted by Mott Macdonald for forecasting passenger traffic, ATM and cargo (both domestic and international). 6.2.3 The Authority notes that GIAL has considered only billable ATM, after excluding ATM traffic that are exempted from landing charges. However, the Authority is of the view that RCS scheme is promoted by the GoI with the objective of making regional air connectivity affordable by supporting airline operators through concessions offered by Central Government, State Government and the Airport Operators. As this scheme is promoted to encourage small aircrafts, therefore the flights operating under this scheme are not eligible to be claimed as a passthrough/ exemption. The Authority notes that, as per GIAL’s submission, out of 23% of less than 80-seater capacity category ATMs handled in FY23, approximately 8% of them falls under RCS category. Based on the above fact, the Authority has estimated traffic projections after excluding ATMs that pertain to less than 80-seater capacity flights which fall under non-RCS category and being exempted from landing charges. The Authority further notes GIAL’s submission that Guwahati as capital city airport and gateway to North East states. It acts as a hub to destinations like Pasighat (IXT), Shillong (SHL), Rupsi (RUP), Tezpur (TEI) and other small sized airports in the vicinity. This regional connectivity model helps boost demand in the aforementioned destinations, which have restrictions for larger aircraft to operate. Further, limited traffic demand from regional cities restricts the seat loads on these routes and thus do not permit airlines to operate bigger aircraft. 6.2.4 The Authority, after rationalization has derived the exempted traffic as 15% for each tariff year and has considered the same for determining the billable domestic ATM. Based on the above factors, the exempt traffic considered by the Authority (after excluding ATMs that pertain to less than 80-seater capacity flights which fall under non-RCS category) for determining billable domestic ATM for the Third Control Period for LGBIA is as follows: Table 67: Exempt traffic considered by the Authority for the Third Control Period Particulars FY’23 FY’24 FY’25 FY’26 FY’27 Exempt Domestic ATM 15% 15% 15% 15% 15% considered by the Authority Similarly, Government of India has allowed exemption of UDF to certain categories of passengers through Order No. AIC 14/ 2019 read with AIC 20/ 2019. GIAL cannot claim any passthrough regarding UDF on such categories and this is followed by AERA across at all Major Airports. 6.2.5 As part of its examination of traffic forecast submitted by GIAL, the Authority has calculated Compounded Annual Growth Rate, or CAGR, for passenger traffic, ATM, and Cargo from, FY 2017- 18 to FY 2019-20 (3-year CAGR), FY 2015-16 to FY 2019-20 (5-year CAGR), FY 2010-11 to FY 2018-19 (9-year CAGR), and FY 2010-11 to FY 2019-20 (10-year CAGR) 6.2.6 The 3-year, 5-year and 10-year CAGRs have been computed for the respective periods up to FY 2019- 20, as FY 2020-21 being an exceptional event year, may not provide an appropriate basis for arriving at CAGR. However, the computation of 9-year CAGR is based on the periods FY 2010-11 to FY 2018- 19, in order to remove certain extraneous events of FY 2019-20 as detailed in para 6.2.8 below. The Consultation Paper No. 01/2024-25 Page 85 of 254TRAFFIC PROJECTIONS FOR THE THIRD CONTROL PERIOD table below provides the details of the CAGR for passenger traffic, ATM, and Cargo: Table 68: CAGR for passenger traffic, ATM, and Cargo Passenger ATM Cargo Year Domestic Internati Combined Domestic Internati Combined Domestic Internati Combined onal onal onal 3 year 8.14% 5.74% 8.13% 4.65% 40.86% 5.17% -2.44% 22.47% -2.44% CAGR 5 year 18.47% 2.46% 18.32% 11.41% 18.22% 11.54% 8.03% -27.73% 8.01% CAGR 9 year 14.61% 9.97% 14.57% 8.11% 13.96% 8.17% 13.71% NA* 13.73% CAGR 10 year 12.23% 10.32% 12.21% 5.84% 17.97% 6.01% 10.70% NA* 10.70% CAGR * Nil international cargo in FY2010-11 6.2.7 The Authority has noted that there is a variation in traffic and volatility in data, which causes the CAGR for 5-year and 3-year period to be inappropriate for future traffic projections. 6.2.8 The Authority notes that there has been a decrease in the Passenger and ATM traffic particularly in the FY 2019-20, which is a pre-COVID year, mainly due to the closure of operations by Jet Airways with no replacement for those vacant slots and the impact of COVID pandemic towards the end of the FY 2019-20. 6.2.9 It was observed that there was a de-growth of 59.63% and 98.95% in domestic passenger traffic and international passenger traffic respectively for FY 2020-21 (compared to FY 2019-20), due to the adverse impact of COVID-19 pandemic on the domestic and international travels (Refer Table 63). Similarly, it was observed that there was a de-growth of 47.41% and 98.00%, respectively in domestic ATM and international ATM for FY 2020-21 (compared to FY 2019-20) as well as a de-growth of 25.08% in domestic Cargo for FY 2020-21 (compared to FY 2019-20). (Refer Table 63) Computation of traffic forecasts by the Authority, considering the impact of COVID-19 pandemic The traffic forecasts have been computed by the Authority, after taking into account the analysis by the following agencies regarding the impact of COVID-19 pandemic on the Aviation sector, apart from the study report provided by Mott Macdonald for LGBIA. 6.2.10 Airports Council International (ACI) ACI in its latest report available has projected the following air passenger traffic outlook: • Prior to the COVID-19 pandemic, the global passenger volume was estimated to reach 10.5 billion passengers in 2023. However, the current projection of global passenger volume in 2023 is approximately 8.6 billion passengers, which is 94.2% of the 2019 level. • The year 2024 is expected to be a milestone for global passenger traffic recovery as it reaches 9.4 billion passengers, surpassing the year 2019 that welcomed 9.2 billion passengers (102.5% of the 2019 level). Compared to the pre-COVID forecast that predicted 10.9 billion passengers in 2024, the effects of the pandemic represent a potential loss of 13.9%. • While the Asia-Pacific region is expected to have a substantial jump in passenger traffic in the first half of 2023 along with the ongoing opening of the Chinese market, its recovery is predicted to slow down significantly in the second half of the year due to challenges in overseas tourism and looming economic concerns. By the end of the year, the region is expected to reach 2.9 billion passengers, or 87.3% of the 2019 level. With the uncertainty from both upside and downside factors, the region is expected to reach approximately 3.4 billion passengers, or 99.5% of the 2019 level, in 2024. Consultation Paper No. 01/2024-25 Page 86 of 254TRAFFIC PROJECTIONS FOR THE THIRD CONTROL PERIOD 6.2.11 International Air Transport Association (IATA) IATA in its latest market analysis report has reported the following: • Industry-wide revenue passenger-kilometers (RPKs) increased 29.7% year-on-year (YoY) in November and closed the gap to 2019 levels to within 1%. • Available seat-kilometers (ASKs) rose by 28.6% YoY, recovering to 98.2% of pre-pandemic capacity. Global passenger load factor increased over the year and compared to 2019, now standing at 81.8%. • Domestic RPKs grew 6.7% over pre-pandemic levels with an annual growth rate of 34.8%. International RPKs 94.5% of pre-pandemic levels and increased 26.4% YoY. • Air passenger traffic, measured in revenue passenger-kilometers (RPKs), continued to grow in November with a 29.7% increase over the year. Global RPKs are now just 0.9% lower than pre- pandemic levels. In seasonally adjusted terms, growth continued although at a slightly slower pace compared to the previous months with 0.6% month-on-month (MoM) growth. Conclusion on traffic forecasts based on the above assumptions 6.2.12 Considering the extraordinary adverse impact of COVID-19 pandemic on domestic and international air travel, the Authority has taken into consideration the forecasted data published by ACI and IATA cited in para 6.2.10 and 6.2.11 for arriving at the revised traffic projections. 6.2.13 The Authority has reviewed the actual Passenger traffic, ATM and Cargo traffic data for FY 2022-23 (from AAI website) and has considered the same for estimating traffic for the Third Control Period: Table 69: Comparison of Passenger, ATM and Cargo traffic at LGBIA of FY2019-20 vs FY 2022-23 Traffic of FY’23 as a % of FY’20 FY’20 FY’23 traffic Traffic Internati Internati Internati Domestic Total Domestic Total Domestic Total onal onal onal Passenger 5,422,289 35,160 5,457,449 5,039,315 12,165 5,051,480 92.94% 34.60% 92.56% (in Nos.) ATM (in 44,539 1,000 45,539 45,701 208 45,909 102.61% 20.80% 100.81% Nos.) Cargo (in 21,267 3 21,270 22,823 - 22,823 107.32% 0.00% 107.30% MT) 6.2.14 The Authority notes that GIAL has considered the actual passenger traffic and ATM data for FY 2022- 23 available on AAI’s website (as shown in the table above). The Authority vide email dated April 20, 2024 to provide actual traffic of FY2023-24 and the same was provided by GIAL vide email dated April 20,2024. The Authority compared the same with the data available on AAI website and proposes to consider actual traffic for FY2023-24 as per Table 70. Table 70: Forecasted and Actual Passenger, ATM, Cargo traffic submitted by GIAL for FY’24 Year Passenger (in Nos.) ATM (in Nos.) Cargo (in MT) Domestic Interna Combined Domestic Interna Combined Domestic Internati Combined tional tional onal FY24 Forecasted 6473222 69797 6543019 58773 1197 59970 24293 3 24296 by GIAL till Mar’24 Actuals till 5927288 30321 5957609 45578 570 46148 18851 0 18851 Mar ’24 6.2.15 The Authority reviewed the CAGR (3-year, 5-year, 9-year and10-year) derived by it as per Table 68, and considering the positive outlook provided by the Expert Agencies, the Authority proposes to Consultation Paper No. 01/2024-25 Page 87 of 254TRAFFIC PROJECTIONS FOR THE THIRD CONTROL PERIOD consider the passenger, ATM, and cargo traffic proposed by GIAL for the last three (3) tariff years (FY 2025-26 till FY 2026-27). 6.2.16 The Authority notes that due to comissioning and operationalization of NITB in first quarter of FY2025- 26, the terminal building area shall increase by 621% from the existing terminal area. Due to increase in area it is expected that traffic will pick up from FY2025-26 onwards and GIAL will be able to achieve the forecasted traffic. 6.2.17 Based on the above analysis, the Authority thus proposes to consider actual passenger traffic, ATMs, and cargo for FY2022-23 and FY2023-24 as per Table 69 and Table 70 respectively; and GIAL’s submission with respect to the traffic in each category, for the remaining three tariff years of the Third Control Period. The ratio of domestic exempted and billable ATMs considered by the Authority is as per Table 67. 6.2.18 GIAL has metioned in its MYTP submission that commisioning of new Integrated Cargo Terminal (ICT) shall be done in FY2024-25 while operationalization shall happen in FY2025-26, and has considered handling of cargo from the new ICT, from FY2026-27 onwards. The Authority proposes to consider the same. The Authority also proposes to consider volumes for FY25 and FY26 as submitted by GIAL. The Authority has assumed the same volumes for FY24, FY25 and FY26 due to cargo being handled from interim facility in absence of ICT. The Authority further proposes to consider 50% of the total cargo volumes forecasted to be handled by GIAL in FY 2026-27. 6.2.19 The traffic growth rates and the corresponding traffic for passengers and ATM as considered by the Authority for the Third Control Period are given in the table below: Table 71: Traffic proposed to be considered by the Authority for the Third Control Period Domestic Passengers (Lacs) FY’20 FY’23 FY’24 FY’25 FY’26 FY’27 Total Domestic PAX submitted by GIAL 54.22 50.39 64.73 65.97 74.31 89.58 344.98 Domestic PAX proposed by the 50.39 59.27 65.97 74.31 89.58 339.52 Authority GIAL’s submission as a % of FY 92.94% 119.38% 121.66% 137.04% 165.21% 2019-20 traffic Proposed traffic as per the 92.94% 109.31% 121.66% 137.04% 165.21% Authority as a % of FY 2019-20 traffic International Passengers (Lacs) FY’20 FY’23 FY’24 FY’25 FY’26 FY’27 Total International PAX submitted by 0.35 0.12 0.70 0.67 1.13 1.36 3.98 GIAL International PAX proposed by 0.12 0.30 0.67 1.13 1.36 3.59 the Authority GIAL’s submission as a % of FY 34.60% 198.51% 190.62% 321.65% 387.32% 2019-20 traffic Proposed traffic as per the 34.60% 86.24% 190.62% 321.65% 387.32% Authority as a % of FY 2019-20 traffic Total passengers (Lacs) FY’20 FY’23 FY’24 FY’25 FY’26 FY’27 Total Total PAX as per GIAL's 54.57 50.51 65.43 66.64 75.44 90.94 348.97 submission Total PAX (Domestic and 50.51 59.58 66.64 75.44 90.94 343.11 International) proposed by the Authority Proposed total PAX as per GIAL's 92.56% 119.89% 122.11% 138.23% 166.64% submission as a % of FY 2019-20 traffic Consultation Paper No. 01/2024-25 Page 88 of 254TRAFFIC PROJECTIONS FOR THE THIRD CONTROL PERIOD Proposed total PAX as per the 92.56% 109.16% 122.11% 138.23% 166.64% Authority as a % of FY 2019-20 traffic Domestic ATM (in '000) FY’20 FY’23 FY’24 FY’25 FY’26 FY’27 Total Domestic ATM submitted by 44.54 45.70 58.77 59.36 66.50 80.22 310.54 G IAL Domestic ATM proposed by the 45.70 45.58 59.36 66.50 80.22 297.48 A uthority (A) AO's submission as a % of FY 102.61% 131.96% 133.27% 149.30% 180.10% 2 019-20 total ATM Proposed ATM traffic as per the 102.61% 102.33% 133.27% 149.30% 180.10% Authority as a % of FY 2019-20 A TM Domestic exempted ATM % FY’20 FY’23 FY’24 FY’25 FY’26 FY’27 Total Submitted by GIAL 18% 18% 18% 18% 18% As per the Authority (B) 15% 15% 15% 15% 15% Domestic Billable ATM (in '000) FY’20 FY’23 FY’24 FY’25 FY’26 FY’27 Total Submitted by GIAL 37.47 48.19 48.67 54.53 65.78 254.65 As per the Authority C = A*(1-B) 38.85 38.74 50.45 56.52 68.18 252.75 International ATM (in '000) FY’20 FY’23 FY’24 FY’25 FY’26 FY’27 Total International ATM submitted by 1.00 0.21 1.20 1.17 1.55 1.89 6.02 GIAL International ATM proposed by 0.21 0.57 1.17 1.55 1.89 5.39 the Authority GIAL's submission as a % of FY 20.80% 119.70% 117.10% 155.20% 189.30% 2019-20 ATM Proposed ATM traffic as per the 20.80% 57.00% 117.10% 155.20% 189.30% Authority as a % of FY 2019-20 ATM Total ATM (in '000) FY’20 FY’23 FY’24 FY’25 FY’26 FY’27 Total Total ATM (Domestic and 45.54 45.91 59.97 60.53 68.05 82.11 316.57 International) as per GIAL’s submission Total ATM (Domestic and 45.91 46.15 60.53 68.05 82.11 302.74 International) proposed by the Authority AO's submission as a % of FY 100.81% 131.69% 132.91% 149.43% 180.30% 2019-20 total ATM Proposed total ATM as per the 100.81% 101.34% 132.91% 149.43% 180.30% Authority as a % of FY 2019-20 ATM Domestic Cargo traffic (in MT in FY’20 FY’23 FY’24 FY’25 FY’26 FY’27 Total ’000) Domestic cargo submitted by 21.27 22.82 24.29 23.70 27.13 33.30 131.24 GIAL Domestic cargo proposed by the 22.82 18.85 23.70 27.13 33.30 125.80 Authority GIAL's submission as a % of FY 107.32% 114.23% 111.44% 127.55% 156.59% 2019-20 total Domestic Cargo Proposed total ATM as per the 107.32% 88.64% 111.44% 127.55% 156.59% Authority as a % of FY 2019-20 Domestic Cargo International Cargo (MT in ’000) FY’20 FY’23 FY’24 FY’25 FY’26 FY’27 Total International cargo submitted by 0.003 0.00 0.003 1.30 1.40 1.50 4.20 GIAL Consultation Paper No. 01/2024-25 Page 89 of 254TRAFFIC PROJECTIONS FOR THE THIRD CONTROL PERIOD International cargo proposed by 0.00 0.00 1.30 1.40 1.50 4.20 the Authority Total Cargo (MT in '000) FY’20 FY’23 FY’24 FY’25 FY’26 FY’27 Total Total cargo submitted by GIAL 21.27 22.82 24.30 25.00 28.53 34.80 135.44 Total cargo proposed by the 22.82 18.85 25.00 28.53 34.80 130.00 Authority GIAL's submission as a % of FY 107.30% 114.23% 117.53% 134.11% 163.62% 2019-20 total Cargo Proposed Cargo traffic as per the 107.30% 88.63% 117.53% 134.11% 163.62% Authority as a % of FY 2019-20 Cargo GIAL's share of Cargo Traffic FY’23 FY’24 FY’25 FY’26 FY’27 Total (MT in '000) As per GIAL Domestic cargo 3.50 4.50 5.50 13.50 International cargo Integrated Cargo Terminal 30.00 30.00 Total cargo handled 3.50 4.50 5.50 30.00 43.50 GIAL Market Share 14% 18% 19% 86% As per the Authority Domestic 3.50 4.50 5.50 13.50 International Integrated Cargo Terminal 17.40 17.40 Total cargo handled 3.50 4.50 5.50 17.40 30.90 GIAL Market Share 14% 18% 19% 50% 6.2.20 The Authority has considered the traffic proposed in Table 71 above, to assess the need for the Capital expenditure proposed by GIAL for the Third Control Period and accordingly, the Authority has rationalized the CAPEX submitted by GIAL for the Third Control Period for LGBIA. 6.3 Authority’s Proposal regarding Traffic for the Third Control Period Based on the available facts and analysis thereupon, the Authority proposes the following with regard to traffic forecast for the Third Control Period: 6.3.1 To consider the ATM, Passenger traffic and Cargo traffic for the Third Control Period for LGBIA as per Table 71. 6.3.2 To true up the traffic volume (ATM, Passengers and Cargo) on the basis of actual traffic in the Third Control Period while determining tariffs for the Fourth Control Period. Consultation Paper No. 01/2024-25 Page 90 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD 7 CAPITAL EXPENDITURE (CAPEX), DEPRECIATION AND REGULATORY ASSET BASE (RAB) FOR THE THIRD CONTROL PERIOD 7.1 Background 7.1.1 RAB is one of the essential elements in the process of tariff determination. The return to be provided on the RAB constitutes a considerable portion of the Aggregate Revenue Requirement for an Airport Operator. To encourage the participation of the private sector in airport development and operations, investors must be fairly compensated for the capital outlays involved. At the same time, to safeguard the interests of the airport users, it must be ensured that the capital additions are efficient, their needs justified, and the return on investment provided solely on the assets related to the core operations (i.e., Aeronautical services) of the airport. 7.1.2 The Authority notes that as part of the Concession Agreement (CA), GIAL needs to develop LGBIA in a phased manner during the Concession period, as well as cater to the annual passenger throughput capacity (domestic and international) and annual cargo handling capacity, along with ancillary facilities as per its demand projections. Further, development of the airport includes construction and procurement of various assets as described in the Concession Agreement such as: • Runways, taxiways, apron, aircraft parking bays, air traffic control tower, Cargo facilities, Parking, flight kitchens, MRO facilities, warehousing facilities, airline offices, administrative offices and associated facilities. • Construction and procurement of Terminal Building and facilities and • Construction of required approach roads. 7.1.3 The Authority notes that GIAL is mandated to develop an integrated terminal building which is efficiently planned, flexible for phase-wise development, sustainable and economical, as stipulated in Schedule B of Annex I of the CA. Further, as per Clause 23.7.1 of the CA -" The Concessionaire shall participate in the user survey of ASQ undertaken by Airports Council international ("ACI") or any substitute thereof, conducted every quarter and shall ensure that the Airport achieves and maintains a rating of at least 4.5 (four point five) out of 5.0 (five) and/ or shall appear within top 20 (twenty) percentile of all airports, in its category in the world in such survey within 5 (five) years from the COD and maintain the same throughout the rest of the Concession Period." 7.1.4 The Authority understands that as part of the Concession Agreement (CA), GIAL shall be liable to pay AAI the amount incurred by AAI as on the COD in respect of works-in-progress as set forth in Schedule T of the CA. As per section 3.5 of the MYTP submitted by GIAL, the AAI has raised an invoice of ₹430.89 Crore (excluding GST). As per GIAL, these assets are capitalized in the books of account as and when completed. Accordingly, the Authority notes that these assets are captured in Fixed Asset Register and forms part of Regulatory Asset Base. 7.1.5 The Independent Consultant appointed by the Authority has performed an in-depth analysis of the submissions made by GIAL towards Aeronautical Capital Additions, Depreciation and RAB. In this respect, the Independent Consultant has performed the following functions: i. Reviewed construction plan submitted by GIAL in view of various technical studies undertaken by GIAL, Airport Master Plans, BOQs (wherever provided), Copies of Letter of Intent (LOI), Letter of Award (LOA), Purchase Orders and Work Orders etc., wherever provided. The Independent Consultant also considered the responses of GIAL to the clarification sought in relation with CAPEX plan from time to time. ii. Sought documentary evidence and the process of approval of capital addition projects including competitive bidding process for award of various work orders to the contractors, if applicable. Consultation Paper No. 01/2024-25 Page 91 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD iii. The consultants also visited LGBIA for a site visit on 10th October’2023 and 21st-22nd March 2024 focusing specifically on review of current airport operation and proposed airport development plans. Based on the review of documents as stated above and the essentiality and necessity for Airport operations, the Authority has rationalized the CAPEX projects submitted by GIAL, by shifting the capitalization date of some of the projects in view of the project progress, verification of item rates and optimization of the capacity augmentation proposed by GIAL for various assets. 7.1.6 In the background of the facts stated above, the Authority through its independent consultant has examined the capital expenditure proposed by GIAL, considering the historical traffic trends and future traffic estimates such that only essential, reasonable and efficient CAPEX is considered as part of RAB for the Third Control Period. This is done with a view to encourage the investment and maintain a balanced approach between sustainable operations of the GIAL and the interest of the airport users. Further, the Authority take cognizance of the fact that, if any excessive capex is allowed in this Control Period, it would be against the regularity framework, as tariff would have no link to the services/facilities created at the Airport and the resultant high aeronautical charges would be unfair to the end users. Hence, the Authority through its independent consultant has examined the entire CAPEX plan in detail including CWIP projects and the New CAPEX for LGBIA, considering the historical traffic trends and future traffic estimates such that only essential, reasonable and efficient CAPEX is considered as part of RAB for the Third Control Period with a view to encourage the investors and maintain a balanced approach between the sustainable operations of GIAL and the interest of the airport users. 7.1.7 Based on the above, the Authority has rationalized the capital expenditure for all the projects and accordingly proposed capital additions for the Third Control Period. Further, the Authority has adjusted the capitalization timelines for some of the project based on project progress. 7.1.8 Towards this objective, the Authority has examined in detail the Aeronautical Capital Expenditure, Depreciation and RAB submitted by GIAL and has presented its views in the following order: i. Capital Additions initiated by AAI during the pre-COD period and transferred to GIAL as part of the Concession Agreement and Capital expenditure proposed by GIAL for the Third Control Period. ii. Interest during Construction/financing allowance iii. Aeronautical allocation of capital expenditure for the Third Control Period iv. Aeronautical Depreciation for the Third Control Period v. Regulatory Asset Base for the Third Control Period 7.1.9 The Authority observes that GIAL has submitted various Minor Projects/works under different heads consisting of numerous sub-projects/procurements planned to be carried out over the Third Control Period. The Authority notes that for certain minor projects, GIAL has provided POs and BOQs for only portion of the cost. For the remaining amounts, which consist of multiple line items, cost estimates have not been submitted by GIAL to justify the proposed costs. 7.1.10 The Authority’s Independent Consultant, interacted with the technical team of GIAL on the aspects of airport planning, traffic estimation and its short, mid and long term impact on Airport Economics as provided in the Concession Agreement. Based on the response provided by GIAL, the Authority observed that prima facie, GIAL has not demonstrated desired understanding of optimal planning and execution of capex projects related to airport. This is evident from the fact that the proposed CAPEX has not been linked with expected outturn of traffic and is multifold as compared to other airports which handle similar traffic levels. GIAL has projected a CAPEX to the tune of ₹ 6107 crores (including soft cost and CWIP project) for passenger Consultation Paper No. 01/2024-25 Page 92 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD traffic of 6.66 MPPA in FY’25 (forecasted by GIAL) to 13.1 MPPA, which has no rational justification. This approach of the Airport Operator is not in the overall interest of the stakeholders of the airport. It appears that the CAPEX has been projected by GIAL without linking it with the mandate provided under Schedule B of the Concession Agreement. In view of these facts, the Authority notes that the Capital Expenditure estimates submitted by GIAL are not reasonable / their need is not justifiable. Therefore, the Authority has considered various applicable factors such as current capacity, traffic estimates, normative cost benchmarks, need assessment etc. together with the need for modular development of facilities as mandated by the Concession Agreement and has rationalized the Capital Expenditure. 7.2 GIAL’s submission regarding Capital Expenditure proposed for the Third Control Period 7.2.1. As per the MYTP, GIAL has submitted following Aeronautical Capital addition for the third control period: Table 72: Asset-wise Aero Capitalisation submitted by GIAL for the Third Control Period (₹ crores) Particular FY'23 FY'24 FY'25 FY'26 FY'27 Total Terminal Building 1.98 7.88 3073.68 0.00 0.00 3083.54 Runway, Taxiway & Apron 10.04 3.31 496.21 1234.85 0.04 1744.45 Boundary walls 0.00 0.24 0.00 180.62 0.00 180.86 Software 1.58 1.58 IT equipment 9.11 15.72 1.60 1.66 1.66 29.75 Security Equipment 0.00 0.80 25.86 7.74 7.01 41.41 Plant & Machinery 8.28 12.93 49.06 124.22 27.78 222.27 Other Buildings 6.14 7.53 34.82 44.88 113.95 207.32 Access Roads 0.05 0.05 Furniture 2.35 0.74 0.37 0.26 0.56 4.28 Vehicle 2.55 17.22 21.89 6.15 5.56 53.37 Office equipment 4.98 0.00 0.00 0.00 0.00 4.98 Cargo 0.57 3.77 0 28.45 0 32.79 Fuel 0 15.84 0 397.13 0 412.97 47.63 85.98 3703.49 2025.96 156.56 6019.62* Total *excluding runway strengthening works of ₹ 87.28 crores considered as part of opex 7.3 Authority’s examination regarding Capex, Depreciation and RAB for the Third Control Period The Authority as part of its examination of the Aeronautical Capital Expenditure submitted by GIAL for the Third Control Period, had raised various queries and sought clarification on the essentiality of the capital expenditure and enquired for necessary documents such as project cost estimates, Technical Consultant’s report and inspection report issued by various authorities etc., substantiating the capital expenditure proposed by GIAL in the MYTP. The aforementioned documents and clarifications were provided in a phased manner by GIAL. The Consultation Process is an exhaustive exercise which involves analysis of significant data and facilitates, in reaching conclusions and recording the resultant proposals keeping in mind the interest of all stakeholders. Accordingly, the Authority had relied on the information made available by GIAL and made appropriate analysis and changes wherever necessary. 7.3.1 The Authority has noted that out of total Aeronautical CAPEX submitted by GIAL as part of MYTP, around 47% pertains to terminal works which was taken over from AAI and the balance 53% pertains to the new CAPEX proposed by GIAL for the Third Control Period. While analyzing the MYTP of Consultation Paper No. 01/2024-25 Page 93 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD LGBIA regarding Capital Expenditure for the Third Control Period, the Authority has taken into consideration the traffic as per Table 71. The capex has been rationalized based on various factors viz. normative cost, demand, inflation adjustment etc. 7.3.2 The capital additions as stated in para 7.2 above are further explained as project wise in the table below and evaluated by the Authority in the same sequence: Table 73: Project wise Capital Expenditure submitted by GIAL for the Third Control Period (₹ crores) Year of Capex with S. N o. Particular Capitalization Base Cost Indexation (as per GIAL) Passenger Terminal and Associated Works A NITB (Including Opening CWIP 2025 A.1 2,194.38 2194.38 as per financials) A.2 Kerbside Development 2025 138.60 138.60 Existing Terminal Building 2024-2025 A.3 9.05 9.64 development/modification Total 2,342.03 2,342.62 Runways, Taxiway & Aprons Apron-2 (Demolition and new- B.1 2026 410.55 466.21 construction) Airside Storm Water Drainage B.2 2025 192.68 208.38 works Construction of Part Parallel B B.3 2026 178.66 199.02 Taxiway and Link Taxiways B.4 Land Development works 2026 167.90 189.73 B.5 Widening of Runway Strip 2025 79.06 87.17 Construction of Second Part B.6 2026 71.37 81.64 Parallel Taxiway B.7 Extension of Runway 02–20 2025 47.96 51.61 towards RWY 20 Construction of new Isolation Bay B.8 2025 28.01 30.89 (Rigid Pavement) Construction of Rapid Exit B.9 2026 17.21 19.73 Taxiway B.10 Other Minor Airside Capex Construction of Runway End B.10.1 Safety Area (RESA) after RWY 2025 3.97 4.21 20 Threshold Extension of Blast Pad for RWY B.10.2 02 and Construction of new Blast 2025 3.94 4.24 Pad for RWY 20 Relocation of Simple Approach B.10.3 2025 0.70 0.78 Lighting System for Runway 20 Installation of Category-I B.10.4 Approach Lighting System 2025 6.99 7.38 towards Runway 02 B.10.5 Off-Stand GSE 2026 4.05 4.60 Apron stand surface revamping B.10.6 2024 0.30 0.32 work in old apron Manhole chamber covers for all B.10.7 manholes or pits at apron area, 2025 0.20 0.22 strip area as per ICAO standard Consultation Paper No. 01/2024-25 Page 94 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Year of Capex with S. N o. Particular Capitalization Base Cost Indexation (as per GIAL) Provision of new Earthing system B.10.8 for Runway and other associated 2025 0.17 0.19 works at Guwahati Airport SITC of Inset fittings for Runway- B.10.9 Taxiway intersection at Guwahati 2024 0.38 0.40 Airport Upgradation of flexible pavements B.10.10 2026 0.75 0.87 in Operational area Runway Graded Strip and RESA B.10.11 strengthening (up to 300mm 2024 0.17 0.18 Depth) Airside works (Apron surface revamping works, Provision of B.10.12 2024-2026 1.58 1.73 new Airfield signages, Joint filling and cleaning of old apron) B.10.13 Apron Control 2024 0.20 0.21 B.10.14 Airside Equipments 2024-2026 1.54 1.65 B.11 Runway strengtheing works 2026 65.00 75.25 Total 1,283.36 1,436.60 Construction of Boundary Wall New construction of Airside Perimeter & Service Roads and C.1 demolition of existing Airside 2026 33.75 38.33 Roads due to widening of Runway Strip New construction of Airside C Boundary Wall & demolition of C.2 2026 68.13 77.37 existing Airside Boundary Wall due to widening of Runway Strip C.3 PIDS System 2026 22.88 26.24 C.4 Boundary Wall 2024 0.20 0.21 Total 124.97 142.14 Cargo Complex D.1 Interim Cargo Facility 2024 3.07 3.22 D D.2 New Cargo Terminal 2026 20.00 23.15 Total – Cargo Complex 23.07 26.37 Fuel Farm Infrastructure E.1 Fuel storage farm 2026 119.97 135.07 E.2 Fuel hydrant line 2026 142.72 160.68 Equipment cost 2024 3.00 3.15 E Cost of procurement of IOCL and E.3 2024 10.00 10.50 RIL assets Dead Stock 2026 13.94 16.14 Total – Fuel 289.63 325.55 Vehicles F.1 Vehicles 2024-2027 11.00 12.58 F Modified vehicle for BDDS F.2 2025-2026 3.00 3.39 equipment F.3 Vehicle recovery Van 2024 0.15 0.16 Consultation Paper No. 01/2024-25 Page 95 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Year of Capex with S. N o. Particular Capitalization Base Cost Indexation (as per GIAL) 2 Nos.Tractor withTrolleys & F.4 electric buggies to shuttle nursery 2025-2027 0.20 0.23 between the two terminals F.5 Ambulance 2025 , 2027 0.75 0.87 F.6 Crash Fire Tender 2024 , 2025 23.98 25.81 Quick Reaction Team (QRT) F.7 2025 0.70 0.77 Vehicle Total – Vehicles 39.78 43.81 Plant and Machinery G.1 5 nos. OWS 2026 23.60 26.80 G.2 Triturator 2025 3.47 3.83 G.3 Hazardous Waste Storage 2026 0.49 0.55 Reticulation of utilities to new G.4 2027 8.39 9.78 facilities SITC of LED type SPOL System at Sajanpara, Borsilla & Mirza G.5 2024 0.06 0.06 Hills near LGBI Airport, Guwahati. Laying of GLF light cables G.6 2025 0.85 0.94 approximate 6500 mtrs G.7 Laser unit for AVDGS-2NO 2025 0.40 0.44 G.8 SITC of A-VDGS at Bay no. 4 2025 0.71 0.78 Energy saving projects (hymus perimeter lights, hymus solar G.9 lights, other energy saving 2024 1.52 1.60 projects) (Reduced from 2.7 to 1.52) SITC of Repair and Maintenance G.10 2024 0.30 0.32 work for Airside G Miscellaneous Plant and Machinery (Boom lift, Chiller plant cooling tower development, G.11 Breath Analyser Equipment, 2024-2027 3.07 3.36 Expansion of existing electrical office, Modification of Existing DG set controller etc) PVC coated Chain net for G.12 2025 1.00 1.10 Operation area drains Environmental Projects (R22 based will be replaced by R32, G.13 2024-2027 6.60 7.34 carbon offset projects, ACI 4 + certification, RE 100 etc) EV Charging Stations for E Buses G.14 , Apron Cars , Tugs along with 2024-2027 5.70 6.48 their installation . G.15 carbon sequestration 2024-2027 3.40 3.95 G.16 Biodiversity preservation projects 2024-2027 2.15 2.50 G.17 Fire Fighting Equipment 2024-2027 3.55 3.86 G.18 Disable Aircraft Removal Kit 2025 17.69 19.50 Hand Baggae X-Ray - G.19 2025, 2026 2.55 2.89 60cmX40cm Consultation Paper No. 01/2024-25 Page 96 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Year of Capex with S. N o. Particular Capitalization Base Cost Indexation (as per GIAL) G.20 Explosive Trace Detector(ETD) 2024-2026 1.35 1.49 Hand Held Metal G.21 2024-2027 0.18 0.21 Detector(HHMD) Door Frame Metal G.22 2024-2027 0.59 0.68 Detector(DFMD) Security Operation Control Center G.23 2025-2027 2.77 3.29 (CISF) Security Surveillance Centre G.24 2025 1.50 1.65 (SSC) Close Circuit Television (CCTV) G.25 2025-2027 3.20 3.71 Setup G.26 Access Control system, Adani 2025-2027 2.40 2.78 G.27 Container Tubular shooting Range 2025 1.30 1.43 G.28 Video Surveillance system 2024-2027 3.59 4.23 G.29 Body Scanner 2025-2026 44.57 51.49 G.30 VDGS 2026 12.00 13.89 Total – Plant and Machinery 158.95 180.93 Other Buildings H.1 Relocation of Localiser 02 2024 0.20 0.21 H.2 CCR Building new construction 2026 12.86 14.46 H.3 5 Airside Gates 2026 5.79 6.51 SMR Facilities (New H.4 2025 0.91 1.00 Construction) H.5 Fuel/ EV Charging Station 2026 2.49 2.76 Satellite ARFF Station (New H.6 2025 12.35 13.61 Construction) Modification of MT workshop H.7 into Admin office building 2025 2.14 2.36 (Interim arrangement) Integrated Building for Airport H.8 Police Station, Airport Health 2027 8.84 10.34 Office and Airport Post Office Airport Administration Building H.9 2027 47.52 55.57 H (5,000 Sqm) Airport Maintenance Office H.10 2027 11.41 13.34 (1,200 Sqm) H.11 Solid Waste Facility 2026 2.50 2.82 H.12 Water Supply system 2027 4.66 5.43 H.13 Sewerage System 2027 1.16 1.35 Modification of watch tower at H.14 operational area L.G.B.I. Airport 2024 0.35 0.37 Guwahati Earth filling of low using areas and other miscellaneous works at H.15 operational area related to DGCS 2025 0.40 0.44 compliance from time to time at L.G.B.I. Airport Guwahati H.16 Fire Station Improvement 2024-2025 4.20 4.57 H.17 Other Building - Admin Office 2024 1.50 1.58 H.18 Sewage Treatment Plant 2025 0.36 0.40 Consultation Paper No. 01/2024-25 Page 97 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Year of Capex with S. N o. Particular Capitalization Base Cost Indexation (as per GIAL) Misc Other Buildings - H.19 Upgradation works at RED, ATC, 2024-2025, 2027 2.89 3.26 CISF and BCAS building H.20 Installation of LGB Statue 2024 0.15 0.16 H.21 CISF accommodation 2025-2027 13.50 15.64 H.22 Nursery Development 2027 0.60 0.73 H.23 Misc Horticulture Improvements 2024-2027 1.46 1.64 H.24 Administrative Building 2024-2026 3.64 3.91 Anti Hijacking Control Room H.25 2025-2026 1.22 1.40 (AHCR) upgradation Total – Other Buildings 143.09 163.85 IT equipment I I.1 IT Equipments 2024-2027 16.57 17.80 Total – IT equipment 16.57 17.80 Furniture & fixtures Furniture & Fixtures for Terminal, J J.1 2024-2027 1.48 1.66 Office, Security etc. Total – Furniture & fixtures 1.48 1.66 Security equipment Procurement of Security Equipments (Bullet Proof Jackets, K.1 Bullet Proof Helmet, Bullet Proof 2024-2027 2.62 2.96 Shield, Bullet Proof Morcha, Binocular Device etc) K.2 Threat Containment Vessel (TCV) 2025 14.00 15.44 K K.3 BDDS 2025-2027 4.00 4.61 Misc Security Equipments (Quick Reaction Team Equipments, Radiological Detection K.4 2024-2027 10.99 12.70 Equipment, Network Switch and Cabling Tec Refresh, OFC network CCTV etc) Total – Security equipment 31.61 35.70 Sustaining capex already spent L 47.64 47.64 (FY22-23) Total Project Cost as submitted by GIAL 4,502.17 4,765.00 Apart from the base cost, GIAL has proposed soft cost, IDC and Financing allowance as part of total capex. The details of total capex are as follows: Table 74: Details of Total CAPEX as submitted by GIAL (₹ Crore) S. No. Particular Cost Basic cost (Including indexation) as I 4765.00 tabled above II Soft Cost 682.00 III Interest During Construction 412.00 IV Financing Allowance 248.00 Grand Total 6107.00 Consultation Paper No. 01/2024-25 Page 98 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Note: The above amount includes Runway Recarpeting expenses which is claimed as OPEX by AO, balance amount of ₹ 6019.64 crores is considered as capital expenditure. 7.3.3 Airport User Consultation Committee (AUCC) i. The Authority notes that GIAL conducted Airport User Consultation Committee (AUCC) Meetings on July 06, 2023 and March 27, 2023. The AUCC meeting held on July 06, 2023 which was for proposed capex including related to fuel farm capex for the third control period. The meeting held on March 27, 2023 is for the capital expenditure planned toward Air Cargo Facilities. The meeting was attended by various airport stakeholders including but not limited to International Airport Transport Association (IATA), Federation of Indian Airlines (FIA), The Associated Chambers of Commerce & Industry of India (ASSOCHAM), Indigo, Spicejet, FlyBig, Vistara, Akasa Air, AirAsia, BAOA, Blue Dart, IOCL, HPCL, BPCL, Reliance, AAI, Immigration, Local Trade Bodies among others. As per the minutes of the meeting, the Authority observed that the GIAL had broadly discussed the following with the stakeholders: a. Background of the projects and GIAL future strategy b. Traffic forecast c. Existing infrastructure and proposed master plan. d. Capex project including passenger terminal improvement and kerbside development works, ancillary building works, airside improvement work and other minor projects. ii. From the perusal of the minutes, it turns out that the stakeholders made important observations in relation to the aspects of normative costing, cost estimates for the capex projects, fuel farm, airside works and drainage system. iii. Some of the key observations made by the stakeholders are as below: a. IATA insisted on adoption of AERA normative norms for capital projects and maximise airside capacity of the Airport efficiently. b. Indigo inquired about GIAL plans in increasing airside capacity, possibility of CAT-III operations and following normative approach with respect to project cost. c. FIA insisted upon increasing non-aero revenue to optimize airport charges. d. IMD inquired about the drainage system in and around the airport. e. Fuel farm operator inquired about the availability of open access facility, hydrant line. IOCL mentioned that considering remote location of Guwahati, the AO should plan 7-10 days storage capacity. The stakeholder also enquired about fuel farm cost as same seem to be on higher side which may lead to higher fuel farm charges. iv. The Authority notes from the Minutes of the AUCC meeting that, stakeholders have emphasized to improvisation of airside capacity, terminal building space and fuel farm facility. The Authority also notes that certain observations were made by some of the stakeholders relating to the aspects of normative costing, cost estimates projected for the capex projects, improvement of existing facilities, and to bring economy of scale in its overall operation, costing etc. v. The Authority also notes GIAL response to the stakeholder comments, some of the responses to the key observations raised by the stakeholders are as below: a. GIAL has planned comprehensive airside improvement works including drainage system. b. The project cost has been estimated at a particular time and same will be submitted to the Authority for their review. c. GIAL will take appropriate steps to increase non-aero revenue. d. In case of fuel farm, GIAL has planned 8-10 days storage capacity, the cost has been benchmarked with market rates and the work already carried out by at other airports. vi. The Authority has examined the capital expenditure projects submitted by GIAL and has rationalized it based on present and future designated capacity of the Airport to handle the forecasted traffic and with Consultation Paper No. 01/2024-25 Page 99 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD the perspective of keeping the tariff rates at a reasonable level. 7.3.4 Inflation-adjusted normative cost for capital projects i. The Authority vide its Order No. 07 / 2016-17 dated June 6, 2016 (Normative Order), had considered normative cost of ₹ 65,000/- per Sqm. for Terminal Building. The normative cost specification provided as Annexure-1 of Normative Order. This mainly includes cost toward structural works of the terminal building, air conditioning, fire-fighting system, water supply, sanitary, substation equipment for power supply including stand by system, passenger facilities viz FIDS, Furniture, Signages and Security surveillance, airlines related services viz Check-in, CUTE, CUSS and Baggage Reconciliation System, In-line X ray screening, Standalone screening , BHS for arrival and departure, Escalators, Elevators, Travellators and PBB. The cost of other items required for terminal building such as elevated road connection to the terminal building etc. is not covered in the aforementioned list. The cost of such items will be derived separately and added to the overall cost of the project. ii. In this respect, the Authority notes that it has considered a normative cost of ₹ 1,00,000 per sqm for FY 2020- 21 in some of the recent tariff orders based on the superior specifications, processes and the architectural features of modern Terminal Buildings. In view of the same, the Authority in case of GIAL, proposes to consider ₹ 100,000 per sqm in the base year FY’2021 for terminal building works. iii. The proposed capital expenditure for third control period is spread across the control period. GIAL has applied the inflation index of 5% over the base cost to capture inflationary impact. As per GIAL the 5% YoY growth has been considered based on RBI forecaster survey Dec 2022. The Authority has reviewed the same and observed that same needs to be aligned as per latest inflation index data issued by RBI Forecaster Survey (refer Table 126) iv. The Authority has derived the inflation adjusted normative rates for the proposed capex in the current Control Period by considering the rate of inflation as follows: • FY 2021-22 –The Authority observes that FY 2021-22 was an exceptional year due to COVID -19 pandemic, wherein the inflation rate was 12.97%. However, during the period FY 2016-17 to FY 2020- 21, the rate of inflation was in the range of 1.31% to 4.26%. Considering this extraordinary situation, the Authority feels that the inflation rate of FY 2021-22 needs to be rationalized. Hence, instead of considering the inflation rate of 12.97% for FY 2021-22 (as per press release dated April 18’2022, by Dept. for Promotion of Industry and Internal Trade, Government of India), the Authority has considered the average rate of inflation of FY 2020-21 (1.29%) and of FY 2021-22 (12.97%), which works out to 7.14%. The Authority has considered this average rate of inflation for FY 2021-22, in order to smoothen out the volatility in commodity price caused by COVID-19 pandemic and the supply side disruptions. • FY 2022-23 – 9.42% (considered as per the data published by the Office of the Economic Advisor, Department for Promotion of Industry and Internal Trade) and • FY 2023-24 to FY 2026-27 – (-)0.70% in FY 2023-24, 3.10% for FY 2024-25 and 3.70% thereafter (considered as per 87th Round of Survey of Professional Forecasters on macroeconomic indicators). In the Order No.07/2016-17 dated 13th June 2016 on “In the matter of Normative Approach to Building blocks in Economic Regulation of Major Airports – Capital costs Regarding” the ceiling cost mentioned is inclusive of taxes applicable at that time i.e. 12%. Subsequently, GST has been introduced wherein the GST rate is 18%. Hence, the inflation adjusted normative cost is worked out below by considering the additional 6% resulting in a total GST rate of 18%. The Authority, in this regard notes that the proposed normative cost of ₹ 1,00,000 per sqm is inclusive of GST, Accordingly, the Authority first arrived normative cost excluding of GST and then applied 18% GST which comes to ₹ 1,05,357 per sqm, the amount so arrived is indexed with inflation to arrive normative rates for following years. The inflation adjusted normative costs, thus derived is presented in the below table: Consultation Paper No. 01/2024-25 Page 100 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Table 75: Inflation Adjusted normative rates computed for the Terminal Building by the Authority Financial Inflation rate Inflation adjusted Inflation adjusted normative Year normative rates cost @18% GST (in ₹ per sqm) (in ₹ per sqm) FY’21 - 100000 105357 FY’22 7.14% 107140 112880 FY’23 9.42% 117233 123513 FY’24 -0.70% 116412 122648 FY’25 3.10% 120021 126451 FY’26 3.70% 124462 131130 FY’27 3.70% 129067 135981 *Note Inflation adjusted base amount (inclusive of 12% GST) (A) = Rs. 1,00,000 per sqm Inflation adjusted base amount (exclusive of 12% GST) (B=A*100/112) = Rs. 89,286 per sqm Add GST @ 18% (C=B*18%) = Rs. 16,071 per sqm Normative cost including GST (D = B+C) = Rs. 1,05,357 per sqm The Authority has considered normative cost for the terminal expansion projects considered in this control period. In view of the above, the Authority has considered the applicable normative cost as per the project schedule submitted by GIAL. Further, the Normative Order also provide normative cost for pavement related works for Apron, taxiway, runway. The normative cost for the Runway/taxiway/Apron (excluding earthwork up to sub grade level) was ₹ 4700/- per sqm based on the project executed in FY 2015-16. The Authority has adjusted the normative cost on account of additional tax impact of 6% on account of GST in line with the adjustment made in arriving normative cost for terminal cost across all Airports uniformly. The inflation adjusted normative rate for Runway/taxiway/Apron excluding earthwork up to sub grade level proposed to be as follows: Table 76: Inflation adjusted Normative rates computed for runway/taxiway/apron by the Authority Financial Year Inflation rate Inflation adjusted Inflation adjusted normative normative rates cost @18% GST (in ₹ per sqm) (in ₹ per sqm) FY’16-Base Year 4700 4952 FY’17 1.73% 4781 5038 FY’18 2.96% 4923 5187 FY’19 4.26% 5133 5408 FY’20 1.67% 5219 5498 FY’21 1.31% 5286 5570 FY’22 7.14% 5664 5968 FY’23 9.42% 6198 6530 FY’24 -0.70% 6155 6484 FY’25 3.10% 6346 6685 FY’26 3.70% 6543 6932 FY’27 3.70% 6746 7188 *Note Inflation adjusted base amount (inclusive of 12% GST) (A) = Rs. 4700 per sqm Inflation adjusted base amount (exclusive of 12% GST) (B=A*100/112) = Rs. 4196 per sqm Consultation Paper No. 01/2024-25 Page 101 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Add GST @ 18% (C=B*18%) = Rs. 756 per sqm Normative cost including GST (D = B+C) = Rs. 4952 per sqm 7.3.5 The Authority notes that there are capital projects initiated by AAI during the Pre-COD period and subsequently handed over to GIAL as part of the Concession Agreement (Schedule T and U of the Concession Agreement). The Authority has considered the capital additions of such projects also. 7.3.6 The Authority’s examination of the Capital Expenditure projected for the Third Control Period has been explained in detail in the ensuing paragraphs: A. Passenger Terminal and Associated works A.1 New Integrated Terminal Building (NITB) (₹ 2194.38 crores) i. Project Background The LGBIA currently has only one operational Terminal (T1), which caters to both domestic and international traffic. T1 was constructed in 1998 over approx. 20,000 sqm of area with peak hour capacity of 850 passengers (departure + arrival) and designated capacity of approx. 2 million passengers per annum. However, it has handled about 5.96 million passengers in FY 2023-24 which was highest traffic handled by LGBIA. The Authority in the Second Control Period Tariff order no. 38/2017-18 dtd. 16th February’2018 for LGBIA has in principle allowed capex towards new terminal building. However, as per the order, same would be considered on incurrence while determining tariff for third control period. In view of constraint capacity, AAI initiated construction of NITB in 2018. As on COD, AAI achieved 34% project progress. Further, owing to operate LGBIA on PPP mode, AAI had to transfer the asset to new airport operator i.e. GIAL. As per clause 6.4.5 of the Concession Agreement, the under-construction projects as on COD (majorly NITB and its associated works) were novated to GIAL. The NITB is currently under construction since March 2018. The planned area for NITB is 1,46,292 sqm area against the initial estimate of terminal building by AAI as 130,333 sqm. The new terminal building is expected to have peak hour passenger handling capacity (arrival +departure, domestic and international put together, segregated peaks) of approx. 4,527 PHP (from 4,500 PHP) with increase in area. The new terminal building will have design capacity of 13.1 MPPA. The NITB has two main operational levels, with arrivals at the lower / apron level and departures at the upper level. A mezzanine floor is proposed, part of which is proposed to serve as the airside arrival corridor for passengers alighting from the PBBs and the other part is proposed to act as a service floor for the baggage handling system used for outbound baggage. Following are the salient features of NITB: • Efficient design with all modern facilities and amenities; • Centrally air-conditioned building with provision of Building Management System (BMS) to ensure energy efficiency; • Features designed to comply with Green Buildings norms; • Dedicated toilets and drinking water facility in Departure, Arrival, Security Hold and Concourse Areas; • Baggage conveyer with inline X-ray inspection and other equipment and facilities will be provided in departure area and inclined carousels at Arrival Hall; • Adequate Escalators, Elevators, Automatic Sliding Doors, Passengers Boarding Bridges etc.; Consultation Paper No. 01/2024-25 Page 102 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD • Fire detection, alarm and protection system with fire control room; • Public Address System, CCTV System, Flight Information Display System (FIDS) for passenger convenience; • Security equipment as per requirement specified by BCAS; and interventions for unique user experience such as adequate landscaping, etc. ii. Design improvement or changes undertaken by GIAL: As per GIAL, AAI design required certain modification in view of stakeholders requirements, environmental sustainability and technological interventions. As per GIAL, the proposed interventions will significantly contribute to achieving the Service quality requirements specified in the Concession Agreement. Following are the floor wise changes as proposed by GIAL: a. Improvement in layout- Arrival floor Figure 2: Proposed layout for Arrival Floor Notes: 1. Domestic Bus Gate Lounge more area relocated for seating. 2. International Arrival Hand baggage screening (X Ray) provided more immigration counter. 3. Domestic Arrival Bus Gate location changed for streamlined flow. 4. Domestic loading and unloading area redesigned, goods elevators added. 5. International Bus Gate Lounge proposed. 6. Increase area for Ceremonial Lounge along with dedicated parking. 7. International loading and unloading platform area increased. 8. New Restrooms are proposed for Domestic and International 9. Swing gates proposed between reclaim belts 4 & 5 as provision to cater to Peak Demand. 10. Reserve Lounge proposed. 11. Façade 20 m away compliant with BCAS norms. b. Improvement in layout – Mezzannine Floor at 5.5 meter Consultation Paper No. 01/2024-25 Page 103 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Figure 3: Proposed layout for Mezannine Floor Note: 1. Swing gate for Contact stands 9 & 10 for domestic arrival peak operations proposed, in addition to arrival corridor. 2. Area increased for AOCC, SOCC, IT, ALCR Room, Toilet modifications etc. 3. BOH Store added, SHA circulation added for last boarding bridge (FLB#1) 4. Baby Care Room Added. 5. Landside canteen, Staff Lockers added. 6. Re-arrangement of X-Ray, AHU Rooms, addition of Central Screening Room. 7. Storage space & garbage storage (cold store) added. 8. Mobile network control, IT rooms added, AHU room shifted. c. Improvement in layout – Departure Floor at 10 meter Figure 4: Proposed layout for Departure Floor Notes: 1. SHA Gate seating and circulation added for Gate 1 boarding bridge (FLB#1) 2. Boarding gate rearrangement proposed, by rearranging seating. 3. Addition of Visual Level-4 check rooms for domestic & international. 4. Introduction of ATRS Machines, Modifications in emigration area. 5. New Restrooms, drinking water facility proposed to reduce walking distance. 6. Airline ticketing counter with passenger seating space, reserve lounge, Airport Operator Seating added. Consultation Paper No. 01/2024-25 Page 104 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD 7. Check-in Island -Dual takeaway conveyors with set of power curves to offset the distance from cutout. 8. Compliance with BCAS norms (façade distance from alighting point). 9. Vestibule –5 Nos. d. Improvement in layout – Departure Mezzanine Floor at 15 meter Figure 5: Proposed layout for Departure Mezzanine Floor Notes: 1. Proposed the Day/ Retiring room along with services. 2. Storage space & garbage storage (cold store) added. iii. A comparison of previous design and proposed design by GIAL for NITB The proposed change in the design will lead to marginal increase in Peak Hour Capacity (PHP) of the terminal. As per GIAL submission, Following is the area wise comparison between previous and proposed design: Table 77 : Details of Change in area proposed by GIAL over previous design S. Floor/Component Built up area (sqm) Remarks No. wise Previous Revised design design 1. Basement 8240 9471 In order to adhere to fire safety regulations, there is a proposal to expand the fire corridor. 2 Arrival 43144 54418 In the proposal by GIAL, compliance with BCAS Norm w.r.t. maintaining the Arrival Façade 20m away from alighting point has been maintained. 3 Arrival Mezzanine 19775 21000 For better passenger experience, gate lounge area has been included. Storage area has been proposed (Goods, Cold storage, Garbage etc.). 4 Departure 39410 41052 For better passenger experience, gate lounge area has been proposed. Further the Consultation Paper No. 01/2024-25 Page 105 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD S. Floor/Component Built up area (sqm) Remarks No. wise Previous Revised design design compliance with the BCAS norm, as mentioned at Sl. No. 2 of this Table above, is proposed to be complied with. 5 Departure 14406 14993 Enhanced facilities for better Mezzanine Floor user experience. 6 Utility Block 5358 5358 No Change in area from previous design Total Area-NITB 130333 146292 The Authority, through its independent consultant has reviewed the additional area requirement. GIAL team has also demonstrated the requirement of the additional area during site visit. In view of the above, the Authority notes that the additional area will improve passenger facility and also it is required to comply with applicable norms. Accordingly, the Authority proposes to consider additional area proposed by GIAL for NITB. iv. Cost proposal of NITB AAI has awarded contract for New Integrated Terminal Building to M/s. Shapporji Pallonji Company Limited (SPCL). The scope of work of SPCL included civil and structural works. As part of MYTP, GIAL submitted that the contract for construction of NITB was awarded by the AAI on 26th Mar’2018, i.e. before COD. As per the MYTP submission of GIAL, the cost of the project has increased significantly post award of works on account of increase in quantities in reinforced cement concrete owing to difference in initial drawing at the time of contract and the Good for Construction (GFC) drawings, time overrun on account of COVID- 19 pandemic and supply chain disruption owing to pandemic. Also, the design changes proposed by GIAL led to increase in project cost towards NITB. The Authority observed that GIAL has submitted a revised cost of NITB as ₹ 2333 crores. A cost comparison of original sanctioned cost of AAI vis-à-vis project awarded by AAI and the cost projected by GIAL is provided below: Table 78: Cost comparison of NITB sanctioned originally, awarded and project by GIAL (₹ crores) AAI Awarded Projected S. No. Project detail sanctioned Remarks by AAI by GIAL cost A Civil & structural works The cost is revised on account of area increase Civil & structural from 90000 sqm to works by M/s SPCL 146000 sqm (including includes CIVIL and design related changes of (i) 1166 1007 1541 MEP contract for 15,959 sqm), GFC Terminal and Elevated drawings, increase in Road quantity, rate escalation due to COVID pandemic etc. Sub-Total - A 1166 1007 1541 Consultation Paper No. 01/2024-25 Page 106 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD AAI Awarded Projected S. No. Project detail sanctioned Remarks by AAI by GIAL cost B Packages considered in AAI design but not awarded Baggage Handling (i) - 120 System Passenger Boarding These equipment are (ii) 66 - 41 Bridge required for airport (iii) VDGS - 5 operation. AAI has Augmentation of considered these in (iv) - 41 power supply design however, not Interior decoration, - awarded due to expected (v) furnishing & furniture - 4 PPP arrangement. (excluding art work) (vi) Signages - - 24 Sub-Total - B 66 - 235 Costs/Scope less considered/not considered by AAI but which are essential for Airport C operations (i) IT packages - - 149 (ii) Security package - - 166 Further augmentation of Power is required to These projecs are subject cater additional load to anticipated overall (iii) - - 115 demand for Business airport operation plan Lounges, Airport and stakeholder Villages & F&B requirement, accordingly (iv) Artwork - - 30 could not be planned by (v) ORAT Cost - - 30 AAI at initial stage. Trolleys, furniture, (vi) - - 22 dustbin etc. (vii) Misc. item - - 33 Sub-Total -C - - 545 D Culvert Work -D - - 12 Initial estimate Total (A+B+C+D) 1232 1007 2333 v. The Authority notes that the NITB work has been awarded by AAI in 2018 and owing to operation of LGBIA through PPP mode, the ongoing works have been novated to GIAL. The construction progress and cost has been impacted due to change in design, COVID-19 and supply chain disruption. Further, GIAL has undertaken some of the modification in the previous design which resulted into increase in terminal area by 15,959 sqm. The Authority through its independent consultant has reviewed GIAL MYTP and conducted site visit of LGBIA. In view of the GIAL submission and site visit, the Authority observed that the proposed area would improve passenger facility and also will be required to comply with statutory compliances. Accordingly, the Authority proposes to accept the 146,292 sqm terminal area proposed by GIAL. The Authority notes that the works towards terminal building are still underway and not yet capitalized. As per GIAL, terminal building is expected to be completed in the FY’25 (Jan’25). However, during the site visit, the Authority observed that significant work is pending towards terminal building. The project progress of NITB is ~57 % as on 31st Mar’2024. Further, ORAT testing will also require 1-2 month before commissioning of the terminal. In view of the above, the Authority believe that the terminal capitalization may be achieved in FY’26 (April’25) instead of FY’25 (Jan’25) proposed by GIAL. Consultation Paper No. 01/2024-25 Page 107 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Further, The Authority is of the view that the cost of terminal building should be completed within the inflation adjusted normative cost basis on its normative order i.e. order no. 7/2016-17 dated June 6, 2016. Accordingly, the Authority proposes terminal cost as per applicable normative rates plus the cost towards the works which doesn’t form part of normative cost. As per the normative order, the normative cost proposed is excluding land cost, diversion of facilities and site development activities namely earther filling cost and Electricity Board Deposit. Following are the additional cost component evaluated by the Authority through its independent consultant for the purpose of determination of cost of NITB: • Kerbside road – GIAL has proposed ₹ 138.60 crores towards this works. The Authority through its Independent Consultant has evaluated the estimates of the cost proposed and found reasonable. The Authority proposes to consider this cost. • Electricity Board Deposit – As per the applicable electricity regulation, GIAL has to pay mandatory deposit to DISCOM to avail additional load. Considering the mandatory requirement, the Authority proposes to consider the same. • Earth filling and piling works- GIAL has proposed ₹ 77 crores towards earth work and piling works to be considered extra over normative cost. The Authority believes that the site preparation works including earthwork was already undertaken by AAI and the cost as proposed by AAI was within normative cost. Accordingly, this cannot be considered separately now. • Artwork – GIAL has proposed ₹ 30 crores towards art works. The Authority notes that Artwork is not a mandatory expense and can be done in phases. Accordingly, the Authority proposes to consider ₹ 5 crores towards Artworks at this stage. • ORAT – GIAL has proposed ORAT cost of ₹ 30 crores. In view of the decision taken at other Airports, the Authority proposes not to allow any cost towards ORAT. Following is the proposed normative cost for the terminal building: Table 79 : Details of cost of Terminal Building proposed by the Authority. (₹ crores) Particular Amount Proposed Terminal Area (in sqm) 146,292 Normative Cost (FY’25-26) (Refer Table 75) 131,130 Terminal cost as per Normative Order-A 1918.33 Component over and above Normative cost Kerbside road 138.60 Artwork 5.00 Sub-Total (B) 143.60 Total (C=A+B) 2061.93 Additional allowance due to North-East region Disturbed area allowance @ 5% over (C)* 103.10 Extra labour cost component @ 12.5% (It is 64.44 assumed that project cost comprises 25% labour cost) over (C)* Sub-Total (D) 167.54 Electricity Board deposit (E) 41.00 Cost proposed by the Authority towards NITB 2270.46 F=(C+D+E) Consultation Paper No. 01/2024-25 Page 108 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD *Also Considered in the Second Control Period Tariff order no. 38/2017-18 dtd. 16th February’2018 for LGBIA (refer para 9.20) vi. In view of the above, the Authority proposes to consider the NITB cost based on normative benchmarks. Thereby, the cost of NITB is proposed to be ₹ 2131.86 crores (Indexed to FY’26) excluding kerb side (₹ 2270.46 crores - ₹ 138.60 crores) against ₹ 2194.40 crores (₹ 2333.00 crores - ₹ 138.60 crores) submitted by GIAL. As on Mar’22, the CWIP towards NITB was ₹ 453.67 crores. The Authority accordingly considers balance cost of NITB to be incurred during the Third Control Period as ₹ 1678.19 crores (₹ 2131.86 crores -₹ 453.67 crores). A.2 Kerbside Development works (₹ 138.60 crores) GIAL to facilitate smooth traffic circulation, has proposed grade separation between departure and arrival. The overall general arrangement has been worked out to ensure smooth traffic circulation and to cater to the estimated traffic (peak hour traffic on the main access road is estimated as approx. 3,058 Passenger Car Unit (PCU). At the Arrival Access level, peak hour traffic is estimated as approx. 1,080 PCUs. To cater to this demand, three lane road is proposed as main entry road. This three lane road is proposed to flare up to total six lane road to form about 300 mtr of Kerb to facilitate smooth passenger transition from vehicles to the New Integrated Terminal Building (NITB). Out of the six lanes, two lanes are proposed to be reserved for VIPs separated by 5.2 mtr of raised platform from four lanes open for public. At Departure Ramp (elevated), peak hour traffic is estimated as approx. 1,079 PCUs. To cater to this demand, two lanes are proposed to be reserved for the VIP movement with an additional dedicated Stop Lane. The Stop Lane will ensure that parked vehicles do not affect traffic circulation in the two dedicated lanes for the VIP movement. For public, three dedicated lanes are provided for traffic circulation with one dedicated Stop Lane. As per MYTP, the project was awarded by AAI and carried forward by GIAL. The Authority has reviewed the project cost and benchmarked it with similar works at another Airport. Further, the Authority has sought detailed BoQ for the work by GIAL, GIAL has submitted Basis of rate and following details: Table 80: Details of cost for kerbside development Guwahati Airport Particular FY’25 Amount in Area indexed rates ₹/crores Elevated Road 10726 84200 90.31 At-Grade road 50582 7400 37.43 Sub-Total 127.74 Add: Culvert cost 11.00 Total Cost 138.74 Note: As part of clarification, GIAL has submitted above BoQ which provides ₹ 138.74 crores cost towards kerbside development instead of ₹ 138.60 crores submitted initially. The Authority notes that the Culvert is outside airport boundary and the connectivity should be provided by the State Government. As part of subsequent clarification it is understood that the state govt already initiated the construction of culvert. In view of the same, the Authority proposes to exclude cost considered towards culvert. Further, the project cost proposed by GIAL is compared with the cost allowed for similar work at other Airport, the Authority observed that same is in line Consultation Paper No. 01/2024-25 Page 109 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD considering northeast region (refer Table 79) . In view of the above, the Authority proposes to consider kerb side development cost as ₹ 127.74 Crore (inflation adjusted cost) against GIAL submission of ₹ 138.60 crores (inflation adjusted cost). A.3 Existing Terminal Building Development (₹ 9.64 crores) GIAL as part of improvement in existing terminal building proposed capex is towards fire hydrant system, replacement of old ACs, AHU modification, fire control room related repair, upgradation of BBA, BMA, BHS and Check in counters for smooth passenger operation, signages, terminal refurbishment activities etc.. The Authority, through its independent consultant has reviewed the list of capex proposed by GIAL under this head and have following observations: - GIAL has estimated ₹ 1.50 crores worth of terminal auxiliary equipment. However has not shared any detailed list of BoQ against this item. Since the AO has not shared any detail against this capex and the new terminal building is expected shortly at LGBIA, the AO should optimize any capex on existing terminal building which is not going to be used post commissioning of NITB. - GIAL has estimated ₹ 2.50 crores worth of facelift & refurbishment works of existing terminal. In view of the ongoing development of NITB, the Authority believe that this capex should not be planned. - GIAL has considered some of the routine repair and modification works as capex, same should be considered as part of normal repair works. These include: i. Shifting of Repeater panel to fire control room and minor repair of existing Fire alarm and Fire Detection system - ₹ 0.10 crores ii. Upgradation of retiring room in terms of tiling, painting, furnishing etc. - ₹ 0.10 crores In view of above, the Authority proposes inflationary adjusted cost as ₹ 4.82 crores (lower than the estimated base cost on account of de-growth in inflation factor) against ₹ 9.64 crores submitted by GIAL. B. Runways, Taxiways & Aprons: Following are the details of work towards Runway, Taxiway and Apron: B.1 Apron-2 (Demolition and new-construction) (₹ 466.21 crores) At present LGBIA has 20 nos. of Code-C equivalent stands, this comprises (Apron-1: 9 Nos. and Apron 2: 11 Nos.). In view of the estimated demand, total 34 nos. of Code C equivalent stands are proposed on Apron-2, considering that all commercial aircraft operation will be facilitated from the NITB post commissioning. As per GIAL, the existing Apron-2 is non-compliant and need to be demolished entirely (total approx. 1,18,088 Sqm including rigid and flexible pavements) and re-construct the same. GIAL has envisaged total Apron area of 2,66,535 Sqm of area, including approx. 34,196 Sqm of Head of Stand Road considering future traffic demand. Consultation Paper No. 01/2024-25 Page 110 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Figure 6: Proposed layout for Apron 2 at LGBIA The Authority along with its independent consultant has conducted site visit of LGBIA and believes that GIAL should explore innovative ways to revive Apron 2 for operational use. The Authority believes that the Apron-2 can be made fit for use by applying a PQC overlay, adopting new drainage technology with pre-fabricated drains and adopting trenchless technology for underground utilities and pipelines. These advices were agreed in-principle by the AO for necessary examination and consideration, as otherwise dismantling in operational area could have posed an operational hazard and created many operational constraints/issues. Accordingly, the Authority after site visit along with its Consultant and AO has considered re-examining the restoration of existing Apron by providing pre-cast drains, recasting the apron wherever required, and constructing an additional apron area of only 148,447 sqm. In term of cost, The Authority, through its consultant also verified the estimate provided by GIAL. The Authority notes that the rates adopted by GIAL are more than the inflation adjusted normative rates provided at para 7.3.4. The inflation adjusted normative rates of FY’2026 (based on expected start date of works) has been considered by the Authority for completion of new Apron Area. In case of repair works, the Authority has considered 50% of the rates adopted for new construction. While arriving the normative cost, the Authority has adjusted the normative cost as per para 7.3.4 on account of disturbed area allowance of 5% and extra labour cost component of 12.5% on account of north east region. Following is the adjusted normative cost for FY’2026: Table 81: Details of normative cost for Runway/Taxiway/Apron works Particular Amount in Rs/Sqm Inflation adjusted normative cost for FY’26 6932 Additional allowance due to North-East region Disturbed Area allowance @ 5% 347 Extra labour cost component @ 12.5% (It is assumed 217 564 that project cost comprises 25%* labour cost) Inflation and NER adjusted normative cost 7496 Add: Airside working area constraints @ 5% 375 Propose normative cost per sqm 7871 Consultation Paper No. 01/2024-25 Page 111 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Similarly, in case of drainage works, the Authority proposes GIAL to optimise cost by adopting innovative technology and design to minimise cost. The Authority for the purpose of drainage works proposes to consider 50% of the rates proposed by GIAL. Further, the Authority notes that as per the normative order the normative cost excludes earth work cost upto sub-grade level and AGL works. Accordingly, these have been considered over and above the normative cost. As per GIAL submission the estimated base cost of the project is ₹ 410.55 crores and inflation adjusted cost is ₹ 466.21 crores. The summary of the Authority’s proposal in this regard is detailed below vis a vis GIAL submission: Table 82: Details of the cost submitted by GIAL and proposed by the Authority towards Apron works (₹ crores) As pre GIAL As per the Authority Particular UoM Rate Qty Amount Rate Qty Amount Demolition of Sqm 1400 7086* 0.99 - - - flexible Pavement Demolition of Sqm 4070 111002* 45.18 - - - Rigid Pavement New Pavement (Apron) Rigid Pavement Sqm 13800 232339 320.63 7871 121337 95.50 Flexible Sqm 7800 34196 26.67 7871 27110 21.34 Repair works Rigid Pavement Sqm - - - 3936 111002 43.68 Flexible Sqm - - - 3936 7086 2.79 Drainage Rmt 125000 1366 17.08 60000 1366 8.20 Sub-Total (A) 410.55 171.51 Cost towards Included 52.15 earthwork upto above sub-grade level AGL cost @15% Included 17.53 towards new apron above works Inflation adjustment 55.66 Factored in normative cost Total Cost 466.21 241.19 *As discussed during site visit, the existing apron dismantling can be avoided by usage of prefabricated drains to optimize this expenditure. In view of the above, the Authority proposes to rationalise the cost and the scope of this project. The Authority proposes to consider inflation adjusted cost of ₹ 241.19 crores against ₹ 466.21 crores submitted by GIAL towards Apron-2 works. B.2 Airside Storm Water Drainage work (₹ 208.38 crores) GIAL as part of MYTP and during site visit submitted that existing drainage system is insufficient to runoff storm water. Some of the section of the Airport has temporary drainage system and there is no operational airside drainage system. Additionally, the existing airside drainage system lacks Consultation Paper No. 01/2024-25 Page 112 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD continuity, and GIAL intends to establish connectivity and create a closed-loop system. Following are few pictures of drainage system available at GIAL: Figure 7: Existing drainage system at LGBIA The Authority has noted the points raised by GIAL in MYTP proposal. The Authority through its independent consultant has taken a note of the drainage condition at LGBIA and believes that in order to have faster run off of storm water it is necessary to have robust storm water drainage system in place. However, the Authority also raised a point to GIAL that the drainage system will be successful only if the airport system is connected to well-planned external drainage system outside Airport. The GIAL has clarified that the AO is already working/coordinating with local body to make integrated drainage system so that the storm water does not push back to the Airport. In view of the above, the Authority proposes to consider the capex towards storm water drainage system. During the cost analysis, the Authority observed that some of the rates proposed by GIAL consider 10% overhead on account of airside working area constraints. The same has been revised by the Authority to 5%. Rates considered by GIAL are in line with rates allowed by the Authority at other Airports. Following is the basis of the base cost considered by the Authority towards this project: Table 83: Authority’s examination of Airside Storm Water Drainage cost (₹ crores) Particular GIAL submission Authority Examination Quantity Rate Amount Quantity Rate Amount Drainage 16632 96000 159.67 16632 92000 153.01 Culvert 2220 138125 30.66 2220 138125 30.66 Pipe 460 51000 2.35 460 51000 2.35 crossing Base Cost 192.67 186.02 Inflation 15.71 8.66 adjustment Total 208.38 194.68 Further, during the site visit it was observed that no work has started against this project. Accordingly, the capitalisation of the project is proposed to be shifted by one year from FY’25 to FY’26. The Authority has further adjusted cost on accounf of inflation, in view of above analysis proposes to consider ₹ 194.68 crores as inflation adjusted cost as against ₹ 208.38 crores submitted by GIAL towards this project. B.3 Construction of Part Parallel Taxiway and Link Taxiways (₹ 199.02 crores) Consultation Paper No. 01/2024-25 Page 113 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD The existing peak capacity of the Runway 02-20 is 18 ATMs (Arrival & Departure) per hour. The peak ATM per hour is estimated to be 22 (Arrival & Departure) in FY 2026-27. To facilitate this increase in ATM and ensure operational efficiency, it is proposed that a Part Parallel Taxiway of total 1,00,861 Sqm including shoulders. Further, GIAL has also proposed additional three link taxiways, with total area of 15,845 sqm. As per GIAL the additional three link taxiways will improve operational efficiency. The Authority has noted GIAL submission and as per site visit as well as GIAL presentation it is observed that additional link taxiways are proposed at both side of the runways 02 and 20. This will enable faster exit of aircrafts from the runway and increasing runway availability for airport operation. Also, one of the link taxiways towards runway 20 end will be required to give additional access to Apron 2 in front of NITB. In view of the operational requirement, the Authority proposes to consider the capex towards part parallel taxiway and link taxiways. The Authority through it’s independent consultant analysed the cost proposed by GIAL towards this capex and observed that the cost proposed is higher than the normative cost provided under order no. 07/2016-17 dtd. 6th June,2016. In view of this, the Authority proposes to consider inflation adjusted normative cost as derived under 7.3.4 above to arrive the cost of the project. The Authority, further adjusted inflation adjusted normative cost on account of disturbed area allowance of 5%, extra labour cost component of 12.5% of 25% labour cost on account of north east region and 5% on account of airside working area constraints and arrive at a normative cost of ₹ 7871 per sqm (refer Table 81). Further, the Authority notes that as per the normative order the normative cost excludes earth work cost upto sub-grade level and AGL works. Accordingly, these have been considered over and above the normative cost. Following is the basis of the cost considered by the Authority towards this project: Table 84: Authority’s examination of Part Parallel Taxiway and Link Taxiway cost (₹ crores) Particular GIAL submission Authority Examination Quantity Rate Amount Quantity Rate Amount Main Pavement 81275 15400 125.16 81275 7871 63.97 (Flexible) Shoulder (Flexible) 35431 15100 53.50 35431 7871 27.89 Total 178.66 91.86 Add: Excavation till Included 48.11 subgrade above Add: AGL@ 15% Included 13.78 base cost above Inflation adjustment 20.36 Factored in normative cost Total Cost 199.02 153.75 Further, during the site visit it was observed that no work has started against this project, accordingly, the capitalisation of the project is proposed to be shifted by one year from FY’25 to FY’26. In view of the above, the Authority proposes ₹ 153.75 crores as inflation adjusted cost against GIAL submission of ₹ 199.02 crores inflation adjusted cost. B.4 Land Development Works (₹ 189.73 crores) As per GIAL, a significant portion of the LGBIA lies at lower elevation. Accordingly, GIAL has proposed filling and site grading area of around 605,750 sqm to prevent the risk of flooding and to Consultation Paper No. 01/2024-25 Page 114 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD make these areas suitable for various airside and associated facilities. A figure below provides details of low-lying area at LGBIA: Figure 8: Low lying area at LGBIA As per GIAL submission and the site visits of LGBIA Airport, the Authority notes that the identified low-lying areas are required in airside works in this control period and may be required for future expansions. GIAL has divided the low-lying areas in four zones. The Authority notes from GIAL submission and also on the basis of the site visit, that the proposed land development work can be done in phased manner and also the AO need to optimise on the proposed cost towards land development. Further, the Airport Operator has not demonstrated the concrete plan to overcome this low lying area, no topographical analysis was shared and possibility of phasing of the proposed plan have not been shared. Upon reviewing the site-level charts, the approach to filling low-lying areas remains unclear. Consequently, the consultant independently identified these areas, as marked in Figure 8. Accordingly, the Authority proposes to consider 25% cost for land development works for the purpose of third control period. AO can plan the land development for the balance portion after assessing the critical operational requirements. Following is the basis of the base cost considered by the Authority towards this project: Table 85: Authority’s examination of cost pertaining to land development works: (₹ crores) Particular GIAL submission Authority Examination Quantity Rate Amount Quantity Rate Amount A. Earth Work Package-Site Clearance Clearing and Grubbing Airfield 605750 70.80 4.29 151438 70.80 1.07 Land. (Clearing and grubbing airfield land by dozer and grader including uprooting vegetation, grass, bushes, shrubs and saplings etc, removal of slush including top soil not exceeding 150 mm in thickness and disposal of organic unserviceable soil/materials at designated location & spreading in the low lying areas approved by engineer in charge within project site and stacking of serviceable Consultation Paper No. 01/2024-25 Page 115 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Particular GIAL submission Authority Examination Quantity Rate Amount Quantity Rate Amount material to be used or auctioned with all lifts and lead. Item includes the compaction of ground surface as per specifications section 201 of MORTH specification for Road and Bridge works (5th Revision) [Item no. 1.02 shall be operative for removal of slush/sludge having depth more than 300 mm] Removal of slush/sludge including 122065 300.90 3.67 30516 300.90 0.92 dewatering and disposal of the same in designated areas conforming environmental norms with all labours, equipments, consumables, tool tackles, leads and lifts etc. complete as per instruction of the Engineer In charge. Providing, installing and 25000 129.80 0.32 6250 0.08 0.08 maintaining required capacity dewatering pumps with all accessories, pipelines, labour, materials, consumables, tools tackles etc. complete along with construction of temporary trenches/ditches (if require any) for draining out water from the project battery limits, including obtainment of all statutory permissions from the concerned authorities. B. Earth work package- Earthwork Excavation in all types of soil 138850 282 3.91 34713 282 0.98 (excluding soft and hard rock) for airfield work upto a depth of 500 mm, including cutting and loading, trimming bottom and side slopes, in accordance with requirements of lines, grades and cross sections as per drawings and Technical Specifications section 301 of MORTH specification for Road and Bridge works (5th Revision) and disposal of the excavated earth to the designated location(s) with an average lead of 4 Km or as directed by the Engineer in charge. Supplying, filling, spreading and 218070 1392 30.35 54518 1392 7.59 compacting of Moorum borrowed from outside approved sources, in uniform layers to the required alignment , grades and cross- sections, not exceeding 250 mm compacted thickness of each layer and compacted to 95% of MDD & the requirements of technical specifications. Borrowed Consultation Paper No. 01/2024-25 Page 116 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Particular GIAL submission Authority Examination Quantity Rate Amount Quantity Rate Amount moorum shall comply CBR value ≥ 8% and other parameters in accordance with drawings, Technical Specifications section 305 of MORTH for Road and Bridge works (5th Revision) or as per direction of the Engineer In Charge.The unit rate shall be deemed to include cost of all material, labour, equipments, tools tackles, royalty, transportation and sampling, testing and supervision required for the work. Supplying, filling, spreading and 545175 1392 75.87 136294 1392 18.97 compacting of River sand borrowed from outside approved sources, in uniform layers to the required alignment , grades and cross- sections, not exceeding 250 mm compacted thickness of each layer and compacted to 90% of MDD & the requirements of technical specifications. Borrowed river sand shall comply CBR value ≥ 8% and other parameters in accordance with drawings, Technical Specifications section 305 of MORTH for Road and Bridge works (5th Revision) or as per direction of the Engineer In Charge. The unit rate shall be deemed to include cost of all material, labour, equipments, tools tackles, royalty, transportation and sampling, testing and supervision required for the work. Supplying, filling, spreading and 327105 1392 45.52 81776 1392 11.38 compacting of Hilly soil borrowed from outside approved sources, in uniform layers to the required alignment , grades and cross- sections, not exceeding 250 mm compacted thickness of each layer and compacted to 95% of MDD & the requirements of technical specifications. Borrowed Hilly soil shall comply CBR value ≥ 8% and other parameters in accordance with drawings, Technical Specifications section 305 of MORTH for Road and Bridge works (5th Revision) or as per direction of the Engineer In Charge. The unit rate shall be deemed to include cost of all material, labour, equipments, tools tackles, royalty, Consultation Paper No. 01/2024-25 Page 117 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Particular GIAL submission Authority Examination Quantity Rate Amount Quantity Rate Amount transportation and sampling, testing and supervision required for the work. Providing & Laying of Geotextile 215798 183 3.95 53949 183 0.99 (specs as per Dhamra Airport) Base Cost 167.88 41.97 Inflation adjustment 21.85 1.80 Total Cost 189.73 43.77 The Authority has further adjusted the base cost derived above on account of inflation. Accordingly, the Authority proposes to revise the inflation adjusted cost to ₹ 43.77 crores against GIAL submission of ₹ 189.73 crores respectively. B.5 Widening of Runway Basic Strip (₹ 87.17 crores) GIAL as part of MYTP submitted that the width of existing runway strip is 75m on both sides from the center line of the Runway. Existing runway width does not meet DGCA compliance standards. As per the standards for Precision Approach Runway, the Runway Strip shall, wherever practicable, be extended laterally to a distance of at least 140m on each side of the centre line of the runway and its extended centre line throughout the length of the strip. Accordingly, to comply with the statutory requirement, widening of the Runway Basic Strip to 140m is proposed. For this, site grading works will be required to be carried out over approx. 5,41,530 Sqm of area. The Authority, in view of the safety and compliance with applicable standards proposes to consider this capex. However, the Authority observed that while calculating of the cost for the works, GIAL has considered 10% additional cost on account of airside working area constraints. This has been revised by the Authority to 5% while arriving cost for this work. Following is the basis of the base cost considered by the Authority towards this project: Table 86: Authority’s examination of widening of Runway Basis Strip (₹ crores) Particular GIAL submission Authority Examination Quantity Rate Amount Quantity Rate Amount Site Grading 541530 1460 79.06 541530 1390 75.27 Base Cost 79.06 75.27 Inflation 8.11 1.79 adjustment Total Cost 87.17 77.06 The Authority further adjusted the above cost on account of inflation. Accordingly, the Authority proposes inflation adjusted cost of widening of Runway Basic Strip as ₹ 77.06 crores against GIAL submission of ₹ 87.17 crores. B.6 Construction of Second Part Parallel Taxiway (₹ 81.64 crores) Second Part Parallel Taxiway of Code C (total area: approx. 46,546 Sqm) is proposed to ensure safety and operational efficiency. The Second Part Parallel Taxiway will facilitate seamless operation, i.e. movement of departing aircrafts can take place irrespective of movement of arriving aircrafts, which is imperative to facilitate the projected ATMs. The Authority notes that LGBIA is a gateway to eastern India and keeping in view the expected growing demand, it is important to increase airside capacity. GIAL submitted that in lieu of Second Consultation Paper No. 01/2024-25 Page 118 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Part parallel taxiway the Apron 2 will have only one connection due to which departing aircraft has to wait for pushback until clearance of parallel taxiway by the arriving aircraft. Figure 9: Proposed aircraft movement at part parallel taxiway In view of this Authority proposes to consider this capex. However, the Authority observed that the cost proposed is higher than the normative cost provided under order no. 7/2016-17 dtd. 6th June,2016. In view of this, the Authority proposes to consider inflation adjusted normative cost as derived under 7.3.4 above to arrive the cost of the project and additional adjustment as per Table 81. The normative cost thus arrived is ₹ 7871 per sqm. In view of the above, the Authority proposes inflation adjusted cost as ₹ 60.84 crores against ₹ 81.64 crores submitted by GIAL. B.7 Extension of Runway 02-20 towards RWY 20 (₹ 51.61 crores) LGBIA has a single runway, 02-20, which is 3,103 meter in length and 45 meter in width. GIAL proposes to extend it by 557 meter (admeasuring total 33,420 Sqm, out of which 25,065 Sqm is runway pavement and 8,355 Sqm is shoulder), to ensure compliance and improve operational efficiency of the proposed Apron-2. The Authority notes that this capex is required in line with newly constructed NITB. The Authority, through its independent consultant reviewed the BoQ submitted by GIAL. The cost of the project is derived considering demolition of 600 sqm pavement area and construction of 33420 flexible pavement area. While doing rate analysis, it is observed that the rates considered by GIAL for pavement works are higher than the rates provided under order no. 7/2016-17 dtd. 6th June,2016. In view of this, the Authority proposes to consider inflation adjusted normative cost as derived under 7.3.4 above to arrive the cost of the project and additional adjustment as per Table 81. The normative cost thus arrived is ₹ 7871 per sqm. Further, during the site visit it was observed that no work has started against this project. Accordingly, the capitalisation of the project is proposed to be shifted by one year from FY’25 to FY’26. Following is the basis of the cost considered by the Authority towards this project: Table 87: Authority’s examination of Extension of Runway cost (₹ crores) Particular GIAL submission Authority Examination Quantity Rate Amount Quantity Rate Amount Demolition of Flexible 600 1400 0.08 600 1340 0.08 Pavement New Pavement Consultation Paper No. 01/2024-25 Page 119 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Main Pavement 25065 15400 38.60 25065 7871 19.73 (Flexible) Shoulder Pavement 8355 11100 9.27 8355 7871 6.58 (Flexible) Total 47.96 26.39 Add: Excavation till Included 9.39 subgrade above Add: AGL@ 15% Included 3.95 base cost (excluding above demolition if any) Inflation Adjustment 3.65 Factored in normative cost Total 51.61 39.72 In view of the above, the Authority proposes inflation adjusted cost of ₹ 39.72 crores against GIAL submission of ₹ 51.61 crores. B.8 Construction of new Isolation Bay (Rigid Pavement) (₹ 30.89 crores) At LGBIA, currently, the Isolation Bay is accommodated on the Apron-2, in front of existing Hangar. As per the MYTP the area of isolation bay will be required for aircraft stands. Accordingly, GIAL has proposed to construct a new Isolation Bay beside the Apron-1, towards RWY 02 end (vacant land) to meet the regulatory requirement. As per GIAL, this is also in line with the AAI proposal. Isolation bay is a mandatory parking space required at the Airport to handle aircraft facing an exigency like hijack or bomb threat, In view of the statutory requirement and compliance, the Authority proposes to consider this capex. However, it is observed that the cost proposed is higher than the normative cost provided under order no. 7/2016-17 dtd. 6th June,2016. In view of this, the Authority proposes to consider inflation adjusted normative cost as derived under 7.3.4 above. Further, it is noted that the proposed work is expected to complete in FY’25, Accordingly, the Authority considered the normative cost as arrived for FY’25. Following is the adjusted normative cost proposed for isolation bay related works: Table 88: Normative cost for Apron (FY’25) Particular Amount in Rs/Sqm Inflation adjusted normative cost for FY’25 6685 Additional allowance due to North-East region Disturbed Area allowance @ 5% 334 Extra labour cost component @ 12.5% (It is assumed that 209 543 project cost comprises 25%* labour cost) Inflation and NER adjusted normative cost 7228 Add: Airside working area constraints @ 5% 361 Propose normative cost per sqm 7589 The Authority proposes to consider ₹ 7589 per sqm to arrive cost towards isolation bay. Following is the detailed basis of the cost considered by the Authority towards this project: Consultation Paper No. 01/2024-25 Page 120 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Table 89: Authority’s examination of Cost towards new isolation bay (₹ crores) Particular GIAL submission Authority Examination Quantity Rate Amount Quantity Rate Amount New Pavement Main Pavement (Flexible) 20300 13800 28.01 20300 7589 15.41 Add: Excavation till Included 4.13 subgrade above Add: AGL@ 15% base Included 2.31 cost (excluding above demolition if any) Inflation adjustment 2.88 Factored in normative cost Total 30.89 21.84 In view of the above, the Authority proposes inflation adjusted cost of ₹ 21.84 crores for this project against GIAL submission of inflation adjusted cost as ₹ 30.89 crores. B.9 Construction of Rapid Exit Taxiway (₹ 19.73 crores) To improve operational efficiency through reduction in Runway Occupancy Time (ROT), a Rapid Exit Taxiway (RET) is proposed at Chainage 1,970m measured from the threshold of RWY 02 till point of curvature of RET [length: about 305m, area: approx. 11,238 Sqm]. The proposed chainage will facilitate exit of maximum number of Code C aircrafts. The Authority notes that RET will be an important project to improve runway efficiency as they allow faster exit of aircrafts and thus minimise runway occupancy. Accordingly, proposes to consider this project. While doing rate analysis, it is observed that the cost proposed is higher than the normative cost provided under order no. 7/2016-17 dtd. 6th June,2016. In view of this, the Authority proposes to consider inflation adjusted normative cost as derived under 7.3.4 above to arrive the cost of the project and additional adjustment as per Table 81. The normative cost thus arrived is ₹ 7871 per sqm. Table 90: Authority’s examination of cost towards Rapid Exit Taxiway project (₹ crores) Particular GIAL submission Authority Examination Quantity Rate Amount Quantity Rate Amount New Pavement Main Pavement (Flexible) 7935 15400 12.22 7935 7871 6.25 Shoulders Pavement 3303 15100 4.99 3303 7871 2.60 (Flexible) Total 17.21 8.85 Add: Excavation till Included 4.62 subgrade above Add: AGL@ 15% base Included 1.33 cost (excluding above demolition if any) Inflation adjustment 2.52 Factored in normative cost Total 19.73 14.79 Consultation Paper No. 01/2024-25 Page 121 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD In view of the above, the Authority proposes ₹ 14.79 crores inflation adjusted cost for RET against GIAL submission of ₹ 19.73 crores. B.10 Other Minor Airside Capex (₹ 26.98 crores) GIAL has proposed various minor capital expenditure at airside. Following are the details of the capex proposed: i. RWY 02-20 is proposed to be extended, as elaborated above. Accordingly, fresh construction of RESA for RWY 02 (after reserving 60m for Blast Pad from new RWY 20 threshold) is proposed. GIAL has proposed RESA area in line with CAR which is 21,600 sqm [240 m (L) X 90 m (W)]. The Authority proposes to consider the same. However, cost has been adjusted on account of revision of airside working area constraint overhead from 10% to 5%. ii. Currently, Blast Pad of 30m (length, i.e. along runway centerline) x 60m (lateral) after RWY 02 threshold is provided. To reduce the erosive effects of jet blast and propeller wash from aircrafts, it is proposed to increase the length of the Blast Pad after RWY 02 to make the final dimension of the Blast Pad to 60m x 60m. Additional construction works of 1,800 Sqm is proposed in this regard. This is to comply with the specifications / guidelines as stipulated in the Aerodrome Design Manual (Doc 9157, Fifth Edition, 2020, Part 2), which is referred to at para 3.4.11 of the CAR. As regards RWY 20, it is proposed to construct new Blast Pad of 60m x 60m (fresh construction of 3,600 Sqm) after the new proposed threshold of RWY 20 (i.e. after extension of the runway). In view of the operational requirement, the Authority proposes to consider extension of blast pad area of 5400 sqm. The rate for the work has been adjusted on account of revision of working area constraint allowance from 10% to 5%. iii. GIAL need to relocate simple approach lighting system for runway 20. The proposed work will be required due to extension of RWY 20. GIAL has submitted detailed BoQ. The Authority reviewed the same and proposes to consider the same subject to inflationary adjustment towards cost while indexation. iv. Runway 02 is equipped with CAT-I Instrument Landing System (ILS) and accordingly, the Runway is treated as ‘Precision Approach Runway’. However, currently, Simple Approach Lighting System is installed over a distance of approx. 152m from the RWY 02 threshold. Accordingly, to comply with the Civil Aviation Requirements, ‘Precision Approach Category I Lighting System’ is proposed over a distance of 900m from RWY 02 threshold. The Authority during site visit has sought clarification from GIAL on the feasibility of this project as the approach lighting need to be installed in a lake. GIAL has confirmed that the feasibility assessment has already taken place and the project is feasible. In view of the operational requirement, the Authority proposes to consider this capex. The Authority has proposed to consider the capex based on the detailed BoQ submitted by GIAL subject to inflationary adjustment while arriving at indexed cost. v. In order to serve proposed new stand GIAL has proposed additional area of 3935 sqm for GSE staging. GIAL has proposed Rigid pavement for the proposed GSE area. In view of the operational requirement, the Authority proposes to consider the cost proposed by GIAL against this head subject to inflationary adjustment while arriving indexed cost. vi. In certain capex GIAL has not shared detailed BoQ. In view of the same, the Authority proposes 50% of the capex proposed against these heads. These capital expenditures include SITC of Inset fittings for Runway-Taxiway intersection at Guwahati Airport, Consultation Paper No. 01/2024-25 Page 122 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Runway Graded Strip and RESA strengthening (up to 300mm Depth) and Apron Control. Table 91: Details of other minor works proposed by GIAL and the Authority (₹ crores) S. No. Particular Year of Inflation Inflation Capitalization adjusted cost as adjusted cost as per GIAL per the Authority Construction of 2024-2025 4.21 3.80 Runway End Safety B.10.1 Area (RESA) after RWY 20 Threshold Extension of Blast Pad 4.24 3.89 for RWY 02 and B.10.2 2024-2025 Construction of new Blast Pad for RWY 20 Relocation of Simple 0.78 0.72 B.10.3 Approach Lighting 2025 System for Runway 20 Installation of 7.38 7.18 Category-I Approach B.10.4 2024-2025 Lighting System towards Runway 02 B.10.5 Off-Stand GSE 2025-2026 4.60 3.50 Apron stand surface 0.32 0.31 B.10.6 revamping work in old 2024 apron Manhole chamber 0.22 0.20 covers for all manholes B.10.7 or pits at apron area, 2025 strip area as per ICAO standard Provision of new 0.19 0.17 Earthing system for B.10.8 Runway and other 2025 associated works at Guwahati Airport SITC of Inset fittings 0.40 0.19 for Runway-Taxiway B.10.9 2024 intersection at Guwahati Airport Upgradation of flexible 0.87 0.80 B.10.10 pavements in 2026 Operational area Runway Graded Strip 0.18 0.09 B.10.11 2024 and RESA Consultation Paper No. 01/2024-25 Page 123 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD S. No. Particular Year of Inflation Inflation Capitalization adjusted cost as adjusted cost as per GIAL per the Authority strengthening (up to 300mm Depth) Airside works (Apron 1.73 1.64 surface revamping works, Provision of new B.10.12 2024-2026 Airfield signages, Joint filling and cleaning of old apron) B.10.13 Apron Control 2024 0.21 0.10 B.10.14 Airside Equipment 2024-2026 1.65 1.58 Total 26.98 24.17 The inflation adjusted cost for minor airside capex is proposed to be ₹ 24.17 crores against ₹ 26.98 crores submitted by GIAL. B.11 Runway Strengthening works (₹ 75.25 crores) GIAL has proposed Runway strengthening works for the Third Control Period. As per the MYTP, the runway re-carpeting work was undertaken by AAI in the Second Control Period. During the site visit, the Authority, along with its Independent Consultant, observed that the Runway does not require immediate re-carpeting except turning pad area for continued operation and runway strengthening work can be done in next control period. However, if the condition of the runway deteriorates, GIAL may undertake runway strengthening works in which case the Authority will consider the same on incurrence basis subject to the reasonableness and efficiency at the time of tariff determination of next control period. C. Construction of Boundary Wall C.1 Construction of Airside perimeter and service road (₹ 38.33 crores) As per GIAL, due to widening of the Runway Strip, the existing airside roads at certain stretches (that fall within the area proposed for widening of the Runway Strip) will require to be demolished and new airside roads will require to be constructed. Total area of flexible pavement to be demolished works out as approx. 23,728 Sqm and that of rigid pavement works out as approx. 1,975 Sqm, whereas area of new airside roads works out as 47,989 Sqm. GIAL as part of MYTP has submitted indexed cost of ₹ 38.33 crores with base cost of ₹ 33.75 crores. The Authority as part of clarification of MYTP has sought detailed BoQ for the project. As per the BoQ shared by GIAL, the base cost of the project has been revised to ₹ 32.13 crores. The Authority through its independent consultant has reviewed the BoQ shared by GIAL and observed that the quantity proposed by GIAL is in line with the proposal and the rates adopted is in line with the applicable standards. The Authority notes that the capex will be required owing to extension of airside and thus proposes to consider this capex. However, adjusted the cost on account of inflation factor. The inflation adjusted cost is proposed to be ₹ 33.63 crores instead of ₹ 38.33 crores initially submitted by GIAL. C.2 Construction of Airside Boundary Wall (₹ 77.37 crores) Consultation Paper No. 01/2024-25 Page 124 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD As per GIAL, owing to widening of the Runway Strip and other airside proposals, the existing airside boundary wall at certain stretches will require to be demolished and new airside boundary wall will require to be constructed. The proposed stretches for demolition and new airside boundary wall. Total approx. 11,692m of existing boundary walls are proposed to be demolished and 10,450m of new airside boundary wall is proposed to be constructed. Widening of the airside roads to 7.5m (5.5m carriageway and 1m earthen shoulder on both sides) is proposed on stretches where airside roads are not required to be demolished but width of the carriageway is less than 5.5m. GIAL as part of MYTP has submitted ₹ 68.13 crores as base cost. The Authority as part of clarification sought detailed BoQ of the proposed capex. As per the BoQ submitted by GIAL, the base cost comes to ₹ 64.96 crores. The Authority through its independent consultant has reviewed the BoQ. GIAL has adopted CPWD rates which have been verified and found in line. The Authority notes that due to inclusion of new area within airside, the AO need to construct new boundary wall and demolish existing at selected areas. Accordingly, it is proposed to consider this capex. In view of the above, the Authority proposes inflation adjusted cost of ₹ 67.98 crores against GIAL of ₹ 77.37 crores. C.3 Perimeter Intrusion Detection System (PIDS) system (₹ 26.24 crores) As per MYTP, the Authority notes that LGBIA currently does not have Perimeter Intrusion Detection System (PIDS) along / on its airside boundary wall. As per GIAL, the airport requires PIDS as part of its airport security infrastructure. Therefore, installation of PIDS is proposed for a stretch of 10,450m on the boundary wall. GIAL as part of MYTP has submitted base cost as ₹ 22.88 crores. The Authority has sought detailed BoQ against this capex. As per GIAL submission, the cost of PIDS at LGBIA is estimated based on Lucknow Airport. GIAL has adjusted Lucknow Airport cost with inflation at 5% YoY and airside working area constraint allowance. In view of the security requirement, the Authority proposes to consider this capex. However, adjusted the cost by considering correct inflation factors and removed airside working area constraint premium as this has already been considered in reference rate adopted from Lucknow Airport. In view of the above, the Authority proposes inflation adjusted cost ₹ 20.50 crores against GIAL submission of ₹ 26.24 crores. C.4 Boundary Wall (₹ 0.21 crores) GIAL as per MYTP submitted that at some places boundary walls need to be made to protect airport land from illegal encroachment and fencing work needs to be done. GIAL has proposed ₹ 0.20 crores capex against this. The Authority notes that GIAL has not submitted any BoQ against this line item. Accordingly it is proposed to consider only 50% of the capex proposed by GIAL. D. Cargo Facility As per AAI traffic news, LGBIA handled around 21,270 MT of Cargo in FY 2019-20 (Pre-Covid) level. This comprises of 21,267 MT domestic volume and 3 MT international volume. Prior to the CoD the cargo volumes are handled by AAICLAS (carved out facility). Further, the Authority notes that as per clause 19.4.1 (a) of the Concession Agreement, Following is relevant provision for the Cargo facility at LGBIA: The Concessionaire shall upgrade, develop. operate and maintain the Cargo Facilities in accordance with the provisions of this Agreement, Applicable Laws, Applicable Permits, relevant ICAO Documents and Annexes and Good Industry Practice. Consultation Paper No. 01/2024-25 Page 125 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD GIAL as part of the MYTP has proposed following capex phasing with respect to cargo facility: D.1 Interim Cargo Facility (₹ 3.22 crores) GIAL has started processing domestic cargo with capacity of 2,750 MT p.a. from June 2023 onwards. In this regard, AERA vide order no. 41/2023-24 dated 15th March 2024 allowed GIAL to levy the existing charges for Domestic Cargo Handling Services as per the approved Tariff for the other Cargo Service Provider at LGBIA till 30st September 2024 or tariff determination of third control period, whichever is earlier. GIAL has proposed ₹ 2.31 crores towards procurement of Cargo equipment and ₹ 0.76 crores towards minor refurbishment of old cargo building. The Authority notes that the proposed capex is largely towards equipment and refurbishment. Further, in view of the interim cargo facility developed at similar airport, the Authority proposes to consider the proposed capex however adjusted on account of inflationary impact. The inflation adjusted cost comes to ₹ 3.05 crores, the Authority proposes to consider the same. D.2 Integrated Cargo Terminal (ICT) (₹ 23.15 crores) GIAL has planned a new Integrated Cargo Terminal (ICT) of approx. 8652 sq, mtr. with handling capacity of 43260 MT p.a. The planned facility is proposed to be made operational in FY25-26. The proposed ICT facility will house both domestic inbound and outbound, International Export & Import operations and will efficiently support regional distributions, besides facilitating the processing of special cargo such as perishables, pharma etc. According to GIAL, the existing terminal building shall be refurbished and converted into a new Integrated Cargo Terminal (ICT). The estimated base cost for the refurbishment and equipment is ₹ 19.95 crores. As per GIAL, the capacity planned is correlated with the market demand. As part of MYTP, GIAL proposed to commission this facility in FY’26. The Authority notes that there is an existing cargo facility operated by AAICLAS at Guwahati Airport. However, in view of the Concession requirement and encouraging market competition, the Authority proposes to consider second cargo terminal at LGBIA. GIAL has estimated 86% market share in first year. However, considering the AAICLAS facility, the Authority has considered 50% market share. At 50% market share, GIAL is able to utilize 40% of its facility in the first year (2026-27). Considering the long-term horizon, the Authority proposes to allow 43260 MT cargo facility to GIAL. Following is the market share and corresponding capacity submitted by GIAL and proposed by the Authority: Table 92: Air Cargo demand projections, capacity of LGBIA Particular 2020 2021 2022 2023 2024 2025 2026 2027 Volume in MT at 21270 15951 21858 22823 24296 24999 28526 34801 LGBIA ATMs in No. 44539 23442 33572 45909 59970 60527 68050 82109 Ton/ATM 0.44 0.68 0.65 0.50 0.41 0.41 0.42 0.42 As per GIAL Market share 14% 18% 19% 86% GIAL expected 3500 4500 5500 30000 Volume (In MT) GIAL capacity (In MT) Domestic-Interim 2750 2750 2750 Integrated Cargo - - - 43260 Complex Consultation Paper No. 01/2024-25 Page 126 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Particular 2020 2021 2022 2023 2024 2025 2026 2027 GIAL Capacity 2750 2750 2750 43260 As per the Authority GIAL Market 14% 18% 19% 50% Share GIAL expected 3500 4500 5500 17400 volume (In MT) GIAL Capacity 2750 2750 2750 43260 (In MT) As per GIAL, the cost of new cargo facility of similar size costs much higher than the proposed cost of T-I refurbishment. Since, the cargo terminal is refurbished, GIAL has considered ₹ 10.10 crores as part of infrastructure changes towards existing terminal building: Table 93: Cost proposed by GIAL towards ICC Facility (₹ crores) Particular Amount Other Infrastructure change at Terminal 10.10 Additional Equipment for ICT 5.20 Site Circulation/Vehicle Movement Area 4.71 (10,000 sqmt @ ₹ 4700/Sqm) Total 19.95 The Authority notes that an additional air cargo facility/complex at Guwahati Airport will bring in more competition which will lead to better service quality and price discovery. It will benefit north east region and aviation stakeholders. The Authority through its independent consultant evaluated the proposed cargo capex in line with the similar projects undertaken at other Airports and noted that the proposed project is line with the airport requirement. in view of the same, the Authority proposes to consider the proposed capex towards Cargo facility. However, the cost has been adjusted on account of inflationary impact. The inflation adjusted cost proposed to be ₹ 3.05 crores for interim cargo facility and ₹ 21.18 crores for new cargo terminal against ₹ 3.22 crores and ₹ 23.15 crores submitted by GIAL respectively. E. Fuel Farm Infrastructure At present various Oil Marketing Companies (OMCs) (IOCL, RIL, BPCL and HPCL with storage facility of 800KL, 140KL, 800KL and 200KL respectively) have their respective fuel tanks and refuelling facilities at Guwahati Airport. OMCs manage the operations on their own, and currently operating expenditure and other charges are embedded in Aviation Turbine Fuel (ATF) fuel price. Therefore, as on date there is no concept of open access facility at the Airport. IOCL and RIL are located within the Airport premises whereas BPCL and HPCL are located outside. GIAL in line with the Concession Agreement has planned open access facility for fuel farm. It has proposed following capital expenditure for Fuel Farm infrastructure at LGBIA during third control period: Table 94: Details of Fuel farm capex submitted by GIAL (₹ crores) S. No. Particular Base Cost as per Remarks GIAL E.1 Fuel Storage tank 119.97 New facility proposed by GIAL E.2 Fuel Hydrant line 142.72 Consultation Paper No. 01/2024-25 Page 127 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD S. No. Particular Base Cost as per Remarks GIAL E.3 Equipment Cost 3.00 GIAL planned to procure three refueller as part of interim arrangement E.4 Procurement of 10.00 GIAL has estimated procurement of IOCL and RIL IOCL and RIL asset in line with AMD assets and LKO. E.5 Dead Stock 13.94 Required for operating new facility Total 289.63 GIAL planned new Fuel Farm Facility near to Apron 1 which is very far from upcoming Apron 2. This will require construction of approximately 7 Km hydrant system. Figure 10: Proposed Hydrant System at LGBIA The Authority, during the site visit asked GIAL to evaluate alternate location for fuel farm which can be closer to the Apron 2. In case the facility is planned closer to Apron 2, there will be significant saving toward construction of hydrant line. However, GIAL has not proposed any alternative plan or cost benefit analysis. Secondly, there is a proposal by Petroleum & Natural Gas Regulatory Board (PNGRB) to connect Brown field and Green field Airports with dedicated ATF pipeline network. On such connection, Fuel Tank requirements will reduce substantially. GIAL is directed to examine shifting of fuel farm near to Apron 2 and proposal of PNGRB. Hence, the Authority proposes not to consider any capital expenditure towards new facility for the fuel farm at this stage. However, if fuel facility is developed after examining both the issues, cost will be trued up in next control Period, subject to reasonability and efficiency. As CAPEX has been allowed on incurrence basis, subject to reasonability and efficiency, corresponding revenue and OPEX has been considered. In order to support operational requirement, the Authority proposes to consider capex toward procuring of three refueler and procurement of IOCL and RIL assets. GIAL has considered the cost in line with the similar cost in case of Lucknow and Ahmedabad Airport. The Authority, through its independent consultant has verified the same and found in order. GIAL has estimated ₹ 13.00 crores as base cost and ₹ 13.65 crores inflation adjusted cost. The Authority has adjusted the base cost considering the proposed work will get completed in FY’25. The inflation adjusted cost as per inflation factors considered in para 7.3.4 comes to ₹ 13.31 Consultation Paper No. 01/2024-25 Page 128 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD crores. The Authority proposes to consider ₹ 13.31 crores towards this project against ₹ 13.65 crores estimated by GIAL. F. Vehicles (₹ 39.78 crores) As part of MYTP, GIAL has proposed to procure various vehicles during third control period for operational requirement. The Authority has reviewed the list of vehicles provided by GIAL and have following observations: i. GIAL has planned conversion of diesel cars to electric vehicles. It is estimated that total 17 vehicles will be required by GIAL including one large EV i.e. Bus. GIAL has shared online quotation of electric bus which is around ₹ 2.00 crores. GIAL has estimated total cost of ₹ 11.00 crores for these 17 vehicles. The Authority believes that same is on higher side, accordingly, the estimated cost of E-vehicles other than large EV considered to be 50%, i.e. ₹ 4.5 crores. The cost is thus proposed to be ₹ 6.50 crores against ₹ 11.00 crores requested by GIAL. ii. GIAL estimated two tractors for shifting from nursery and other site-based work requirements. Also, added two electrical buggies with loader attachment and trolleys for plants movement. The base cost estimated to be ₹ 0.20 crores. Same seem to be on higher side compared to market rates. Thus, the Authority proposes to consider ₹ 0.10 crores. iii. GIAL has planned to procure two ambulances during third control period to replace existing ones. GIAL has proposed ₹ 0.75 crores for two ambulances. The Authority, in line with the market rates proposes to consider ₹ 0.50 crores for these ambulances. iv. In case of CFT, GIAL submitted that LGBIA has 3 Rosenbauer CFTs which are more than 12 years old. Hence, it is planned to procure two new CFTs in FY-24 and FY-25 to replace 2 CFTs. GIAL has proposed base cost of ₹ 23.98 crores for two CFTs and shared supporting purchase order and custom duty details. The Authority through its independent consultant reviewed the same and found in order. In view of the operational requirement, the Authority proposes to consider this capex. v. For other vehicles, cost and requirement, as submitted by GIAL has been accepted, subject to inflationary adjustment. vi. In view of the above, the Authority proposes ₹ 34.93 crores as base cost toward vehicles proposed to be procured during third control period against the cost of ₹ 39.78 crores estimated by GIAL. The proposed cost is also adjusted on account of inflation adjustment indexation. Following is the asset wise comparison of GIAL proposal vis a vis cost proposed by the Authority: Table 95: Cost proposed toward Vehicles by the Authority for the Third Control Period (₹ crores) S. No. Year of GIAL Authority capitalization Particular Indexed Base Indexed Base cost Cost cost Cost F.1 Vehicles 2024-2027 11.00 12.58 6.50 6.73 F.2 Modified vehicle for 2025-2026 3.00 3.39 3.00 3.13 BDDS equipment F.3 Vehicle recovery Van 2024 0.15 0.16 0.15 0.15 F.4 2 Nos. tractor with trolleys & electric 2025-2026 buggies to shuttle 0.20 0.23 0.10 0.10 nursery between the two Terminals Consultation Paper No. 01/2024-25 Page 129 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD S. No. Year of GIAL Authority capitalization Particular Indexed Base Indexed Base cost Cost cost Cost F.5 Ambulance 2025 0.75 0.87 0.50 0.52 F.6 Crash Fire Tender 2024-2025 23.98 25.81 23.98 25.00 F.7 Quick Reaction Team 2025 0.70 0.77 0.70 0.72 (QRT) Vehicle Total 39.78 43.81 34.93 36.36 G. Plant & Machinery (₹ 180.93 crores) GIAL has proposed procurement of various equipment for operational requirements. The Authority notes that GIAL has planned for the procurement of machinery and equipment towards achievement of green initiatives norms and to ensure safety and security of operations and the fulfilment of regulatory requirements mandated by agencies like BCAS. Following are the key capital items proposed in third control period: Oil Water Separator (OWS) – As part of environment compliance, GIAL has proposed to install oil water separator at select locations on the airside. It separates oil from the wastewater from aprons, hangar, cargo facility, GA & GSE workshop etc.. GIAL has planned 5 units of oil water separator. Keeping in view the tariff level, the Authority believes that there is a need to rationalize capital expenditure. Accordingly, the Authority proposes to consider three OWS instead of five OWS sought by GIAL. Triturator- As per GIAL, this facility is required for safe and hygienic disposal of waste from aircraft toilets to ensure compliance with safety and environment regulations. Liquid waste from aircraft shall be treated at Triturator as a primary treatment & further will be pumped to STP for secondary treatment. This facility is proposed on the northeast side of T2. The Authority through its independent consultant has evaluated the capex submitted by GIAL and observed that GIAL has considered 15% additional mark up over the base cost of Triturator which is not supported by any requirement. The Authority, in view of the capex optimization proposes to remove 15% mark up and proposes base cost of ₹ 3.06 crores against ₹ 3.47 crores initially submitted by GIAL. Body Scanner – GIAL has estimated requirement of 13 body scanner at LGBIA. The Authority notes that GIAL estimates on higher side as even the major Airport hub in India doesn’t have such magnitude of body scanner. In view of this, the Authority proposes to consider only 5 body scanners at LGBIA. In terms of costing, GIAL has considered ₹ 3.40 crores each. The Authority has examined the cost estimated by GIAL. The Authority notes that in case of Lucknow Airport, the cost towards body scanner has been allowed as ₹ 3.00 crores each. In view of the same, the Authority proposes to consider rates allowed in case of Lucknow Airport with inflationary adjustment. The inflation adjusted cost comes to ₹ 3.21 crores each at FY’23 level and the overall cost for the project during third control period proposed to be ₹ 16.99 crores against ₹ 51.49 crores submitted by GIAL. Safety and Security related project – GIAL has submitted various projects related to safety and security of the Airport. This includes firefighting equipment, disable aircraft removal kit, X-Ray, HHMD, DFMD, ETDs. In view of the safety and security requirement, the Authority proposes to consider this capital expenditure. However, the cost of these items have been corrected on account of inflationary adjustments. Further, GIAL has also proposed capital expenditure towards Security Operational Control Center (CISF), Security Surveillance Centre (SSC), CCTV set up, Container Tubular Shooting range and Video Surveillance system. The Authority notes that GIAL has not shared any further break up or basis against this capex. Further, it is believed that there is scope of cost optimization against these capex. Accordingly, minimize impact on tariff, the Authority proposes 50% cost against GIAL submission. Repair & Maintenance work - GIAL has considered repair and maintenance work of airside amounting Consultation Paper No. 01/2024-25 Page 130 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD to ₹ 0.32 crores as capital expenditure. The Authority proposes to not consider the same as part of capex as it is not in the nature of capital expenditure. Miscellaneous works – GIAL has provided list of minor plant & machinery works. The Authority has reviewed the list of minor works shared by GIAL and noted that these are mainly for upgradation and modification of existing facility. In view of the operational requirement, the Authority proposes to consider the same. Visual Docking Guidance System (VDGS) – GIAL has estimated 24 nos of new VDGS and supported cost of VDGS with price quotation. As per the document the VDGS is expected to cost ₹ 0.50 crores each. In view of the price discovery document submitted by GIAL, the Authority proposes to consider this capex. The proposed inflation adjusted cost is ₹ 12.74 crores against GIAL submission of ₹ 13.89 crores. Others – GIAL has also estimated various equipment. However, has not shared any details for the estimates. In view of the absence of further details and optimisation of tariff levels, the Authority proposes 50% cost towards this capex. Further, in view of the project priority and minimal impact on tariff, the Authority proposes not to consider some of the environment related project related to carbon sequestration and biodiversity preservation projects. Further, the cost proposed by the Authority towards plant & machinery is further adjusted on account of inflation while arriving indexed cost. Following is the comparison of capex proposed by the Authority vis a vis GIAL: Table 96: Details of Plant and Machinery submitted by GIAL and proposed by the Authority (₹ crores) Year of GIAL Authority S. No. Particular Capitalization (as per GIAL) Base Indexed Base Indexed Cost Cost Cost Cost G.1 Oil Water Separator-5 nos. 2025, 2026 23.60 26.80 13.50 14.13 G.2 Triturator 2025 3.47 3.83 3.06 3.13 G.3 Hazardous Waste Storage 2025, 2026 0.49 0.55 0.24 0.25 Reticulation of utilities to G.4 2026, 2027 8.39 9.78 4.19 4.48 new facilities SITC of LED type SPOL System at Sajanpara, Borsilla G.5 2024 0.06 0.06 0.03 0.03 & Mirza Hills near LGBI Airport, Guwahati. Laying of GLF light cables G.6 2025 0.85 0.94 0.43 0.44 approximate 6500 mtrs G.7 Laser unit for AVDGS-2NO 2025 0.40 0.44 0.20 0.20 SITC of A-VDGS at Bay no. G.8 2025 0.71 0.78 0.35 0.36 4 Energy saving projects (hymus perimeter lights, G.9 hymus solar lights, other 2024 1.52 1.60 0.76 0.78 energy saving projects) (Reduced from 2.7 to 1.52) SITC of Repair and G.10 2024 0.30 0.32 0.0 0.0 Maintenance work for Airside Miscellaneous Plant and Machinery (Boom lift, Chiller G.11 2024-2027 3.07 3.36 3.07 3.19 plant cooling tower development, Breath Consultation Paper No. 01/2024-25 Page 131 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Year of GIAL Authority S. No. Particular Capitalization (as per GIAL) Base Indexed Base Indexed Cost Cost Cost Cost Analyser Equipment, Expansion of existing electrical office, Modification of Existing DG set controller etc) PVC coated Chain net for G.12 2025 1.00 1.10 0.50 0.51 Operation area drains Environmental Projects (R22 based will be replaced by G.13 R32, carbon offset projects, 2024-2027 6.60 7.34 4.05 4.22 ACI 4 + certification, RE 100 etc) EV Charging Stations for E G.14 Buses , Apron Cars , Tugs 2024-2027 5.70 6.48 2.85 2.97 along with their installation . G.15 carbon sequestration 2024-2027 3.40 3.95 0.00 0.00 Biodiversity preservation G.16 2024-2027 2.15 2.50 0.00 0.00 projects G.17 Fire Fighting Equipments 2024-2027 3.55 3.86 3.55 3.63 G.18 Disable Aircraft Removal Kit 2025 17.69 19.50 17.69 18.11 Hand Baggage X-Ray - G.19 2025, 2026 2.55 2.89 2.55 2.66 60cmX40cm Explosive Trace G.20 2024-2025 1.35 1.49 1.35 1.40 Detector(ETD) Hand Held Metal G.21 2024-2027 0.18 0.21 0.18 0.19 Detector(HHMD) Door Frame Metal G.22 2024-2027 0.59 0.68 0.59 0.62 Detector(DFMD) Security Operation Control G.23 2025-2027 2.77 3.29 1.38 1.47 Center (CISF) Security Survilience Centre G.24 2025 1.50 1.65 0.75 0.77 (SSC) Close Circuit Television G.25 2025-2027 3.20 3.71 1.60 1.66 (CCTV) Setup G.26 Access Control system, Adani 2025-2027 2.40 2.78 1.20 1.24 Container Tubular shooting G.27 2025 1.30 1.43 0.65 0.67 Range G.28 Video Surveillace system 2024-2027 3.59 4.23 1.80 1.89 G.29 Body Scanner 2025-2027 44.57 51.49 16.07 16.99 G.30 VDGS 2026 12.00 13.89 12.00 12.74 Total 158.95 180.93 94.59 98.74 H. Other Buildings (₹ 163.85 crores) GIAL has proposed construction of various building owing to security requirements, new expansion, administrative building, police station and various utilities etc. The Authority has reviewed the same and have following observations: i. In case of administrative building, the GIAL has proposed to construct 5000 Sqm office building. As part of clarification the Authority has sought further detail and business case for Consultation Paper No. 01/2024-25 Page 132 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD requirement of this much area for an administrative office. However, as part of response, no further clarity was shared by GIAL. In view of this, the Authority noted that a significant part of staff requirement of GIAL will be operational such as airport operation, screening, security, runway operation etc. which will be deployed at respective work location outside administrative building. Accordingly, considering the staff strength there is significant optimization required in the administrative office space area. In absence of adequate plan, the Authority proposes to consider 50 % of the admin building i.e. 50% of employee which are expected to deployed at admin building to overall staff. The Authority has accordingly revised the building area to 2500 sqm. However, the Authority has maintained the same quantities related to demolition works, landside road and site circulation. Further, GIAL has considered the rates as per the rates derived in case of some of the office building at Ahmedabad Airport. The Authority has reviewed the rates submitted by GIAL with the comparable statistics issued by CBRE5 and found the same in the range of similar kind of construction. Following is the comparison of the cost details submitted by GIAL and proposed by the Authority: Table 97: Cost of administrative building as per GIAL and proposed by the Authority (₹ crores) Particular UoM GIAL Authority Rate Qty Amount Rate Qty Amount New Pavement Perimeter Road Sqm 5100 770 0.39 4800 770 0.37 Structure New Building Sqm 92000 5000 46.00 69200 2500 17.30 Site circulation Sqm 4700 2405 1.13 4700 2405 1.13 Total 47.52 18.80 ii. GIAL has proposed an integrated building for Airport Police Station, Airport Health Office and Airport Post Office. An integrated building is planned with an area of approx. 925 sqm. The Authority, through its consultant has sought further detailed BoQ against this capex. However, GIAL has shared a blended rate against this building. The Authority notes that these building will be largely office like structure and accordingly in absence of further details proposes to consider the rate equivalent to admin building. Following is the summary of the Authority proposal: Table 98: Details of Integrated building submitted by GIAL and proposed by the Authority (₹ crores) Particular UoM GIAL Authority Rate Area Amount Rate Area Amount Police Station Sqm 98940 260 2.57 69200 260 1.80 Airport Health Office Sqm 94219 600 5.65 69200 600 4.15 Airport Post Office Sqm 95046 65 0.62 69200 65 0.45 8.84 6.40 iii. The Authority, while reviewing cost for CCR Room observed that GIAL has considered 10% overhead on account of airside constraints. The Authority has revised the same to 5% in view of public works guidelines (generally where NOTAM is issued). iv. GIAL has proposed new ARFF satellite building on account of proposed airside and associated development. As per GIAL, it is required to meet the response time as the current fire station is almost 5 KM away from the edge of the new runway and will not be able to meet the response 5 India Construction Cost Trends 2023 issued by CBRE Consultation Paper No. 01/2024-25 Page 133 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD time. In view of the safety requirement, the Authority proposes to consider this capex. However, the rates have been revised on account of adjustment of airside working area constraint overhead from 10% to 5%. v. GIAL has proposed various other office building such as airport maintenance office, other building-admin office and administrative building. The total base cost proposed against these structures is ₹ 16.54 crores. The Authority notes that GIAL has already proposed new office building and terminal building. The existing structure of office building and terminal building will be idle once these have been shifted to new premises. GIAL should evaluate and consider utilization of these building for additional proposed offices. Accordingly, the Authority proposes not to consider any capex for additional offices. vi. GIAL has further considered various other building and structures such as airside gates, SMR facilities, fuel/EV station, Modification of MT shop into interim office, Solid waste facility, water supply system, sewerage system, watch tower, earth filling, CISF accommodation, nursery development, horticulture, Anti hijacking Control Room etc. The Authority notes that GIAL has not shared any further details on these capex. There is scope in cost optmisation and also in view of keeping tariff at optimum level, the Authority proposes 50% of the proposed capex. vii. In view of the above, the Authority proposes inflation adjusted cost of ₹ 77.28 crores against GIAL submission of ₹ 163.85 crores. Following is the asset wise comparison of GIAL proposal vis a vis inflation adjusted (indexed) cost proposed by the Authority: Table 99: Capex proposed toward Other Buildings by the Authority for Third Control Period (₹ crores) Year of GIAL The Authority S. Particular Capitalization Base Indexed Base Indexed No. (as per GIAL) Cost Cost Cost Cost H.1 Relocation of Localiser 02 2024 0.20 0.21 0.10 0.10 H.2 CCR Building new construction 2025-2026 12.86 14.46 12.11 12.58 H.3 Airside Gates – 5 nos. 2025-2026 5.79 6.51 2.90 3.01 SMR Facilities (New H.4 2025-2026 0.91 1.00 0.45 0.47 Construction) H.5 Fuel/ EV Charging Station 2025-2026 2.49 2.76 1.24 1.28 Satellite ARFF Station (New H.6 2025 12.35 13.61 11.65 11.92 Construction) Modification of MT workshop H.7 into Admin office building 2025 2.14 2.36 1.07 1.09 (Interim arrangement) Integrated Building for Airport H.8 Police Station, Airport Health 2026-2027 8.84 10.34 6.40 6.85 Office and Airport Post Office Airport Administration Building H.9 2026-2027 47.52 55.57 18.80 20.11 (5,000 Sqm) Airport Maintenance Office H.10 2026-2027 11.41 13.34 0.00 0.00 (1,200 Sqm) H.11 Solid Waste Facility 2025-2026 2.50 2.82 1.25 1.30 H.12 Water Supply system 2026 4.66 5.43 2.33 2.48 H.13 Sewerage System 2026 1.16 1.35 0.58 0.62 Modification of watch tower at H.14 operational area L.G.B.I. Airport 2024 0.35 0.37 0.18 0.18 Guwahati Consultation Paper No. 01/2024-25 Page 134 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Year of GIAL The Authority S. Particular Capitalization Base Indexed Base Indexed No. (as per GIAL) Cost Cost Cost Cost Earth filling of low using areas and other miscellaneous works at H.15 operational area related to DGCS 2025 0.40 0.44 0.20 0.20 compliance from time to time at L.G.B.I. Airport Guwahati H.16 Fire Station Improvement 2024-2025 4.20 4.57 4.20 4.41 H.17 Other Building - Admin Office 2024 1.50 1.58 0.00 0.00 H.18 Sewage Treatment Plant 2025 0.36 0.40 0.36 0.37 Misc Other Buildings - 2024-2025, H.19 Upgradation works at RED, 2.89 3.26 1.45 1.48 2027 ATC, CISF and BCAS building H.20 Installation of LGB Statue 2024 0.15 0.16 0.08 0.08 H.21 CISF accommodation 2025-2027 13.50 15.64 6.75 7.04 H.22 Nursery Development 2027 0.60 0.73 0.30 0.33 H.23 Misc Horticulture Improvements 2024-2027 1.46 1.64 0.73 0.75 H.24 Administrative Building 2024-2026 3.64 3.91 0.00 0.00 Anti Hijacking Control Room H.25 2025-2026 1.22 1.40 0.61 0.63 (AHCR) upgradation Total 143.09 163.85 73.72 77.28 I. IT Equipment (₹ 17.80 crores) As part of MYTP, GIAL has submitted proposal to procure various IT equipment for operational requirement and upgradation. The Authority has reviewed the same and have following observations: i. GIAL has proposed ₹ 13.12 crores worth of IT Strategic projects towards passenger flow management, queue monitoring system to provide advance information to operation team for better flow management, wheelchair tracking, trolley tracking, IOT & Digiyatra. The Authority notes that the cost proposed for the planned project are very high. Also the technology like IoT, trolley tracking are still to be implement at major airport in India. In view of the insufficient details, the Authority proposes to consider 20% of the cost proposed by GIAL. ii. GIAL has estimated ₹ 0.35 crores toward other IT projects and shared no further details. Since there are no details provided, the Authority proposes not to consider this capex. Also, GIAL has proposed ₹ 0.20 crores for innovation lab. The Authority notes that GIAL is supported by corporate team which are involved in strategy formulation, have access to various industry information and expertise and the cost of this already been allocated to GIAL as part of corporate allocation. In view of the duplication of cost, the Authority proposes to not consider this capex. iii. Following are the details of capex along with corrected cost by the Authority: Table 100: Capex proposed toward IT equipment by the Authority for Third Control Period (₹ crores) Year of GIAL The Authority S. Particular Capitalization Base Indexed Base Indexed No. (as per GIAL) Cost Cost Cost Cost Active component (Network I.1 2024-2027 0.10 0.11 0.10 0.10 Switches, Firewall, Router) Consultation Paper No. 01/2024-25 Page 135 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Year of GIAL The Authority S. Particular Capitalization Base Indexed Base Indexed No. (as per GIAL) Cost Cost Cost Cost Passive Components (Network I.2 2024-2027 0.45 0.45 0.45 0.42 CAT-6 and OFC cabling) Data center Infrastructure and Wi-Fi I.3 2024-2027 0.41 0.44 0.41 0.41 setup I.4 Cyber Security 2024-2027 0.10 0.11 0.10 0.10 Voice Infra (EPABX & IP Phone) & I.5 2024-2027 0.05 0.05 0.05 0.05 Recording Solutions I.6 New User - Laptop / Desktop 2024-2027 0.26 0.28 0.26 0.26 I.7 SAP licenses 2024-2027 0.44 0.47 0.44 0.44 I.8 Other IT Cost 2024-2027 0.35 0.38 0.00 0.00 1. FIDS: Flight Information Display System 2. PA (Public Announcement I.9 2024-2027 0.10 0.11 0.10 0.10 System 3. LED Walls, 4. Video Walls Strategic Projects (Pax Count, Flow & Queue Monitoring. Wheelchair, I.10 2024-2027 13.12 14.11 2.62 2.97 Buggy & Trolley Tracking (IOT), OT) & Digi Yatra I.11 Innovation & Technology Lab 2024-2027 0.20 0.22 0.00 0.00 I.12 SMS Software 2024-2027 1.00 1.08 1.00 1.01 Total 16.57 17.80 5.53 5.87 iv. In view of the above, the Authority proposes ₹ 5.87 crores inflation adjusted cost toward IT project against GIAL submission of ₹ 17.80 crores. J. Furniture & fixtures (₹ 1.66 crores) GIAL has proposed to procure various furniture & fixtures for terminal operations during third control period. The Authority in view of the new proposed terminal and office complex proposes to consider the capex and the cost estimated by GIAL. The base cost proposed the Authority is ₹ 1.48 crores which is in line with the submission made by GIAL. The indexed cost has been adjusted on account of inflationary adjustment. The Authority proposes to consider inflation adjusted cost of ₹ 1.56 crores against ₹ 1.66 crores submitted by GIAL. K. Security Equipment’s (₹ 35.70 crores) i. GIAL has proposed procurement of bullet proof jackets, bullet proof helmet, bullet proof shield, bullet proof morcha, binocular device etc. In this regard GIAL has collectively estimated an amount of ₹ 2.62 crores as base cost and ₹ 2.96 crores as inflation adjusted cost. The Authority notes that there is no justification provided by GIAL for the amount estimated. In view of the security requirement and absence of supporting details, the Authority proposes to consider 50% of the capex proposed by GIAL. The inflation adjusted cost proposed to be ₹ 1.34 crores. ii. Threat Containment Vehicle (TCV) – GIAL has proposed to procure TCV for LGBIA at ₹ 15.44 crores. In this regard GIAL has shared a quotation of USD 1.3 Mn plus duty/taxes. In view of the security requirement and available quotation, the Authority proposes to consider the same. However, the cost of the proposed vehicle is adjusted on account of inflationary Consultation Paper No. 01/2024-25 Page 136 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD adjustment in 2025 i.e. ₹ 14.33 crores. iii. As per MYTP, GIAL has estimated ₹ 4.00 crores as base cost (₹ 4.61 crores indexed cost) towards BDDS which are required as per security requirements. GIAL has not shared any further supporting details against this line item. In view of the same, the Authority proposes to consider 50% of the proposed cost by GIAL, the inflation adjusted cost comes to ₹ 2.09 crores. iv. GIAL as part of MYTP has submitted requirement of miscellaneous security equipment such as quick reaction team equipment, radiological detection equipment, network switch and cabling tech refresh, OFC network CCTV etc.. GIAL has estimated ₹ 10.99 crores as base cost for these items collectively. GIAL has shared following list of security equipment: Table 101: Details of miscellaneous security equipment (₹ crores) S. No. Particulars ₹/Cr Justification / Remarks 1 RT Sets 2.91 Considering cost of Tetra Set Requirement as per AVSEC Order 06/2018 2 Server and Storage 2.90 Tech refresh of Video Surveillance system at Tech Refresh terminal building. Replacement of EOL camera (AvSec Circular 05/2017) 3 Network Switch and 3.69 Tech refresh of Video Surveillance system, Cabling Tec Refresh, network cable, city side camera. Installation of OFC network CCTV, AI facility camera. Installation of bar coded Other building scanner for labor at Cargo gate as per AEP connectivity's Guidelines 2022 (AvSec Circular 05/2017, AEP Guidelines 2022) 4 Centralized Access 0.29 Installation of Bio Metric Access Control System Control System at existing terminal building (CACS) (Avsec Circular 02/2007, Appendix-J) 5 Quick Reaction Team 0.21 QRT equipment for CISF Equipment (Avsec Order 06/2018) 6 Radiological Detection 1.00 1. BCAS regulatory compliance & CISF Equipment. requirements 2. Avsec Circular 01/2020. Radiological Detection Equipment will be operationalized by Aviation Security Group (ASG) with immediate effect and upkeep & maintenance will lie with Airport Operator. Total 10.99 The inflation adjusted cost for the above projects is ₹ 12.70 crores as per GIAL submission. In view of the security requirement, the Authority proposes to consider this capex however the cost has been adjusted on account of inflationary adjustment. The cost is accordingly revised to ₹ 11.66 crores. In view of the security requirement and compliance, the Authority proposes to consider inflation adjusted cost of ₹ 29.43 crores against GIAL submission of ₹ 35.70 crores. L. Sustaining capex (₹ 47.64 crores) As per MYTP, GIAL has incurred sustaining capex of ₹ 47.64 crores in FY’23. The capex is mainly on account of earth filling work at runway strip as required by DGCA, stamp duty payment as required under Concession Agreement, SAP license, administrative buildings, IT networking, terminal building works, X-ray, security, furniture & fixture and office equipment. Following are the details of capex incurred during FY’23: Consultation Paper No. 01/2024-25 Page 137 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Table 102: Details of sustaining capex for FY'23 (₹ crores) Amount in Particular Remarks (₹ crores) Earth filling works as per DGCA, Apron Runway, Taxiway and Apron 10.04 refurbishment works, Stamp duty allocation SAP license, IT networking, workstation, IT equipment 9.11 laptops and other office related IT equipment Passenger trolleys, electrical installation, X-ray Plant and Machinery 8.28 baggage, rubber removal machine, STP, stamp duty allocation etc. Office building, horticulture, parking, stamp Other Buildings 6.14 duty allocation etc. FIDS, Trace detector, LED displays, UG water Office equipment 4.98 system, CCTV, office equipments Notional Lease Asset 3.95 Right of Use of leashold building QRT vehicles, Electric vehicle, stamp duty 2.55 allocation etc. Vehicles Furniture & fixtures 2.35 Office and terminal related furniture Intangilble Assets 2.13 Airport Concession Rights Terminal roof waterproofing, refurbishment Terminal Building 1.98 work at existing terminal, stamp duty allocation etc. Software 1.58 Various enterprise software, SITA license Cargo building 0.57 Civil works towards domestic cargo Access Road 0.05 Improvement of internal roads Total 53.73 Less: Notional asset & intangible assets 6.08 Right of use and airport concession rights Net Amount 47.64 The Authority has reviewed the capital expenditure incurred by GIAL in FY’23 for sustainable operation. It is noted that the capital expenditure is mainly related to airside works, stamp duty payable as per concession requirement, IT licenses like SAP, SITA etc, office building, equipment and furniture, terminal related refurbishment works, borrowing cost etc.. In view of the operational requirement, the Authority proposes to consider this capex. 7.3.7 Based on above proposals, the summary of New Capital Expenditure projects proposed by the Authority for the Third Control Period is as follows: Table 103: Capital Expenditure proposed by the Authority for the Third Control Period (₹ crores) Financial Year of Cost as Cost as Capitalization per per the Difference S. No. Particular Proposed Remarks As per GIAL Authority C=(A-B) by the GIAL (A) (B) Authority Passenger Terminal Building and Associated Works NITB (Including Cost adjusted as per A.1 Opening CWIP 2025 2026 2194.38 2131.86 (62.52) Normative A as per financials) A.2 Kerbside 2025 2026 138.60 127.74 (10.86) Reduction of culvert Development cost and Consultation Paper No. 01/2024-25 Page 138 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Financial Year of Cost as Cost as Capitalization per per the Difference S. No. Particular Proposed Remarks As per GIAL Authority C=(A-B) by the GIAL (A) (B) Authority benchmarking with other airports Exisiting Terminal Adjusted cost in view A.3 2024-2025 2024-2025 9.64 4.82 (4.82) Building of NITB and repair Development related works Total 2342.62 2264.41 (78.20) Runways, Taxiway & Aprons Cost adjusted as per Apron-2 Normative & B.1 (Demolition and 2025-2026 2025-2026 466.21 241.19 (225.02) inflationary rew-construction) adjustment Airside Storm B.2 Water Drainage 2025 2026 208.38 194.68 (13.70) Inflationary works adjustment Construction of Cost adjusted as per Part Parallel Normative & B.3 2025 2026 199.02 153.75 (45.27) Taxiway and inflationary Link Taxiways adjustment Land B.4 Development 2026 2026 189.73 43.77 (145.97) Cost optimisation and works phase wise work Adjusted on account of reduction in Widening of B.5 2025 2025 87.17 77.06 (10.10) working area Runway Strip constraint factor from 10% to 5% Cost adjusted as per Construction of Normative & B.6 Second Part 2026 2026 81.64 60.84 (20.80) inflationary Parallel Taxiway adjustment B Cost adjusted as per Extension of Normative & B.7 Runway 02–20 2025 2026 51.61 39.72 (11.90) inflationary towards RWY 20 adjustment Construction of Cost adjusted as per new Isolation Normative & B.8 2025 2025 30.89 21.84 (9.04) Bay (Rigid inflationary Pavement) adjustment Cost adjusted as per Construction of Normative & B.9 Rapid Exit 2026 2026 19.73 14.79 (4.94) inflationary Taxiway adjustment Other Minor B.10 Airside Capex Construction of Adjusted on account Runway End of reduction in Safety Area B.10.1 2025 2026 4.21 3.80 (0.41) working area (RESA) after constraint factor from RWY 20 10% to 5%, Threshold inflationary Extension of adjustment or B.10.2 Blast Pad for 2025 2026 4.24 3.89 (0.36) adjusted cost to 50% RWY 02 and Consultation Paper No. 01/2024-25 Page 139 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Financial Year of Cost as Cost as Capitalization per per the Difference S. No. Particular Proposed Remarks As per GIAL Authority C=(A-B) by the GIAL (A) (B) Authority Construction of in absence of new Blast Pad for BoQ/details. RWY 20 Relocation of Simple Approach B.10.3 2025 2025 0.78 0.72 (0.06) Lighting System for Runway 20 Installation of Category-I Approach B.10.4 2025 2026 7.38 7.18 (0.19) Lighting System towards Runway 02 B.10.5 Off-Stand GSE 2026 2026 4.60 3.50 (1.10) Apron stand surface B.10.6 2024 2024 0.32 0.31 (0.01) revamping work in old apron Manhole chamber covers for all manholes B.10.7 or pits at apron 2025 2025 0.22 0.20 (0.02) area, strip area as per ICAO standard Provision of new Earthing system for Runway and B.10.8 2025 2025 0.19 0.17 (0.01) other associated works at Guwahati Airport SITC of Inset fittings for B.10.9 Runway-Taxiway 2024 2024 0.40 0.19 (0.20) intersection at Guwahati Airport Upgradation of flexible B.10.10 2026 2026 0.87 0.80 (0.07) pavements in Operational area Runway Graded Strip and RESA B.10.11 2024 2024 0.18 0.09 (0.09) strengthening (up to 300mm Depth) Airside works ( Apron surface revamping works, Provision B.10.12 of new Airfield 2024-2026 2024-2026 1.73 1.64 (0.10) signages, Joint filling and cleaning of old apron) B.10.13 Apron Control 2024 2024 0.21 0.10 (0.11) Consultation Paper No. 01/2024-25 Page 140 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Financial Year of Cost as Cost as Capitalization per per the Difference S. No. Particular Proposed Remarks As per GIAL Authority C=(A-B) by the GIAL (A) (B) Authority Airside B.10.14 2024-2026 2024-2026 1.65 1.58 (0.08) Equipments As per existing Runway runway condition and B.11 strengthening 2026 - 75.25 0.00 (75.25) other planned work, it works is propose to defer this work. Sub-Total 1436.60 871.81 (564.79) Construction of Boundary Wall New construction of Airside Perimeter & Service Roads C.1 and demolition of 2025-2026 2025-2026 38.33 33.63 (4.70) existing Airside Roads due to Cost adjusted on widening of account of revised Runway Strip submission by GIAL New construction C of Airside and inflationary adjustment Boundary Wall & demolition of C.2 2025-2026 2025-2026 77.37 67.98 (9.38) existing Airside Boundary Wall due to widening of Runway Strip C.3 PIDS System 2025-2026 2025-2026 26.24 20.50 (5.74) C.4 Boundary Wall 2024 2024 0.21 0.10 (0.11) In absence of BoQ adjusted cost to 50% Sub-Total 142.14 122.21 (19.94) Cargo Complex Interim Cargo Adjusted cost on D.1 2024 2024 3.22 3.05 (0.17) Facility account of D New Cargo inflationary D.2 2026 2026 23.15 21.18 (1.97) Terminal adjustment Sub-Total 26.37 24.23 (2.14) Fuel Farm Infrastructure E.1 Fuel storage farm 2025-2026 - 135.07 0.00 (135.07) It is proposed to re- E.2 Fuel hydrant line 2025-2026 - 160.68 0.00 (160.68) evaluate fuel farm Equipment cost 2024 2025 3.15 3.07 (0.08) location and fuel storage tank capacity E Cost of due to dedicated line. procurement of E.3 2024 2025 10.50 10.24 (0.26) Project has been IOCL and RIL allowed on incurrence Assets b asis. Dead Stock 2026 - 16.14 0.00 (16.14) Sub-Total 325.55 13.31 (312.24) Vehicles F F.1 Vehicles 2024-2027 2024-2027 12.58 6.73 (5.85) Consultation Paper No. 01/2024-25 Page 141 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Financial Year of Cost as Cost as Capitalization per per the Difference S. No. Particular Proposed Remarks As per GIAL Authority C=(A-B) by the GIAL (A) (B) Authority Modified vehicle F.2 for BDDS 2025-2026 2025-2026 3.39 3.13 (0.26) equipment Vehicle recovery F.3 2024 2024 0.16 0.15 0.00 Van 2 Nos.Tractor withTrolleys & electric buggies Adjustment in F.4 2025-2026 2025-2026 0.23 0.10 (0.13) to shuttle nursery rates/qty and inflation between the two adjustment Terminals F.5 Ambulance 2025 2025 0.87 0.52 (0.35) Crash Fire F.6 2024-2025 2025-2026 25.81 25.00 (0.80) Tender Quick Reaction F.7 Team (QRT) 2025 2025 0.77 0.72 (0.06) Vehicle Sub-Total 43.81 36.36 (7.46) Plant and Machinery G.1 5 nos. OWS 2026 2026 26.80 14.13 (12.67) G.2 Triturator 2025 2025 3.83 3.13 (0.70) Hazardous Waste G.3 2026 2026 0.55 0.25 (0.30) Storage Reticulation of G.4 utilities to new 2027 2027 9.78 4.48 (5.30) facilities SITC of LED type SPOL System at Sajanpara, G.5 2024 2024 0.06 0.03 (0.03) Borsilla & Mirza Hills near LGBI Adjustement on Airport, account of Guwahati. inflationary adjustment, 50% G Laying of GLF consideration of work light cables G.6 2025 2025 0.94 0.44 (0.50) where BoQ is not approximate provided, project 6500 mtrs need assessment and Laser unit for G.7 2025 2025 0.44 0.20 (0.24) Cost optimization. AVDGS-2NO SITC of A- G.8 VDGS at Bay no. 2025 2025 0.78 0.36 (0.42) 4 Energy saving projects (hymus perimeter lights, hymus solar G.9 lights, other 2024 2024 1.60 0.78 (0.82) energy saving projects) (Reduced from 2.7 to 1.52) Consultation Paper No. 01/2024-25 Page 142 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Financial Year of Cost as Cost as Capitalization per per the Difference S. No. Particular Proposed Remarks As per GIAL Authority C=(A-B) by the GIAL (A) (B) Authority SITC of Repair G.10 and Maintenance 2024 2024 0.32 0.00 (0.32) work for Airside Miscellaneous Plant and Machinery (Boom lift, Chiller plant cooling tower development, G.11 Breath Analyser 2024-2027 2024-2027 3.36 3.19 (0.17) Equipment, Expansion of existing electrical office, Modification of Existing DG set controller etc) PVC coated Chain net for G.12 2025 2025 1.10 0.51 (0.59) Operation area drains Environmental Projects (R22 based will be replaced by R32, G.13 2024-2027 2024-2027 7.34 4.22 (3.12) carbon offset projects, ACI 4 + certificationn, RE 100 etc) EV Charging Stations for E Buses , Apron G.14 2024-2027 2024-2027 6.48 2.97 (3.51) Cars , Tugs along with their installtion . carbon G.15 2024-2027 - 3.95 0.00 (3.95) sequestration Biodiversity G.16 preservation 2024-2027 - 2.50 0.00 (2.50) projects Fire Fighting G.17 2024-2027 2024-2027 3.86 3.63 (0.23) Equipments Disable Aircraft G.18 2025 2025 19.50 18.11 (1.39) Removal Kit Hand Baggae X- G.19 Ray - 2025, 2026 2025, 2026 2.89 2.66 (0.22) 60cmX40cm Explosive Trace G.20 2024-2026 2024-2025 1.49 1.40 (0.09) Detector(ETD) Hand Held Metal G.21 2024-2027 2024-2027 0.21 0.19 (0.02) Detector(HHMD) Door Frame G.22 Metal 2024-2027 2024-2027 0.68 0.62 (0.05) Detector(DFMD) Consultation Paper No. 01/2024-25 Page 143 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Financial Year of Cost as Cost as Capitalization per per the Difference S. No. Particular Proposed Remarks As per GIAL Authority C=(A-B) by the GIAL (A) (B) Authority Security Opration G.23 Control Center 2025-2027 2025-2027 3.29 1.47 (1.82) (CISF) Security G.24 Survilience 2025 2025 1.65 0.77 (0.89) Centre (SSC) Close G.25 CircuitTelevision 2025-2027 2025-2027 3.71 1.66 (2.05) (CCTV) Setup Access Control G.26 2025-2027 2025-2027 2.78 1.24 (1.54) system, Adani Container G.27 Tubular shooting 2025 2025 1.43 0.67 (0.77) Range Video G.28 Surveillace 2024-2027 2024-2027 4.23 1.89 (2.34) system G.29 Body Scanner 2025-2027 2025-2027 51.49 16.99 (34.50) G.30 VDGS 2026 2026 13.89 12.74 (1.15) Sub-Total 180.93 98.74 (82.19) Other Buildings Relocation of H.1 2024 2024 0.21 0.10 (0.11) Localiser 02 CCR Building H.2 2026 2026 14.46 12.58 (1.88) new construction H.3 5 Airside Gates 2026 2026 6.51 3.01 (3.50) SMR Facilities H.4 (New 2025 2025 1.00 0.47 (0.54) Construction) Fuel/ EV H.5 2026 2026 2.76 1.28 (1.48) Charging Station Adjustement on Satellite ARFF account of working H.6 Station (New 2025 2025 13.61 11.92 (1.69) area constraint, Construction) inflationary Modification of adjustment, 50% MT workshop consideration of work H into Admin where BoQ is not H.7 2025 2025 2.36 1.09 (1.26) office building provided, project (Interim need assessment, arrangement) Cost optimisation on Integrated account of reduction Building for in area of admin and Airport Police other associated H.8 Station, Airport 2027 2027 10.34 6.85 (3.49) buildings Health Office and Airport Post Office Airport Administration H.9 2027 2027 55.57 20.11 (35.46) Building (5,000 Sqm) Airport H.10 2027 - 13.34 0.00 (13.34) Maintenance Consultation Paper No. 01/2024-25 Page 144 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Financial Year of Cost as Cost as Capitalization per per the Difference S. No. Particular Proposed Remarks As per GIAL Authority C=(A-B) by the GIAL (A) (B) Authority Office (1,200 Sqm) Solid Waste H.11 2026 2026 2.82 1.30 (1.52) Facility Water Supply H.12 2026 2026 5.43 2.48 (2.94) system H.13 Sewerage System 2027 2027 1.35 0.62 (0.73) Modification of watch tower at H.14 operational area 2024 2024 0.37 0.18 (0.19) L.G.B.I. Airport Guwahati Earth filling of low using areas and other miscellaneous works at H.15 operational area 2025 2025 0.44 0.20 (0.24) related to DGCA compliance from time to time at L.G.B.I. Airport Guwahati Fire Station H.16 2024-2025 2024-2025 4.57 4.41 (0.15) Improvement Other Building - H.17 2024 2024 1.58 0.00 (1.58) Admin Office Sewage H.18 2025 2025 0.40 0.37 (0.03) Treatment Plant Misc Other Buildings - Upgradation 2024- 2024- H.19 3.26 1.48 (1.78) works at RED, 2025, 2027 2025, 2027 ATC, CISF and BCAS building Installation of H.20 2024 2024 0.16 0.08 (0.08) LGB Statue CISF H.21 2025-2027 2025-2027 15.64 7.04 (8.60) accomodation Nursery H.22 2027 2027 0.73 0.33 (0.40) Development Misc Horticulture H.23 2024-2027 2024-2027 1.64 0.75 (0.90) Improvements Administrative H.24 2024-2026 - 3.91 0.00 (3.91) Building Anti Hijacking Control Room H.25 2025-2026 2025-2026 1.40 0.63 (0.77) (AHCR) upgradation Sub-Total 163.85 77.28 (86.57) IT equipment I I.1 IT Equipments 2024-2027 2024-2027 17.80 5.87 (11.92) Adjustment toward strategic project and Consultation Paper No. 01/2024-25 Page 145 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Financial Year of Cost as Cost as Capitalization per per the Difference S. No. Particular Proposed Remarks As per GIAL Authority C=(A-B) by the GIAL (A) (B) Authority inflationary adjustment Sub-Total 17.80 5.87 (11.92) J Furniture & fixtures Furniture & Fixtures for J.1 2024-2027 2024-2027 1.66 1.56 (0.10) Terminal, Office, Security etc. Sub-Total 1.66 1.56 (0.10) Security equipment Procurement of Security Equipments (Bullet Proof Jackets, Bullet K.1 Proof Helmet, 2024-2027 2024-2027 2.96 1.34 (1.61) Bullet Proof Shield, Bullet Proof Morcha, Binocular Device etc) Threat Cost adjusted to 50% K.2 Containment 2025 2025 15.44 14.33 (1.10) where insufficient Vessel (TCV) K details provided; K.3 BDDS 2024-2027 2024-2027 4.61 2.09 (2.52) inflationary Misc Security adjustment Equipments (Quick Reaction Team Equipments, Radiological K.4 Detection 2025-2026 2025-2026 12.70 11.66 (1.04) Equipment, Network Switch and Cabling Tec Refresh, OFC network CCTV etc) Sub-Total 35.70 29.43 (6.27) Sustaining capex L already spent 47.64 47.64 0.00 (FY22-23) Total Capex 4764.66 3592.84 (1171.83) Note: The variation in the capex (excluding soft cost) allowed by the Authority vis a vis submitted by GIAL is mainly on the account of adjustment of cost towards airside works, inflation adjustment, adoption of rates based on industry benchmarks and capacity optimization. 7.3.8 Capital Work in Progress (CWIP) i. In terms of the clause 6.4.5 of the Concession Agreement, GIAL has to take over CWIP from AAI and reimburse the cost of such CWIP to AAI. Following is the relevant extract of the Concession Agreement: Consultation Paper No. 01/2024-25 Page 146 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD “6.4.5 Notwithstanding anything to the contrary in this Clause 6.4, the Concessionaire shall be liable to pay to the Authority such amounts as may have been incurred by the Authority as on the COD in respect of the contracts relating to works-in-progress as have been set forth in Schedule T. Such amounts shall be intimated by the Authority with supporting documents and details within 30 (thirty) days of COD and shall be due and payable by the Concessionaire to the Authority within a period of 90 (ninety) days thereon. The Parties shall constitute a committee comprising representatives of the Concessionaire, Authority and each of the counterparties under such contracts, which committee shall be responsible for: (a) facilitating any discussions and/ or interactions amongst AAI, the Concessionaire and the counterparties under such contracts, including in respect of any modifications to the works, and (b) coordinating, facilitating, and monitoring the progress of such works-in-progress. The Concessionaire shall be responsible to incur any additional cost towards completion of such work-in-progress assets after COD. Upon reimbursement by the Concessionaire to the Authority, of amounts as may have been incurred by the Authority as on the COD for such work-in-progress assets as provided for above, and completion of such works-in-progress by the Concessionaire, such works-in-progress assets shall form part of the Airport. The amounts reimbursed by the Concessionaire to the Authority and additional amounts incurred by the Concessionaire for completion of such work-in-progress assets shall be considered as investments made by the Concessionaire in creation of such assets for the purpose of determination of Aeronautical Charges by the Regulator. In the event that any part of the amounts reimbursed by the Concessionaire to the Authority pursuant to this Clause 6.4.5 are not considered for pass- through by the Regulator due to any act or omission on the part of the Authority, the adjustment towards any differences in the amounts reimbursed by the Concessionaire to the Authority and the amounts considered for pass-through by the Regulator shall be undertaken as part of the Balancing Payment that becomes due and payable as per Clause 31.4 immediately after the determination of the Aeronautical Charges by the Regulator.” ii. As per MYTP for third control period, GIAL received CWIP invoices from AAI totaling ₹ 430.89 crores. As on 31st Mar’22 the GIAL CWIP was ₹ 453.67 crores. The Authority understands from the MYTP submission made by GIAL that these CWIP will be capitalized along with terminal building. The Authority has accordingly considered the capitalization of this CWIP along with terminal building. iii. The Authority notes that GIAL has not paid any GST amount (on the value of RAB and CWIP invoices) to AAI. Further, in future, if AAI is required to bear the GST, then based on the indemnity bond provided by GIAL, the same will be recovered by AAI from GIAL. As the GST amount has not been paid by GIAL, the Authority has not considered the same for determining RAB for the Third Control Period. However, the Authority will consider the statutory payments relating to GST amount on RAB and CWIP invoices, on actual incurrence basis, at the time of true up of the Third Control Period, while determining tariff of the next Control Period. 7.3.9 The Authority notes that GIAL would be eligible to claim GST Input Tax Credits on procurement of certain movable property. The Authority expects that GIAL would properly account for such credits in its submissions in accordance with Chapter V of The Central Goods And Services Tax Act, 2017 at the time of true up of the RAB for the Third Control Period. The Authority may examine the accounting of input tax credits and make necessary adjustments in this regard at the time of determination of tariffs for the Fourth Control Period. 7.3.10 Soft Cost – Technical Consultancies, Contingencies, Pre-Operative cost, design cost, PMC, Consultation Paper No. 01/2024-25 Page 147 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Preliminary expenses i. GIAL as part of proposed project cost for third control period has considered soft cost of ₹ 682 crores. GIAL has considered 16% of capital expenditure as soft cost on account of technical consultancies, contingencies, preoperative Cost, design cost, PMC, preliminary expenses. ii. The Authority upon review of GIAL’s explanation and relevant documents has the following views with respect to soft cost: a. The Authority notes that for other PPP airports such as HIAL, BIAL, DIAL etc. the above- mentioned costs had been considered in the past in the range of 8% - 11% of the project costs. The Authority is of the view that 16% claimed by GIAL is on the higher side, as compared to other PPP Airports and hence not justified. b. Many of the capex allowed to GIAL are bought out items, wherein orders are placed on Supply, installation, Testing & Commissioning (SITC) basis, Hence, soft cost such as Project Management Consultancy (PMC), Design etc. need not be incurred on such items. c. New Capital Expenditure allowed to GIAL includes works on airside. On airside works such as Apron, Taxiway, Runway overlay, Fuel farm etc. PMC charges are normally in the range of 1% to 3% maximum. d. Soft cost claimed by the GIAL includes, contingencies also, which do not come as a separate line item while capitalizing the assets and is not to be claimed without any contingent activity. e. GIAL has considered 16% soft cost unilaterally on overall capex items. However, the consideration of soft cost vary asset wise. Following are the observations of the Authority in this regard: Table 104: Asset head wise analysis and observation regarding soft cost Asset Head Items Analysis and Observations Airside/landside drain works, On airside works, PMC charges are in Earth filling, Basic strip the range of 1% to 3% development with earth Air Side works boundary wall, Apron, taxiways, airside improvement work, security gates and other airside works etc. BDDS equipment, Tractor, Items are purchased on Supply, Ambulance, Crash Fire Tender, Installation, Testing & Commissioning QRT vehicles, Fuel Farm (SITC) basis. Soft costs are bare Equipment, ETD, HHMD, minimum (i.e., in the range of 1%-3%) DFMD, CCTV, VDGS, Fire and are mostly not applicable on such Bought Out Fighting equipment, Bullet items. Items Proof Jackets, Bullet Proof Helmet, Bullet Proof Shield, Bullet Proof Morcha, Binocular Device, Threat containment vehicle etc. GIAL has included contingencies also in soft cost, Contingencies are not Contingencies applicable after commissioning of Assets. In view of the above, the Authority proposes to consider the aforementioned costs to the extent of 8% of the Aero CAPEX of the projects allowed by the Authority for the current Control Period. The Consultation Paper No. 01/2024-25 Page 148 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Authority has thus derived the amount proposed to be allowed towards the aforementioned costs as ₹ 283.62 crores against ₹ 682 crores proposed by GIAL. 7.3.11 The Authority proposes to readjust (reduce) 1% of the uncapitalised project cost from the ARR / target revenue as re-adjustment in case any particular capital project is not completed/ capitalized as per the approved capitalisation schedule. It is further proposed that if the delay in completion of the project is beyond the timeline given in the capitalization schedule, due to any reason beyond the control of GIAL or its contracting agency and is properly justified, the same would be considered by the Authority while truing up the actual cost at the time of determination of tariff for the next Control Period. The re- adjustment in the ARR/ Target Revenue is to protect the interest of the stakeholders who are paying for services provided by GIAL and is also encouragement for GIAL to commission/ capitalize the proposed assets as per the approved CAPEX plan/schedule. 7.3.12 Financing Allowance/Interest During Construction As part of the MYTP, GIAL had considered 65% debt funding for the proposed capex and balance 35% from equity portion. GIAL has considered Interest During Construction at the rate of 12% over debt portion and financing allowance at the rate of 12% over equity portion. As per MYTP, GIAL has considered IDC over 65% of funding source and financing allowance over balance funding source. The details of FA and IDC submitted by GIAL is given below: Table 105: FA and IDC submitted by GIAL (₹ crores) Particular FY’22 FY’23 FY’24 FY’25 FY’26 FY’27 Total IDC 18.30 113.68 187.76 90.52 1.73 412.00 Financing Allowance 26.25 9.86 61.21 101.10 48.74 0.93 248.10 Total 26.25 28.16 174.90 288.86 139.26 2.67 660.10 The Authority examined GIAL’s claim as well as the justification provided for the same in detail and has summarized its view as shown below: i. The Authority considered that providing return on capital expenditure from the very beginning of construction will significantly lower the risks for an airport operator and may require revisiting the return on equity allowed to airport operators as the investment in the asset class will then be equated to risk free rate of return. ii. Further, provision of Financing Allowance will disincentivize the Airport Operators from ensuring timely completion of projects and delivery of services to the users. Therefore, the Authority is of the view that a return should be provided only when the assets are made available to the airport users except in the case of certain costs like IDC that will have to be incurred in case debt is used for funding of projects. iii. Furthermore, the future returns from the project should generate adequate returns to cover the cost of equity during the construction stage. GIAL is adequately compensated for the risks associated with the equity investments in a construction project once the project is capitalized by means of a reasonable cost of equity. iv. Developments at greenfield airports inherently take longer durations to commission and operationalize. Thus, airport operators would have to wait for a considerable duration before getting returns on large capital projects. Keeping this in view, the Authority had earlier provisioned for financing allowance in initial stages to such airports. It may be further noted that the Authority has never provided financing allowance in the case of brownfield airports in its any of the Tariff Orders. Further, financing allowance for greenfield airports of BIAL, HIAL, Consultation Paper No. 01/2024-25 Page 149 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD CIAL etc. was allowed only for the initial stages of their development, after which IDC was permitted on the debt portion of the proposed capital expenditure. v. It is pertinent to note that in case of a greenfield airport, investment in regulatory blocks by the Airport Operator would not make the airport facilities available to the passengers. Brownfield and Greenfield airports can’t be equated on this issue. In greenfield airports, the tariff is not applicable, and no revenue is available to the Airport Operator till the aeronautical services have been created and put to use. However, in the case of brownfield airports, where GIAL brings in additional investments, the airport facilities are mobilized and enabled to other functional parts of the airport, which remains functional and GIAL keeps on enjoying the charges from the users. In the case of LGBIA, since new projects have included mobilization of existing operations, the said Airport is ought to be considered as a brownfield airport, which in the opinion of the Authority would not be eligible for an allowance on the equity portion of newly funded capital projects. vi. Financing Allowance is a notional allowance and different from interest during construction. Therefore, the provision of Financing Allowance on the entire capital work in progress would lead to a difference between the projected capitalization and actual cost incurred, especially when the Airport Operator funds the projects through a mix of equity and debt. Further, the Authority opines that only IDC should be provided on the debt borrowings availed for execution of a project. vii. AERA Guidelines, 2011 does not specifically state that Financing Allowance is to be provided on equity portion of the capital expenditure. The proviso to Section 13 (1) (a) of the AERA Act states that “different tariff structures may be determined for different airports having regard to all or any of the above considerations specified at sub-clauses (i) to (vii) of Section 13 (1) (a)”. viii. In respect of IDC, the Authority is inclined to allow the same and accordingly, the Authority has considered IDC to be provided on the debt portion of the value of average CWIP derived on the basis of revised Capitalization schedule proposed by the Authority. Further, the Authority proposes to consider the notional gearing ratio (debt-equity ratio of 48:52) followed for other PPP airports and cost of debt @ 9% (refer para 8.2.5 onwards) for the Third Control Period for calculating the value of IDC. Based on the same, the Authority has derived an amount of ₹ 179.42 crores and proposes to allow the same as against ₹ 660.10 crores (as Financing Allowance and IDC) claimed by GIAL for the Third Control Period. Following is the asset category wise IDC for the proposed capex programme. Table 106: Asset category wise details of Interest During Construction as per the Authority (₹ crores) Particular FY’23 FY’24 FY’25 FY’26 FY’27 Total Land Development Works - - 0.38 1.14 - 1.52 Airside Improvement Works - 0.04 7.78 25.32 5.03 38.17 Ancillary Building - - - 0.46 0.27 0.73 Development Works ATF storage and distribution - - 0.13 - - 0.13 system Development of Cargo - 0.01 - 0.49 - 0.50 Facilities Environment Related - - 0.17 0.56 0.02 0.75 Passenger Terminal & - 23.46 50.03 64.02 - 137.51 Associated works Utilities - - - 0.08 0.03 0.11 Total - 23.51 58.49 92.08 5.34 179.42 Consultation Paper No. 01/2024-25 Page 150 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD ix. GIAL estimated IDC of ₹ 412.00 crores against which the Authority proposes ₹ 179.42 crores for IDC. The reduction in IDC amount is on account of adjustment towards cost of debt, change in gearing ratio, optimization in capex amount and revised phasing. x. The IDC proposed by the Authority towards the capital expenditure for the Third Control Period is given below: Table 107: IDC proposed by the Authority for the Third Control Period (₹ crores) Particular FY’23 FY’24 FY’25 FY’26 FY’27 Total IDC - 23.51 58.49 92.08 5.34 179.42 7.3.13 Summary of the Capital expenditure proposed by the Authority for Third Control Period: a. With reference to above following is the summary of the capex proposed by the Authority for the purpose of regulatory asset base for third control period in case of LGBIA: Table 108: Summary of the CAPEX proposed by the Authority for Third Control Period (₹ crores) S. No. Project Name Reference Amount in ₹ Crore GIAL Authority A Basic cost (Including Para 7.3.7 4717.36 3545.20 indexation) as tabled above B Soft Cost Para 7.3.10 682.00 283.62 C Interest During Para 7.3.12 412.00 179.42 Construction D Financing Allowance Para 7.3.12 248.00 0 Total – New Capex 6059.36 4008.24 E FY’23 as per actual 47.64 47.64 capex incurred Grand Total 6107.00 4055.88 7.3.14 Allocation of capital expenditure into Aeronautical and Non-Aeronautical a. GIAL has submitted following with respect to RAB allocation methodology for third control period: 9.1 As per AERA Order No 14/2016-17 and as mandated under the Concession Agreement, the Hybrid-Till with 30% cross subsidization of non-Aeronautical revenues is the applicable methodology. The relevant extract from AERA order and Concession Agreement is as follows: 9.1.1 Extract from AERA order: The authority, in exercise of powers conferred by Section 13(1)(a) of the Airports Economic Regulatory of India Act 2008 and after careful consideration of the comments of the stakeholders on the subject issue, decides and orders that: - (i) The Authority will in future determine the tariffs of major airports under “Hybrid Till” where in 30% of non-aeronautical revenues will be used to cross-subsidize aeronautical charges. Accordingly, to that extent the airport operator guidelines of the Authority shall be amended. The provisions of the Guidelines issued by the Authority, other than regulatory till, shall remain the same. (ii) In case of Delhi and Mumbai airports, tariff will continue to be determined as per the SSA entered into between Government of India and the respective airport operators at Delhi and Mumbai. 9.1.2 Extract from Concession Agreement: 28.3.2 The GOI has, through the National Civil Aviation Policy dated June 15,2016, approved, (“Shared-Till Approval”) the 30% (thirty percent) shared-till framework for the determination and regulation of the Aeronautical Charges for all airports in India, and the same shall be Consultation Paper No. 01/2024-25 Page 151 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD accordingly considered by the Regulator for the purposes of the determination of the Fees/ Aeronautical Charges pursuant to the provisions of this Agreement. It is clarified that, for the purposes of this Agreement, the Shared-Till Approval shall apply as on the date of this Agreement notwithstanding any subsequent revision or amendment of such Shared-Till Approval. 28.3.3 The Aeronautical Charges shall be regulated and set/ re-set, in accordance with the Shared-Till Approval, terms of this Agreement including the terms set out in Schedule R (Memorandum of Understanding) and the Applicable Laws. 9.1.3 Extract from Schedule R of the Concession Agreement: 2.2 Principles for Determination and Revision of Fees 2.2.1 The GOI has, through the National Civil Aviation Policy dated June 15, 2016 approved the 30% (thirty percent) shared-till framework for the determination and regulation of the Aeronautical Charges for all Airports in India (“Shared-Till Approval”), and the same shall be accordingly considered by AERA, for the purposes of the determination of the Fees/ Aeronautical Charges pursuant to the provisions of this Agreement. 2.2.2 The Aeronautical Charges shall be regulated and set/ re-set, in accordance with the Shared- Till Approval, the terms of the Concession Agreement and the Applicable Laws. 9.2 As per Clause 5.2 of the AERA Guidelines: 5.2.1. Scope of the RAB (a) In normal course, all airport fixed assets will come under the scope of the RAB. However, the Authority may, based on due consideration of relevant factors, include or exclude certain fixed assets from the scope of RAB. (b) The relevant RAB assets shall be all the fixed assets proposed by the Airport Operator(s), after providing for such exclusions therefrom or such inclusions therein, as may be determined by the Authority in respect of specific assets based on following principles:- (i) The assets that substantially provide amenities / facilities/ services that are not related to, or not normally provided at an airport, may be excluded from the scope of RAB; (ii) The assets that in the opinion of the Authority do not derive any material commercial advantage from the airport (for example from being located close to the airport) may be excluded from the scope of RAB; (iii) Responses by stakeholders in relation to their inclusion or exclusion during consultations. (iv) Specification of, to the Authority's satisfaction, sufficient accounting separation to ensure that the costs and revenues associated with the assets shall be clearly identified for the preparation and audit of regulated airport accounts; (v) Specification of, to the Authority's satisfaction wherever appropriate (where the Authority considers there may be substantial financial risks associated with any asset), sufficient legal separation to protect the Airport Operators, and thus airport Users, in the event of any substantial financial risks materialising. The Authority shall require the Airport Operator(s) to insulate the Users by suitably ring fencing the assets excluded from the scope of RAB. The principles governing the ring fencing are mentioned in the paragraph 7.5 of Order Number 13/2010-11 of the Authority issued on 12-Jan-2011. (vi) Notwithstanding the principles mentioned under points (i) to (v) above, assets with fixed locations inside terminal buildings shall be considered within the scope of RAB. (c) Any exclusion/ inclusion shall only be considered if it is proposed to be executed in the Control Period for which the Multi Year Tariff Proposal is submitted. (d) The Authority may also, in its discretion, consider any other relevant factors for exclusion or inclusion of assets. (e) The assets related to any service(s) provided by the Airport Operator that are subject to separate control and regulated as per Clause 5.7, shall be excluded from the scope of RAB. Consultation Paper No. 01/2024-25 Page 152 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD 9.2.1 It is observed that as per AERA Guidelines, 5.2.1 (b) (vi) all the assets which are part of the terminal building shall be considered as part of RAB. Therefore, terminal building as a whole should be considered as RAB /Aeronautical asset and not required to be allocated into Aero and Non-Aero. b. The Authority has examined GIAL submission and have following observations: i. As per tariff guidelines 2011 for Airport Operators the tariff for an Airport needs to be calculated as per single till methodology. According to which all building block of ARR considered 100% as aeronautical. ii. The Authority in order to adopts uniform tariff policy across all major airports had amended its tariff guideline to the extent of adoption of Hybrid Till instead of Single Till prescribed in the guidelines vide order 14/2016-17. The Hybrid Till in principle considers only aeronautical portion of OPEX and CAPEX as pass through in tariff with 30% cross subsidy from Gross Non-Aero Revenue. iii. The revenue, cost and asset are interlinked and should be aligned in accordance with the till methodology adopted for tariff determination. Thus, as part of asset allocation exercise, we would require identification and allocation of Assets and OPEX into Aero and Non-Aero iv. The Authority has adopted following basis for allocation of RAB addition during third control period: Terminal Building Ratio - It was observed that GIAL has classified the entire area of the terminal building as aeronautical. Upon enquiry, GIAL stated that this was done in accordance with the AERA Act. Terminal Building Area is planned in an airport considering the facilities to be provided for Aeronautical activities and provision of space for certain Non-Aeronautical activities such as Food & Beverage, Duty Free etc. Also, in case of PPP airports, the focus on Non- Aeronautical activities is expected to be more as these would generate revenues and a part of the same would also cross subsidize the Aeronautical charges. The Non-Aeronautical activities are over 10% of terminal building area at other similar size PPP airports. Prescriptions of IMG norms also provide for non-aeronautical area to be between 8% and 12%, with the range being higher for larger airports. Considering the above, the Authority proposes to consider the ratio of 90:10 towards Aeronautical and Non-Aeronautical in line with its decision in Order No. 03 /2017-18 dated 2nd June 2017 for GIAL for the Third Control Period and recommendation in independent study on asset allocation. Employee Ratio- GIAL has submitted expected deployment of employees during third control period. Basis on employment schedule and rationalization, the employee ratio has been calculated at operating expense chapter (please refer Table 140 of O&M chapter of this consultation paper for detailed calculation). The effective employee ratio for third control period comes to 96.01%. Gross Block Asset Ratio – As per the asset allocation study the gross block asset ratio is 95.39% as on 31st Mar’2022, same has been considered for third control period for the purpose of asset allocation. v. It is to be further noted that the Authority has considered above ratios to allocate assets planned to be procured as part of third control period, the allocation ratio will be revised as per asset allocation exercise undertaken by the Authority in the next control period. Following is the asset wise allocation for asset addition proposed in third control period: Consultation Paper No. 01/2024-25 Page 153 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Table 109: Asset wise allocation for asset addition proposed in third control period Particular Allocation Basis Aeronautical portion Terminal Building Terminal Ratio 90.00 % Runway, Taxiway and Apron Aeronautical 100.00 % Cargo building Aeronautical 100.00 % Cargo Equipment Aeronautical 100.00 % Boundary wall Aeronautical 100.00 % Software Employee Ratio 96.01 % IT equipment Employee Ratio 96.01 % Security equipment Aeronautical 100.00 % Plant and Machinery Gross Block Asset 95.39 % Other Buildings Gross Block Asset 95.39 % Access Road Aeronautical 100.00 % Fuel Aeronautical 100.00 % Furniture & fixtures Gross Block Asset 95.39% Vehicles Employee Ratio 96.01% Office equipment Employee Ratio 96.01% 7.4 Capital addition for the Third Control Period Total capital addition as per the Authority for third control period is ₹ 4055.89 Crore. The Authority considers following capitalization schedule for the purpose of third control period. Table 110: Capitalization schedule proposed by the Authority for the Third Control Period (₹ crores) Particular FY'23* FY'24 FY'25 FY'26 FY'27 Total Terminal Building 1.98 5.20 - 2,431.96 - 2,439.15 Runway, Taxiway and Apron 10.04 - 113.78 861.88 - 985.71 Cargo Facility 0.57 3.30 - 23.37 - 27.24 Boundary wall - - 0.11 136.50 - 136.61 Software 1.58 - - - - 1.58 IT equipment 9.11 - 2.04 2.11 2.19 15.46 Security equipment - - 22.27 5.25 4.26 31.78 Plant and Machinery 8.28 - 44.03 58.11 5.23 115.65 Other Buildings 6.14 0.11 23.85 27.68 33.63 91.41 Access Road 0.05 - - 145.92 - 145.97 Fuel - - 14.50 - - 14.50 Furniture & fixtures 2.35 - 0.99 0.22 0.47 4.03 Vehicles 2.55 - 21.27 17.99 - 41.81 Office equipment 4.98 - - - - 4.98 Total 47.65 8.61 242.86 3,710.99 45.77 4,055.89 *actual Capital addition proposed above is further allocated into Aeronautical asset for the purpose of Regulatory Asset Base for third control period. The year wise details for Regulatory Asset Base are as follows: Table 111: Year wise details for Aeronautical capex proposed by the Authority for the Third Control Period (₹ crores) Aero Capitalisation S. No. Particular Total FY'23* FY'24 FY'25 FY'26 FY'27 Passenger Terminal and Associated Works Consultation Paper No. 01/2024-25 Page 154 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Aero Capitalisation S. No. Particular Total FY'23* FY'24 FY'25 FY'26 FY'27 NITB (Including Opening A.1 0.00 0.00 0.00 2188.77 0.00 2188.77 CWIP as per financials) A A.2 Kerbside Development 0.00 0.00 0.00 145.92 0.00 145.92 Exisiting Terminal Building A.3 0.00 4.68 0.00 0.00 0.00 4.68 Development Sub-Total – (A) 0.00 4.68 0.00 2334.68 0.00 2339.36 Runways, Taxiway & Aprons Apron-2 (Demolition and B.1 0.00 0.00 0.00 269.89 0.00 269.89 rew-construction) Airside Storm Water B.2 0.00 0.00 0.00 217.40 0.00 217.40 Drainage works Construction of Part Parallel B.3 0.00 0.00 0.00 174.76 0.00 174.76 Taxiway and Link Taxiways B.4 Land Development works 0.00 0.00 0.00 48.79 0.00 48.79 B.5 Widening of Runway Strip 0.00 0.00 84.88 0.00 0.00 84.88 Construction of Second Part B.6 0.00 0.00 0.00 68.07 0.00 68.07 Parallel Taxiway Extension of Runway 02–20 B.7 0.00 0.00 0.00 44.61 0.00 44.61 towards RWY 20 Construction of new Isolation B.8 0.00 0.00 24.06 0.00 0.00 24.06 Bay (Rigid Pavement) Construction of Rapid Exit B.9 0.00 0.00 0.00 16.55 0.00 16.55 Taxiway B.10 Other Minor Airside Capex Construction of Runway End B.10.1 Safety Area (RESA) after 0.00 0.00 0.00 4.23 0.00 4.23 RWY 20 Threshold Extension of Blast Pad for B B.10.2 RWY 02 and Construction of 0.00 0.00 0.00 4.32 0.00 4.32 new Blast Pad for RWY 20 Relocation of Simple B.10.3 Approach Lighting System 0.00 0.00 0.79 0.00 0.00 0.79 for Runway 20 Installation of Category-I B.10.4 Approach Lighting System 0.00 0.00 0.00 7.90 0.00 7.90 towards Runway 02 B.10.5 Off-Stand GSE 0.00 0.00 0.00 3.92 0.00 3.92 Apron stand surface B.10.6 0.00 0.00 0.33 0.00 0.00 0.33 revamping work in old apron Manhole chamber covers for all manholes or pits at apron B.10.7 0.00 0.00 0.22 0.00 0.00 0.22 area, strip area as per ICAO standard Provision of new Earthing system for Runway and other B.10.8 0.00 0.00 0.19 0.00 0.00 0.19 associated works at Guwahati Airport SITC of Inset fittings for Runway-Taxiway B.10.9 0.00 0.00 0.21 0.00 0.00 0.21 intersection at Guwahati Airport Consultation Paper No. 01/2024-25 Page 155 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Aero Capitalisation S. No. Particular Total FY'23* FY'24 FY'25 FY'26 FY'27 Upgradation of flexible B.10.10 pavements in Operational 0.00 0.00 0.00 0.86 0.00 0.86 area Runway Graded Strip and B.10.11 RESA strengthening (up to 0.00 0.00 0.09 0.00 0.00 0.09 300mm Depth) Airside works (Apron surface revamping works, Provision B.10.12 of new Airfield signages, 0.00 0.00 1.19 0.57 0.00 1.77 Joint filling and cleaning of old apron) B.10.13 Apron Control 0.00 0.00 0.11 0.00 0.00 0.11 B.10.14 Airside Equipments 0.00 0.00 1.70 0.00 0.00 1.70 B.11 Runway strengtheing works 0.00 0.00 0.00 0.00 0.00 0.00 Sub-Total – (B) 0.00 0.00 113.78 861.88 0.00 975.66 Construction of Boundary Wall New construction of Airside Perimeter & Service Roads C.1 and demolition of existing 0.00 0.00 0.00 37.62 0.00 37.62 Airside Roads due to widening of Runway Strip New construction of Airside C Boundary Wall & demolition C.2 of existing Airside Boundary 0.00 0.00 0.00 76.05 0.00 76.05 Wall due to widening of Runway Strip C.3 PIDS System 0.00 0.00 0.00 22.84 0.00 22.84 C.4 Boundary Wall 0.00 0.00 0.11 0.00 0.00 0.11 Sub-Total (C) 0.00 0.00 0.11 136.50 0.00 136.61 Cargo Complex D.1 Interim Cargo Facility 0.00 3.30 0.00 0.00 0.00 3.30 D D.2 New Cargo Terminal 0.00 0.00 0.00 23.37 0.00 23.37 Sub-Total (D) 0.00 3.30 0.00 23.37 0.00 26.67 Fuel Farm Infrastructure E.1 Fuel storage farm 0.00 0.00 0.00 0.00 0.00 0.00 E.2 Fuel hydrant line 0.00 0.00 0.00 0.00 0.00 0.00 Equipment cost 0.00 0.00 3.35 0.00 0.00 3.35 E Cost of procurement of IOCL E.3 0.00 0.00 11.16 0.00 0.00 11.16 and RIL assets Dead Stock 0.00 0.00 0.00 0.00 0.00 0.00 Sub-Total (E) 0.00 0.00 14.50 0.00 0.00 14.50 Vehicles F Sub-Total (F) (F1-F5) 0.00 0.00 20.42 17.27 0.00 37.70 Plant and Machinery G Sub-Total (G) (G1-G30) 0.00 0.00 42.00 55.43 4.99 102.42 Other Buildings H Sub-Total (H) (H1-H25) 0.00 0.10 22.75 26.40 32.08 81.34 IT equipment I I.1 IT Equipment 0.00 0.00 1.96 2.03 2.10 6.09 Consultation Paper No. 01/2024-25 Page 156 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Aero Capitalisation S. No. Particular Total FY'23* FY'24 FY'25 FY'26 FY'27 Total – IT equipment 0.00 0.00 1.96 2.03 2.10 6.09 Furniture & fixtures Furniture & Fixtures for J.1 Terminal, Office, Security 0.00 0.00 0.95 0.21 0.45 1.60 J etc. Total – Furniture & 0.00 0.00 0.95 0.21 0.45 1.60 fixtures Security equipment Procurement of Security Equipment (Bullet Proof Jackets, Bullet Proof Helmet, K.1 0.00 0.00 1.45 0.00 0.00 1.45 Bullet Proof Shield, Bullet Proof Morcha, Binocular Device etc) Threat Containment Vessel K.2 0.00 0.00 15.48 0.00 0.00 15.48 (TCV) K K.3 BDDS 0.00 0.00 1.11 1.15 0.00 2.25 Misc Security Equipment (Quick Reaction Team Equipment, Radiological K.4 Detection Equipment, 0.00 0.00 4.24 4.10 4.26 12.60 Network Switch and Cabling Tec Refresh, OFC network CCTV etc) Total – Security equipment 0.00 0.00 22.27 5.25 4.26 31.78 Sustaining capex already L 45.95 45.95 spent (FY22-23) Total 45.95 8.09 238.76 3463.03 43.87 3799.70 Note-Above cost is aeronautical and includes inflation, soft cost, IDC *as per actuals 7.5 Depreciation for the Third Control Period GIAL’s submission 7.5.1 GIAL follows the policy of determining the rates of depreciation based on the ‘useful life’ of different asset classes. While submitting the Multi-Year Tariff Proposal for the Third Control Period for LGBIA, GIAL has taken cognizance of the rates of depreciation approved by the Authority in its order vide Order No. 35 dated January 12, 2018, and Amendment No. 01 to Order No. 35 / 2017-18 on ‘Determination of Useful Life on Airport Assets’. However, GIAL has considered different rates for certain asset classes based on the recommendations by independent technical evaluation for Lucknow and Ahmedabad Airports and the same are as per the table given below -: Table 112: Depreciation rates determined by GIAL for the Third Control Period Asset Class Depreciation as per GIAL’s submission Terminal Building 4.00% Runway, Taxiway and Apron 5.00% Cargo Building 4.00% Cargo Equipment 13.33% Boundary wall 20.00% Computer Servers, networks, etc. 33.33% Computer End-user devices 33.33% Consultation Paper No. 01/2024-25 Page 157 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Asset Class Depreciation as per GIAL’s submission Security equipment 13.33% Plant and Machinery 13.33% Other buildings 3.33% Access road 10.00% Fuel farm facility assets 13.33% Furniture & fixtures 14.29% Vehicles 20.00% Office Equipment 20.00% 7.5.2 Depreciation has been computed separately on opening block of assets and on the proposed additions. For the additions to RAB, GIAL has calculated the depreciation during year of capitalization on 50% of the asset value (assuming that the asset is capitalized in the middle of the financial year). 7.5.3 The depreciation amount submitted by GIAL for the Third Control Period has been presented in the table below. Table 113: Depreciation submitted by GIAL for the Third Control Period (₹ crores) Particular FY'23 FY'24 FY'25 FY'26 FY'27 Total Terminal Building 0.26 0.45 62.07 123.53 123.53 309.85 Runway, Taxiway and Apron 5.38 5.73 18.21 61.48 92.35 183.16 Cargo Facillity 0.01 0.10 0.17 0.74 1.31 2.34 Boundary wall 2.86 0.70 0.12 18.18 36.17 58.02 Software - 0.53 0.53 0.53 0.00 1.58 IT equipment 1.23 6.86 9.45 9.68 4.49 31.70 Security equipment - 0.05 1.83 4.07 5.05 11.01 Plant and Machinery 9.24 9.71 12.34 22.74 30.18 84.21 Other Buildings 1.38 1.62 2.32 3.64 6.29 15.25 Access Road 0.03 0.03 0.03 0.01 0.01 0.11 Fuel - 1.06 2.11 28.58 55.05 86.79 Furniture & fixtures 0.38 0.76 0.83 0.77 0.75 3.51 Vehicles 2.10 3.99 6.51 8.95 10.12 31.67 Office equipment 0.24 1.24 1.23 1.22 1.15 5.08 Total 23.11 32.83 117.76 284.13 366.46 824.29 Authority’s examination regarding Depreciation for the Third Control Period 7.5.4 The Authority duly examined the recommendations of the Technical Study Report on ‘useful life of assets’ submitted by GIAL and observed that the expert appointed by GIAL has prescribed the useful lives of assets component wise after technical assessment. 7.5.5 The Authority noted the methodology adopted by the Valuer to evaluate the useful lives of assets is as follows: • “Physical inspection of some of the assets • Detailed discussions with the Projects, Finance & Engineering and Maintenance team of MIA and the General Manager (Engineering – Civil) of Airports Authority of India pertaining to usage of the assets. • Guidance for determination of Useful Life given in Depreciation under Companies Act, 2013 Consultation Paper No. 01/2024-25 Page 158 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Schedule 2, Airports Economic Regulatory Authority of India (“AERA”), Marshall & Swift Valuation Service (MVS) and American Society of Appraisers (ASA) • Our understanding and experience as qualified engineers " 7.5.6 The Authority has observed the recommendations given in the study report for adopting shorter useful life and noted the following: • The Independent Expert appointed by GIAL has considered the various components of the Terminal Building such as False Ceiling, Sanitation works, Glass façade, Flooring works etc. for assessing the useful life of the Terminal Building. The Expert has calculated the contribution of each of the components to the overall structure of the Terminal Building along with the estimated useful life of such components wherein shorter useful lives have been adopted for False Ceiling, Sanitation works, Glass façade and Flooring works due to frequent renovation works in the building, weather conditions, wear and tear, etc., and arrived at the weighted average useful life of the entire structure of Terminal Building as approximately 25 years Further, the Authority notes that GIAL has adopted the same shorter useful life of 25 years for the projected capital expenditure on construction of new Cargo Terminal Building. • Similarly, the Independent Expert has recommended shorter useful life for Runways, Taxiways and Apron based on the useful life followed by various international regulators and associations. • Further, in respect of Plant and machinery items, as per the technical report, these items are broadly used at LGBIA for 24 hours per day as the Airport is working all three shifts and hence, as prescribed under the Companies Act 2013, Schedule II for assets used during the year for double shift or triple shift, the Expert has recommended to adopt useful life of 7.5 years instead of 15 years. The Authority also notes that GIAL has adopted the same shorter useful life of 7.5 years for Cargo and Security Equipment. • GIAL has adopted shorter useful life of 3 years for Flight Information Display System (FIDS) and AOCC Equipment (included under the category of ‘Information and Technology equipment’) in its MYTP submission. 7.5.7 Apart from the above, the Authority notes that in respect of Fuel Farm facility, GIAL has adopted ‘weighted average’ useful life of 7.5 years. Since the major portion of the assets are in the nature of Plant and Machinery, GIAL has estimated the useful life of the Fuel facility as 7.5 years and adopted higher depreciation of 13.33% for the entire capital expenditure projected for this facility. 7.5.8 The Authority on perusal of all the above, has summarized its view as under: Asset class - Building: The Expert has recommended shorter life for False Ceiling, Sanitation works, Glass façade and Flooring works which appear to be integral part of the Airport Terminal Building. The Authority's Order No.35 does not provide for reducing the life of assets under Asset class -Buildings. The Authority observes that various components mentioned above are also an integral part of the Terminal Building and should be added to the Terminal Building cost by applying the same rate of depreciation as that of buildings. While the technical report provided by GIAL has determined the shorter life to be adopted, it has not provided sufficient rationale for adopting such shorter useful life. Since these assets are all part of the building, the Authority is of the view that the same rate applicable to building should be applied to these assets and no reduction in life of these assets are called for. Further, the Authority notes that adequate maintenance expenditure is allowed to enable GIAL to maintain the assets in good working condition during its entire life. The Authority has issued Order No.35 as part of its normative approach to various Building Blocks in Economic regulation of Major Airports where it has stated that, “The Authority has been of the considered view, that it would be preferable to have as far as practicable, a broad year to year consistency in what Depreciation is charged by the companies as Consultation Paper No. 01/2024-25 Page 159 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD certified by the relevant statutory auditors and what the Authority would take into account in its process of tariff determination. Issue of a notification will ensure this objective." In view of all the above, the Authority is not inclined to deviate from ensuring this objective and therefore proposes not to consider the shorter useful life of 25 years claimed by GIAL for both the Terminal Building and newly projected Cargo terminal building. Asset Class -Runways, Taxiways and Aprons: The Expert has recommended adopting a shorter life of 20 years based on useful life followed by certain international associations and regulators, like, Federation Aviation Administration -US Department of Transportation, Civil Aviation Authority – UK, Australian Airports Association – Australia etc., which the Authority feels does not provide proper justification for adopting a shorter useful life. Therefore, the Authority finds no reason to reduce the life of the Runway which enhances the burden of Airport users by increasing the tariff. Other Asset Classes: Order No.35 provides for specific determination of life through technical evaluation for specific assets other than those listed in the Order based on specific requirement of the Airport. The Authority finds that none of the asset in these classes where a shorter life has been adopted as specific assets are based on specific requirement of the Airport. Therefore, the Authority finds no merit in reducing the life of such asset for tariff purposes. 7.5.9 Based on all the above, the Authority has proposed the following useful life for all the assets of LGBIA during the Third Control Period: Table 114: Useful Life proposed by the Authority for all the assets in the Third Control Period (In Years) Useful life submitted by Useful life proposed by Asset Class GIAL the Authority Terminal Building 25 30 Runway, Taxiway and Apron 20 30 Cargo Building 25 30 Cargo Equipment 7.5 15 Boundary wall 5 5 Computer Servers, networks, etc. / 3 3 Software Computer End-user devices / IT 3 3 equipment Security equipment 7.5 15 Plant and Machinery 7.5 15 Other buildings 30 30 Access road 10 10 Furniture & fixtures 7 7 Vehicles 5 8 Office Equipment 5 5 7.5.10 Considering the above changes in depreciation rates, revision in the value of opening gross block of assets and proposed capital expenditure, the Authority proposes the following depreciation for the Third Control Period. Table 115: Aeronautical depreciation proposed by the Authority for the Third Control Period (₹ crores) Particular FY'23 FY'24 FY'25 FY'26 FY'27 Total Terminal Building 0.17 0.27 0.35 36.83 73.31 110.94 Runway, Taxiway and Apron 2.97 3.15 5.04 21.30 35.66 68.12 Consultation Paper No. 01/2024-25 Page 160 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Cargo building 0.01 0.07 0.13 0.52 0.91 1.64 Boundary wall 2.85 0.66 0.06 13.72 27.32 44.62 Software - 0.51 0.51 0.51 0.00 1.52 IT equipment 1.18 4.06 4.11 4.47 2.46 16.28 Security equipment - - 0.74 1.66 1.98 4.38 Plant and Machinery 3.62 4.00 5.35 8.41 10.18 31.56 Other Buildings 1.47 1.58 1.95 2.77 3.75 11.53 Access Road 0.03 0.03 0.03 7.31 14.60 22.00 Fuel - - 0.36 0.73 0.73 1.81 Furniture & fixtures 0.37 0.68 0.74 0.72 0.69 3.20 Vehicles 1.02 1.17 2.43 4.76 5.81 15.19 Office equipment 0.23 1.19 1.18 1.17 1.11 4.88 Total 13.93 17.37 22.99 104.88 178.51 337.68 7.5.11 The depreciation claimed by GIAL in comparison with that proposed by the Authority for each financial year is shown in the table below: Table 116: Depreciation claimed by GIAL and proposed by the Authority for the Third Control Period (₹ crores) Particulars FY’23 FY’24 FY’25 FY’26 FY’27 Total Depreciation claimed by 23.11 32.83 117.76 284.13 366.46 824.29 GIAL Less: Adjustments made by -9.18 -15.46 -94.77 -179.25 -187.95 -486.61 the Authority on account of change in useful life and revision in asset addition. Depreciation proposed by 13.93 17.37 22.99 104.88 178.51 337.68 the Authority The Authority proposes to consider depreciation for LGBIA for the Third Control Period as ₹ 337.68 crores. 7.6 Regulatory Asset Base (RAB) for the Third Control Period GIAL has submitted RAB for the Third Control Period as follows: Table 117: RAB proposed by GIAL for LGBIA for the Third Control Period (₹ crores) Particulars FY’23 FY’24 FY’25 FY’26 FY’27 Total Opening RAB (1) 140.28 164.82 217.99 3803.72 5545.53 Additions (2) 47.65 86.01 3703.48 2025.95 156.55 6019.64 Disposal/Transfers (3) 23.11 32.83 117.76 284.13 366.46 Depreciation (4) 164.82 217.99 3803.72 5545.53 5335.63 824.29 Closing RAB (5) = [(1) +(2) – (3) – (4)] 152.55 191.41 2010.86 4674.63 5440.58 Average RAB = [(1) + (5)]/2 140.28 164.82 217.99 3803.72 5545.53 Consultation Paper No. 01/2024-25 Page 161 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Authority’s examination regarding RAB for the Third Control Period 7.6.1 Opening RAB The Authority notes that the Opening RAB amounting to ₹ 140.38 crores (as submitted by GIAL) has been revised to ₹ 151.90 crores based on the adjustments made to the RAB as mentioned in Table 50 of this Consultation Paper. Following are the key consideration in revision of opening RAB: • Adjustment on account of revision in asset classification as detailed in asset allocation study. • GIAL has considered higher useful life of asset which has been aligned to the useful life recommended as per order no 35/2017-18 dated 12th Jan’2018. This is resulted into reduction in depreciation and increase in regulatory asset base. • As part of asset transfer to GIAL, AAI has to pay ₹ 5.94 crores towards payment of vacation of quarters from CPWD. Since, CPWD asset handed over to GIAL as part of transition process, same has been considered by the Authority as part of opening RAB. • The Authority in line with above consideration proposed following Regulatory Asset Base schedule for the Third Control Period: Table 118: RAB proposed by the Authority for LGBIA for the Third Control Period (₹ crores) Particulars Ref. FY FY FY FY FY Total 2022-23 2023-24 2024-25 2025-26 2026-27 Opening RAB (1) Table 50 151.90 183.92 174.64 390.40 3748.55 Capital Additions (2) Table 111 45.95 8.09 238.76 3463.03 43.87 3799.70 Depreciation (3) Table 116 13.93 17.37 22.99 104.88 178.51 337.68 Closing RAB (4) = 183.92 174.64 390.40 3748.55 3613.92 [(1) +(2) – (3)] Average RAB = 167.91 179.28 282.52 2,069.48 3,681.24 [(1) + (4)]/2 7.6.2 The Authority proposes to consider RAB for the LGBIA for the Third Control Period as detailed in Table 118. 7.7 Authority’s proposal regarding CAPEX, Depreciation and RAB for the Third Control Period Based on the material before it and based on its analysis, the Authority proposes the following with regard to CAPEX, depreciation and Regulatory Asset Base for the Third Control Period. 7.7.1 To consider the revised Terminal Building ratio of 90:10 in line with the Study on allocation of assets between Aeronautical and Non-aeronautical assets for LGBIA, IMG norms and as approved for other similar Airports. 7.7.2 To allow IDC during the Third Control Period and not to allow Financing Allowance as mentioned in Para 7.3.12. 7.7.3 To adopt the capitalization of Aeronautical Expenditure for the Third Control Period in accordance with Table 111. 7.7.4 To reduce (adjust) 1% of uncapitalized project cost from the ARR in case any particular capital project is not completed/capitalized as per approved capitalization schedule, as mentioned in para 7.3.11. The same will be examined at the time of tariff determination of next Control Period. 7.7.5 To examine the accounting of input tax credits in accordance with Chapter V of The Central Goods and Consultation Paper No. 01/2024-25 Page 162 of 254CAPEX, DEPRECIATION AND RAB FOR THE THIRD CONTROL PERIOD Services Tax Act, 2017 and make necessary adjustments at the time of determination of tariffs for the Third Control Period. 7.7.6 To true up the Aeronautical Capital expenditure based on actuals subject to, cost efficiency and reasonableness at the time of determination of tariff for the Fourth Control Period. 7.7.7 To adopt Aeronautical Depreciation as per Table 115 for the Third Control Period. 7.7.8 To true up the Depreciation of the Third Control period based on the actual asset additions and actual date of capitalization during the tariff determination of the Fourth Control Period. 7.7.9 To consider average RAB for the Third Control Period for LGBIA as per Table 118. 7.7.10 To true up the RAB based on actuals at the time of tariff determination for the Fourth Control period. Consultation Paper No. 01/2024-25 Page 163 of 254FAIR RATE OF RETURN (FRoR) FOR THE THIRD CONTROL PERIOD 8 FAIR RATE OF RETURN (FRoR) FOR THE THIRD CONTROL PERIOD 8.1 GIAL’s submission regarding FRoR for the Third Control Period Cost of equity 8.1.1 GIAL has considered the Cost of equity as 17.30% based on a report by PwC. 8.1.2 GIAL has submitted the following assumptions for estimating the Cost of equity: • Risk-free rate was calculated by taking 10-year average yield on a daily basis, for 10-year Government of India securities. • Asset beta was derived based on five-year weekly regressed beta computed for comparable listed airports (weighted), and adjusted for appropriate leverage to determine the levered Equity beta • Although various debt-equity (leverage or gearing) ratios had been analyzed, the assumed leverage for computation of Cost of equity was the normative approach and standard adopted in earlier tariff determination exercises of the Authority, i.e., debt-equity ratio of 48:52. For such leverage ratio, the Equity beta was computed to be in the range of 1.35 – 1.38. • Equity risk premium over risk-free rate was computed as 7.06%, based on an average of equity risk premiums computed by a list of studies and standard market indices taken for the analysis. Table 119: Cost of equity computation as per GIAL’s submission Parameter Value Risk-free rate 7.57% Equity Risk Premium 7.06% Debt-equity ratio (leverage) 48:52 Equity beta 1.35 - 1.38 Cost of equity (rounded off) 17.11% – 17.28% Cost of debt 8.1.3 GIAL has submitted that Cost of debt assumed for the Third Control Period was 12%, based on actual debt taken as of date. 8.1.4 In May 2022, Adani Airport Holdings Limited had raised a 3-year External Commercial Borrowing facility from a consortium of Standard Chartered Bank and Barclays Bank PLC. The all-in borrowing cost of this facility is 12.10% p.a., the breakdown of which is provided in the table below: Table 120: Breakdown of all-in External Commercial Borrowing cost of Adani Airport Holdings Limited Particulars Value Secured Overnight Financing Rate (SOFR) reference 2.28% Spread over SOFR 4.25% Withholding tax gross up (at 5% of SOFR + spread) 0.33% One-year forward Dollar-Rupee hedge cost (mandatory as per RBI guidelines) 4.51% Upfront fees (annualised) 0.73% All-in Cost of External Commercial Borrowing 12.10% 8.1.5 It was mentioned that a part of the proceeds raised from this facility are being on-lent to GIAL for the purpose of financing its capital expenditure at the rate of 12.25% p.a. For the purposes of computation of weighted average cost of capital, cost of debt has been assumed as 12% p.a. Weighted average cost of capital 8.1.6 Based on the Cost of equity, Cost of debt and gearing ratio, GIAL has submitted the following FRoR for the Third Control Period: Consultation Paper No. 01/2024-25 Page 164 of 254FAIR RATE OF RETURN (FRoR) FOR THE THIRD CONTROL PERIOD Table 121: FRoR computation submitted by GIAL Parameter Value Cost of equity 17.30% Cost of debt 12.00% Weighted average gearing of equity 52.00% Weighted average gearing of debt 48.00% FRoR 14.76% 8.2 Authority’s Examination regarding FRoR for the Third Control Period Cost of equity 8.2.1 The Authority had commissioned independent studies for the evaluation of cost of capital separately, in case of each PPP Airport, namely DIAL, MIAL, GHIAL, BIAL and CIAL through a premier institute, namely IIM Bangalore and proposes to use these study reports as a basis, to the extent applicable and relevant, to ascertain the Cost of equity of LGBIA for the Third Control Period. 8.2.2 The independent study reports have drawn from the international experience of airports and their conclusions have been evaluated to the extent comparable with LGBIA in terms of hybrid till, ownership structure, size, scale of operations and regulatory framework. The median and average Cost of equity arrived at by the independent study reports are 15.16% and 15.18%, respectively, as shown in the table below: Table 122: Computation of Cost of equity as per IIM Bangalore independent study reports Particulars CIAL MIAL BIAL DIAL GHIAL Average Risk-free rate (A) 7.56% 7.56% 7.56% 7.56% 7.56% 7.56% Equity beta (B) 0.9427 0.9391 0.9262 0.9732 0.9442 0.94508 Equity risk 8.06% 8.06% 8.06% 8.06% 8.06% 8.06% premium (C) Cost of equity 15.16% 15.13% 15.03% 15.41% 15.17% 15.18% A + (B * C) Average Cost of equity 15.18% 8.2.3 The Authority notes that the Cost of Equity for the purpose of determination of FRoR has to be fairly consistent in case of PPP airports across India as the factors considered by the Independent Study in CAPM formula such as Risk Free Rate, Market premium are in Indian context and do not vary significantly among the Airports as these are operated under similar environment. Further, the averaging out exercise normalises the risk factors across Airports in Cost of Equity computation. 8.2.4 Based on the above reports, the Authority proposes the Cost of equity of 15.18% for LGBIA for the Third Control Period. This is also in line with the considerations of the Authority for other similar airports including Lucknow. Cost of debt 8.2.5 GIAL has considered Cost of Debt for the Third Control Period at 12% based on its current borrowing rate from a related party and based on Adani Airport Holdings Limited’s all-in borrowing cost of 12.10%. 8.2.6 Since the Airport has not obtained any credit rating from an external rating agency, there is no direct comparable entity or market data for determining cost of debt for LGBIA. 8.2.7 The Authority recommends that the Airport bring in further efficiencies in its cost of borrowing by leveraging its parent entity’s financial strength in order to reduce the interest rates. This suggestion is also in keeping with the spirit of PPP whereby it is expected that the financial strength of PPP airports Consultation Paper No. 01/2024-25 Page 165 of 254FAIR RATE OF RETURN (FRoR) FOR THE THIRD CONTROL PERIOD will be maintained at an optimal level and their cost of capital will be within reasonably allowable limits. GIAL should avail the synergies and benefits owed to it by its strong shareholding and balance sheet of its Parent companies and therefore work towards bringing down the cost of debt to the same level as other PPP airports. 8.2.8 The Authority also notes that the cost of debt for airport operators forms vital part of the Return on Capital Employed / Fair Rate of Return provided to the airport operators on the investment towards creation of the capital assets w.r.t the airport project. It is imperative that the cost of debt that is considered in the calculation of FRoR is reflective of the current cost of debt that the airport operator incurs towards debt financing the airport infrastructure. The following aspects, in this regard has been considered while arriving at the efficient cost of debt to be provided as part of the FRoR: i. Cost of debt financing in the Indian / International context is usually linked to the External Credit Rating of the Airport Operator/ Project SPV. As a result, any cost of debt actually incurred if it must be deemed efficient should be factoring in the External Credit Rating (ECR) of the entity. Usually Banks/ FIs mark a spread over and above their benchmark lending rate (usually published as Marginal Cost of Lending Rate i.e. MCLRs) as the interest rate for funding specific projects. This spread is linked to the ECR of the Borrower which in this case is the airport operator. AERA has follow a similar assessment to arrive at the cost of debt to be provided to the airport operator. ii. Debt must be a senior secured debt raised from financial institutions/ banks private /public or foreign at an arm’s length basis. There could be instances wherein the debt raised is subordinated to senior debt and would hence incur a higher cost and thereby deemed inefficient. Such inefficient cost may not be the right indicator of the actual cost of debt and hence appropriate adjustment has to be carried out while allowing such cost in the tariff determination process. iii. There have also been instances wherein senior secured debt have been advanced by promoter/ promoter entities in which case the arm’s length criteria could be questioned. It is pertinent to note that similar to the above case such costs also could not be deemed to be efficient and hence adequate adjustments to be carried out to ensure that the costs considered is reflective of the efficient cost. AERA doesn’t encourage related party transactions and insists transparency and arm’s length criteria in the interest of public. iv. Airport Operators currently in the country baring a few exceptions have managed to retain an ECR of A and above. In some cases where the airport is yet to establish a steady stream of positive cash flows on account of emerging nature of operations, the debt servicing is backed by the strength of the promoter entities which is also factored by the ECR rating agencies. As a result, considering the prevalent MCLRs which are in the range of 8.45%- 8.55%, an interest rate of 9% is usually considered as the cost of debt for these airport operators. However, given the expected softening of rates globally, and the impetus to promote economic growth as inflations fears have slowed down, the MCLRs are expected to gradually reduce over the next 2-3 years bringing down the cost of borrowing further. AERA want Airport Operators to improve ECR by bringing in efficiency and transparency which in turn will reduce MCLRs. v. Arriving at the cost of debt through assessment of the debt raising capacity of the airport operator rather than providing the actual cost of debt as submitted by the airport operator would benefit the airport stakeholders in the long run. The Airport operators would strive to be more efficient in their fund-raising endeavours rather than taking comfort from the true up option available to them considering the actual cost of debt. Consultation Paper No. 01/2024-25 Page 166 of 254FAIR RATE OF RETURN (FRoR) FOR THE THIRD CONTROL PERIOD AERA has already been following a similar exercise while arriving at the leverage ratios wherein a D:E ratio of 48:52 has been considered rather than the actual debt: equity (D:E) ratio which is in the range of 80:20 for most of the airport operators. Considering an efficient cost of debt rather than the actual cost of debt will be consistent with the stand taken for the leverage ratios used to calculate the FRoR. Further, it may also be noted that as the traffic growth and associated revenue from Aeronautical & Non- Aeronautical services improve; and the timely execution of capital projects, approved by the Authority, are completed and start to yield benefits. It is expected that the debt profile of LGBIA is bound to improve and its inherent financial risk, as reflected in the cost of debt will reduce to the levels of other PPP airports. 8.2.9 The Authority expects GIAL to exercise its best endeavor to undertake the financing towards capital expenditure at competitive rates as in other PPP airports and take all steps as detailed above, with support from its Parent company to optimize the cost of debt and follow all requisite procedures of financing including following all Government guidelines, obtaining efficient credit rating etc. in order to ensure that debt is contracted at optimum rates to ensure that the users of the airport are not burdened. 8.2.10 The Authority also notes that the average cost of debt of the other five PPP airports viz., DIAL, MIAL, GHIAL, BIAL and CIAL is 8.96%. 8.2.11 Accordingly, the Authority has considered the Cost of Debt of 9% for the computation of Fair Rate of Return. The Authority also directs GIAL to ensure that Related Party transactions, if any, with respect to borrowing of funds are benchmarked with most optimum rates available and is well justified. Fair Rate of Return 8.2.12 Based on the above, the Authority proposes to consider the following FRoR for the Third Control Period for LGBIA: Table 123: Fair Rate of Return proposed by the Authority for the Third Control Period Parameter Value Cost of equity 15.18% Cost of debt 9.00% Weighted average gearing of equity 52.00% Weighted average gearing of debt 48.00% Fair Rate of Return 12.21% 8.2.13 The above independent study reports have used the Capital Asset Pricing Model (CAPM) and a notional gearing (Debt: Equity) ratio of 48:52 to determine the levered Equity beta and accordingly, derive the Cost of equity. The Authority would like to mention that FRoR is computed on the basis of Cost of Equity and Cost of Debt. It has determined the CoE based on the IIM Bangalore independent study reports for the other PPP Airports whereas, the Cost of Debt has been computed as per the 3-month SBI MCLR along with spread and the Cost of Debt of other five PPP airports viz., DIAL, MIAL, GHIAL, BIAL and CIAL. 8.2.14 The Authority notes that the actual gearing deployed by Airport Operators of PPP airports are usually higher than the notional gearing adopted by the Authority, which ultimately benefits the AO. However, since the debt equity mix has been proposed by the Authority considering the efficient capital structure and the interest of all the Stakeholders, the notional gearing ratio of 48: 52 will not be trued up during the tariff determination for the next Control Period. Consultation Paper No. 01/2024-25 Page 167 of 254FAIR RATE OF RETURN (FRoR) FOR THE THIRD CONTROL PERIOD 8.3 Authority’s proposals regarding FRoR for the Third Control Period Based on the materials before it and based on its analysis, the Authority proposes the following: 8.3.1 To consider the Cost of equity at 15.18%. 8.3.2 To consider the notional debt to equity (gearing) ratio of 48%:52% in line with target gearing ratio being considered in case of other PPP airports. 8.3.3 To consider cost of debt of 9% for the Third Control Period. 8.3.4 To consider FRoR of 12.21% for the Third Control Period based on above mentioned Cost of equity, Cost of debt and gearing ratio as per Table 123. Consultation Paper No. 01/2024-25 Page 168 of 254INFLATION FOR THE THIRD CONTROL PERIOD 9 INFLATION FOR THE THIRD CONTROL PERIOD 9.1 GIAL’s submission regarding Inflation for the Third Control Period 9.1.1 GIAL has submitted inflation as 5% from FY23-24 onwards every year, while projecting capital expenditure and operating expenditure for LGBIA for the Third Control Period. 9.1.2 The inflation rate has been submitted by GIAL based WPI inflation forecasts as summarized in the table below: Table 124: WPI inflation rate submitted by GIAL Financial Year WPI All Commodities Source FY23-24 onwards Mean as 5% RBI Forecaster Survey 79th round dated 07th Dec 2022 9.2 Authority’s examination regarding Inflation for the Third Control Period 9.2.1 The Authority has examined the submission made by GIAL on inflation to be considered for the Third Control Period. 9.2.2 The Authority proposes to consider mean of WPI inflation forecasts (All Commodities) for FY 2023- 24, FY2024-25 and FY 2025-26 as per the recent “Results of the Survey of Professional Forecasters on Macroeconomic Indicators – Round 87” released on April 5, 2024, by the Reserve Bank of India (RBI). An extract of the results is reproduced below: Table 125: WPI inflation rates as per RBI’s annual forecast Financial Year WPI All Commodities Source FY22-23 9.42% Index Numbers of Wholesale Price in India for the (Cumulative YoY) Month of March, 2023 (Base Year: 2011-12) published by Ministry of Commerce & Industry FY23-24 Mean as -0.7% FY24-25 Mean as 3.1% RBI Forecaster Survey 87th round dated April 5, 2024 FY25-26 Mean as 3.7% 9.2.3 The Authority has considered the inflation rate of FY 2025-26 for the subsequent tariff year of the Third Control Period. Accordingly, the following table shows the inflation rates as proposed by the Authority for the Third Control Period. Table 126: Inflation rates proposed by the Authority for Third Control Period Particulars FY’23 FY’24 FY’25 FY’26 FY’27 WPI inflation 9.42% -0.7% 3.1% 3.7% 3.7% 9.3 Authority’s proposal relating to inflation for the Third Control Period Based on the material before it and its analysis, the Authority proposes the following: 9.3.1 To consider WPI inflation as per Table 126. Consultation Paper No. 01/2024-25 Page 169 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD 10 OPERATION AND MAINTENANCE (O&M) EXPENSES FOR THE THIRD CONTROL PERIOD 10.1 GIAL’s submission regarding Operation and Maintenance (O&M) Expenses for the Third Control Period 10.1.1 GIAL in its MYTP submission has stated that the Aeronautical Operation and Maintenance (O&M) expenses for the Third Control Period has been estimated based on the following assumptions: • Expansion of LGBIA: GIAL is constructing a New Integrated Terminal Building (NITB) as obligated under Concession Agreement and is proposed to be commissioned by FY 2024-25. After commissioning of NITB operations from the existing Terminal 1 will be moved to NITB. Year wise increase in operational terminal area is tabled below. Table 127: Details of increase in the Terminal Building area projected by GIAL YoY % increase in Financial Year T1 (sq. m.) NITB (sq. m.) Total (sq. m.) area FY’23 20,300 20,300 FY’24 20,300 20,300 0% FY’25 20,300 20,300 0%* FY’26 1,46,300 1,46,300 621% FY’27 1,46,300 1,46,300 0% *NITB shall be operational from Feb’25 onwards. Hence for projection of expenses, area increase has been assumed from FY25-26 onwards Considering the expansion of the Terminal Building area, as shown in the above table, GIAL has projected proportionate increase in various expenses such as Utilities, IT expenses, Rates & Taxes, Security and Other Operating expenses. • Inflation: GIAL has considered inflationary increase based on 79th Round of RBI forecaster survey Dec-2022, towards all expenses for the Third Control Period. • Base Year: FY 2022-23 has been considered as the base year and relevant growth percentages have been applied over the same to estimate expenses for other Financial Years. • Fuel Operating Expenses: The operations of Fuel facility are to be outsourced to a third-party vendor in FY 2023-24 on a ‘Cost plus margin’ basis, which includes employee cost, repairs and maintenance expenses and facility operating expenses. Annual inflation of 5% is considered in the O&M fee increase. • Cargo Operating Expenses: Cargo expenses have been estimated for the Third Control Period based on the assumption of an interim cargo facility from FY2023-24 onwards and a new Integrated Cargo Terminal (ICT) facility by refurbishing / retrofitting the existing passenger Terminal-1 building from FY 2026-27. Further, Cargo expenses have been increased by 10% per annum for the Third Control Period. 10.1.2 GIAL has submitted the following categories of O&M expenses in its MYTP submission: Table 128: O&M expenses (category wise) claimed by GIAL for the Third Control Period Type of O&M Expense Expense Category Manpower Expenses – AAI employees Manpower Expenses – GIAL employees Aeronautical Operating Expenses Utility Expenses IT Expenses Rates and Taxes Consultation Paper No. 01/2024-25 Page 170 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD Type of O&M Expense Expense Category Security Expenses Corporate Allocation Administrative Expenses – Collection Charges on UDF Administrative Expenses - Others Insurance Repair and Maintenance Expenses Other Operating Expenses Independent Engineer Fee Amortisation of Runway recarpeting expenses O&M Expenses Fuel Operating Expenses Bowser Rental GIAL Staff Salary Cargo Operating Expenses O&M expenses Customs cost recovery 10.1.3 The above expenses do not include Concession Fee, since it is not considered as part of Aeronautical O&M expenses, as per Clause 27.1.2 of the CA, which states that: “The Monthly Concession Fee paid/ payable by the Concessionaire to the Authority under and pursuant to the terms of this Agreement shall not be included as a part of costs for provision of Aeronautical Services and no pass-through would be available in relation to the same.” 10.1.4 GIAL has allocated all O&M expenses as Aeronautical. Table 129: Segregation of O&M expenses and basis of allocation as per GIAL’s submission Expense Category Expense classification Aeronautical Manpower expenses – AAI employees Aeronautical 100 % Manpower expenses – GIAL employees Aeronautical 100 % Utility expenses Aeronautical 100 % IT expenses Aeronautical 100 % Security expenses Aeronautical 100 % Corporate Allocation Cost Aeronautical 100 % Administrative expenses Aeronautical 100 % Insurance expenses Aeronautical 100 % Rates and taxes Aeronautical 100 % Repairs and Maintenance expenses Aeronautical 100 % Other Operating expenses Aeronautical 100 % Independent Engineer Fee Aeronautical 100 % Runway recarpeting Aeronautical 100 % Fuel Operating expenses Aeronautical 100 % Cargo Operating expenses Aeronautical 100 % 10.1.5 The total Aeronautical O&M expenses including Fuel and Cargo Operating Expenses submitted by GIAL for the Third Control Period have been presented as follows: Table 130: Total Aeronautical Operation and Maintenance expenses submitted by GIAL (₹ crores) Particulars FY’23 FY’24 FY’25 FY’26 FY’27 Total Aeronautical Operating Expenses Manpower expenses - AAI 27.64 32.52 31.85 30.26 33.28 155.55 Manpower expenses - GIAL 9.57 14.38 28.52 44.92 53.07 150.46 Consultation Paper No. 01/2024-25 Page 171 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD Particulars FY’23 FY’24 FY’25 FY’26 FY’27 Total Utility expenses 6.70 8.24 8.65 65.49 68.76 157.85 IT expenses 2.50 7.00 19.78 41.09 44.02 114.39 Rates and Taxes 0.31 0.75 0.79 5.71 6.00 13.56 Security expenses 3.75 6.00 6.11 9.97 12.02 37.86 Corporate Allocation Cost 12.89 15.00 42.39 45.65 48.91 164.85 Administrative expenses (excluding 0.98 1.64 1.67 1.89 2.27 8.45 Collection charges on UDF) Administrative expenses – Others 13.56 34.00 37.40 41.14 45.25 171.35 Insurance 2.31 2.89 6.68 9.03 9.52 30.43 Repairs and Maintenance 19.51 23.74 28.29 136.31 200.51 408.36 Other Operating expenses 13.43 22.00 23.10 167.63 176.02 402.18 Independent Engineer Fees 3.91 3.91 3.91 4.11 4.31 20.16 Runway recarpeting - - - 22.61 26.47 49.08 Financing Charges and Others 2.52 47.81 10.87 16.24 18.50 95.94 Aeronautical Operating Expenses (A) 119.58 219.87 250.01 642.06 748.94 1,980.47 Fuel Operating Expenses O&M Expenses - 2.95 9.33 10.27 11.73 34.28 Bowser Rental - 0.66 0.99 - - 1.65 Fuel Operating Expenses (B) - 3.61 10.32 10.27 11.73 35.93 Cargo Operating Expenses Insourced salary - 0.50 0.55 0.61 0.67 2.32 O&M Expenses - 1.05 1.49 2.00 11.98 16.51 Customs Cost Recovery - - - - 1.80 1.80 Cargo Operating Expenses (C) - 1.55 2.04 2.60 14.44 20.63 Total Aeronautical O&M Expenses 119.58 225.03 262.36 654.93 775.11 2,037.03 (A+B+C) 10.1.6 The growth rates assumed by GIAL for total Aeronautical O&M expenses have been presented in the tables below: Table 131: Growth rates for Aeronautical O&M expenses submitted by GIAL for the Third Control Period Particulars Cost Driver FY’23 FY’24 FY’25 FY’26 FY’27 Escalated Aeronautical Operating Expenses Manpower Expenses – AAI Salary Cost - 10% 10% 10% 10% employees Manpower Expenses – GIAL Salary Cost - 10% 10% 10% 10% employees Utility expenses (Power) Per unit rate - 5.0% 5.0% 5.0% 5.0% IT expenses Total Expense - 75.9% 71.1% 7.7% 14.3% Rates and Taxes Total Expense - 35.3% 182.6% 7.7% 7.1% Security expenses Total Expense - 29.5% 1.8% 13.2% 20.5% Corporate Allocation Cost Total Expense - 35.3% 182.6% 7.7% 7.1% Administrative expenses (UDF) - 29.5% 1.8% 13.2% 20.5% Administrative expenses (Others) Total Expense - 10.0% 10.0% 10.0% 10.0% Insurance – on Opening Net Total Expense - 10.0% 10.0% 10.0% 10.0% block of Assets Repairs and Maintenance – on Total Expense - 10.0% 10.0% 10.0% 10.0% Opening Net block of Assets Consultation Paper No. 01/2024-25 Page 172 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD Particulars Cost Driver FY’23 FY’24 FY’25 FY’26 FY’27 Escalated Other Operating expenses Total Expense - 5.0% 5.0% 5.0% 5.0% Independent Engineer Fees - - - 5.0% 5.0% Fuel Operating Expenses O&M Expenses Total Expense - - 5% 5% 5% Bowser Rental Total Expense - - - - - Cargo Operating Expenses Insourced salary Total Expense - - 10% 10% 10% O&M Expenses Total Expense - - 10% 10% 10% Customs Cost Recovery Total Expense - - 10% 10% 10% Table 132: One-time Escalation rates for Aeronautical O&M expenses submitted by GIAL for the Third Control Period Particulars Cost Driver FY’23 FY’24 FY’25 FY’26 FY’27 Escalated Electricity Charges Billable Units - - - 621 % - Rates & taxes Total Expense - - - 621 % - IT Expenses Total Expenses - - - 100% - Security expenses Total Expense - - - 50 % - Other Operating Expenses Total Expense - - - 621% - It can be seen from Table 132 above, that GIAL has claimed one-time escalation rates in Utilities, Rates and Taxes, IT Expenses, Security expenses and Other Operating expenses in FY 2025-26 based on projected increase in the area of Terminal Building (i.e., NITB commissioning). 10.1.7 GIAL while estimating runway recarpeting amortization has also considered carrying cost on the unamortized balance of the expense incurred on re-carpeting of runways at the rate of FRoR i.e. 14.76%. 10.2 Authority’s examination regarding Operation and Maintenance (O&M) Expenses for the Third Control Period 10.2.1 The Authority has examined the Operation and Maintenance expenses based on the following parameters: A. Consideration of actual expenses for FY 2022-23 and FY2023-24, and revision in growth rates of various expenses B. Re-allocation of the expenses into aeronautical, non-aeronautical and common. C. Rationalization of Employee Head Count 10.2.2 GIAL, in their submission proposes 100% of the operating expenses as Aeronautical. The tariff methodology adopted by the Authority, segregates O&M expenses into Aeronautical, Non- Aeronautical and Common considering the nature and purpose of the services for which these expenses are incurred. However, in the absence of any specific information regarding segregation of expenses, due clarifications were sought from GIAL regarding calculation of various allocation ratios such as terminal area. GIAL has maintained that as per the AERA guidelines, airside assets are to be considered as Aeronautical and the Terminal Building is considered as Aeronautical as per the AERA Act. However, if GIAL so desires, they may adopt Single Till methodology wherein all assets and operating expenses are considered as Aeronautical. 10.2.3 The Authority also notes that LGBIA is a brownfield airport and was established in 1958. The Authority has accordingly considered rationalization of costs in certain categories considering that these were Consultation Paper No. 01/2024-25 Page 173 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD operated at optimal level of costs by AAI earlier. Manpower Expenses of AAI employees 10.2.4 GIAL has considered the Manpower Expenses of AAI employees as 100% aeronautical, as this expense is considered as pass through in the determination of Aeronautical charges, as per the Clause 6.5 read with Clause 28.4.3 of the Concession Agreement. The Authority, in this regard examined the extract of the relevant clauses of the Concession Agreement which reads as under: • Clause 6.5.1. states that: (i) “Select Employees” shall mean those employees of the Authority as set forth in Schedule S (of the rank of assistant general manager and below) who are posted at the Airport by the Authority and shall be deployed at the Airport for the duration of the Joint Management Period and Deemed Deputation Period. The Select Employees shall stand reduced to the extent of employees who retire, are deceased or otherwise separated from Authority's services during the Joint Management Period or Deemed Deputation Period. It is clarified that the Select Employees shall not be reduced to the extent of employees who are transferred by AAI. (ii) “Joint Management Period” shall mean the period commencing from the COD and ending on the date which is I (one) calendar year after the COD. (iii) “Deemed Deputation Period” shall mean the period commencing from the expiry of the Joint Management Period and ending on the date which is 2 (two) calendar years therefrom.” • Clause 6.5.4 states that: “The Concessionaire shall bear the Select Employee Costs for the Joint Management Period and Deemed Deputation Period.” • Clause 6.5.10 states that: “If, at the expiry of the Deemed Deputation Period, the number of Accepting Employees is less than 60% (sixty) percent of the Select Employees (the ·'Deficit Employees"), the Concessionaire shall, commencing from the expiry of the Deemed Deputation Period pay to the Authority, on a monthly basis, such amounts as may be indicated in an invoice to be raised by the Authority on the Concessionaire with regard to the emoluments payable by the Authority in respect of such Deficit Employees (the "Deficit Employee Costs"). (ii) The Deficit Employee Costs shall be considered for pass-through in the determination of the Aeronautical Charges.” • Clause 28.4.3. states that: “The Parties agree and acknowledge that the Concessionaire expressly waives its right to seek as pass-through in the Aeronautical Charges such costs and/ or expenses which the Concessionaire is restrained under this Agreement from seeking to be passed-through thereunder.” 10.2.5 The Authority, on review of the above clauses of the CA, proposes to consider the Manpower Expenses of AAI employees up to ‘Deemed Deputation Period’ as Common since the Manpower of AAI is used for both Aeronautical and Non-aeronautical activities. Accordingly, the Authority proposes to apportion the Manpower Expenses of AAI employees up to ‘Deemed Deputation Period’ to Aeronautical activities based on the Employee Headcount Ratio of AAI employees as of March 2024 (refer Table 140). 10.2.6 In respect of the Manpower Expenses of AAI employees relating to ‘Deficit Employees’ after the expiry of the Deemed Deputation Period (expires in October 2024), the Authority proposes to consider these Consultation Paper No. 01/2024-25 Page 174 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD expenses as 100% pass through as mandated by Clause 6.5.10. of the CA. Manpower Expenses of employees of GIAL 10.2.7 GIAL has allocated the Manpower Expenses of GIAL employees as 100% Aeronautical. The Authority observes that since total manpower strength includes staff which provides non-aeronautical services also, the aeronautical Employee Headcount of GIAL needs to be suitably derived for appropriate allocation of costs. The Aeronautical Headcount and Employee Headcount Ratio (ECHR) for each tariff year, as well as 5-year average of such ECHR for the entire Third Control Period has been provided in Table 140 below. Utility Expenses 10.2.8 GIAL has segregated the expenses towards Utilities after netting off the recoveries proposed to be made from the Concessionaires for Non-aeronautical activities and has considered the net Utilities expenses as 100% Aeronautical. The Authority finds this allocation to be in line with that followed in other similar airports and proposes to consider the same. IT expenses and Insurance expenses 10.2.9 GIAL in its MYTP submission has considered the expenses towards IT expenses as 100% Aeronautical. The Authority, however, proposes to apportion the IT expenses in the Terminal Building ratio of 90:10 as prescribed in para 7.3.14 considering the utility and nature of IT services being provided at the Airport which is also in line with the allocation considered for other similar airports. 10.2.10 GIAL has considered the Insurance expenses as 100% Aeronautical. However, the Authority proposes to consider the Insurance expenses as Common on the basis that these expenses encompass all assets including Non-Aeronautical assets. The Authority, thus proposes to apportion as per the Gross Fixed Asset Ratio i.e., 95.39:4.61 as proposed by the Study on Efficient Operation and Maintenance Expenses of LGBIA, and also considered for other similar airports. Security Expenses 10.2.11 The Authority observes that GIAL has considered the expenses towards Security as 100% Aeronautical. The Authority, however proposes to consider the Gross Fixed Asset Ratio i.e., 95.39:4.61, as prescribed by the Study on Efficient Operation and Maintenance Expenses of LGBIA, for allocating Security expenses. Administrative Expenses 10.2.12 The Authority observes that GIAL has segregated Administrative expenses including expenses towards Professional & Consultancy, Sales & Marketing, Travelling & Communication, Printing & stationery etc. and considered all as 100% Aeronautical. The Authority apportioned the Administrative Expenses in Gross Fixed Asset Ratio i.e., 95.39:4.61, as proposed by the Study on Efficient Operation and Maintenance Expenses of LGBIA undertaken for Second Control Period. 10.2.13 The Authority observes that GIAL has considered Collection charges on UDF as 100% Aeronautical on the basis that these charges have been paid towards collection of aeronautical revenue and accordingly the Authority has considered the same as Aeronautical which is in line with the approach adopted for other airports. Corporate Cost Allocation 10.2.14 GIAL has considered expenses towards Corporate Allocation Cost as 100% Aeronautical in its MYTP submission. GIAL has engaged an Independent Consultant for conducting a Study on allocation of Corporate Costs of both AEL and AAHL. GIAL has further shared a Note on the Consultation Paper No. 01/2024-25 Page 175 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD Study report which provides the types of services / costs that have to be allocated to GIAL, along with the basis of allocation of such costs. As per the details shared by GIAL, the corporate costs have been allocated based on applicable costs or revenue drivers such as Ratio of Number of Employees of a SPV to Total Adani Group Employees, Ratio of Per Pax Revenue of SPV to total Per Pax Revenue, Ratio of Debt raised for a SPV to total Debt raised for Airport Group, Ratio of Turnover of a SPV to Total Group Turnover etc. GIAL has further shared details of the total corporate cost allocated to each airport, which is 5.43% for FY23, as apportioned to GIAL. GIAL has derived the allocable corporate expense based on the aforementioned study. However, the basis for allocation of the costs towards Aeronautical and Non-aeronautical activities has not been provided in the Study report. In the absence of an appropriate basis, the Authority allocated the cost in the ratio of revised Total Employee Headcount Ratio i.e., Employee Head Count of both AAI and GIAL for each tariff year as is shown in Table 140. Expenses towards Repairs & Maintenance, Rates & Taxes and Other operating expenses 10.2.15 The Authority observes that GIAL in its MYTP submission has considered expenses towards Repairs and Maintenance as 100% Aeronautical. The Authority has treated R&M expenses as Common expense, since it pertains to assets providing Aeronautical and Non-Aeronautical services. The Authority thus proposes to apportion these expenses as per the Terminal Building Ratio i.e., 90:10. 10.2.16 The Authority observes that GIAL has considered expenses towards Rates and Taxes as 100% Aeronautical. The Authority treated the same as Common expense and apportioned it as per the Gross Fixed Asset Ratio i.e., 95.39:4.61. 10.2.17 The Authority observes that GIAL has considered expenses towards Other Operating expenses as 100% Aeronautical. The Authority considers treating such expenses as Common expense and proposes to allocate as per the Terminal Building ratio of 90:10. 10.2.18 The Authority observes that GIAL has considered expenses towards Independent Engineer Fees as 100% Aeronautical. In accordance with the CA, GIAL has to appoint an Independent Engineer. As per Clause 24.3.1, the cost associated with such Independent Engineer shall be considered as pass-through for determination of Aeronautical Charges by the Regulator. Relevant extract of the CA has been reproduced below: Clause 24.3.1. The remuneration, cost and expenses of the Independent Engineer shall be paid by the Authority, and all such remuneration, cost and expenses shall be reimbursed by the Concessionaire to the Authority within 15 (fifteen) days of receiving a statement of expenditure from the Authority. Any amounts paid to the Independent Engineer shall be considered for a pass-through for the determination of the Aeronautical Charges by the Regulator. Considering the concession provisions quoted above, IE expenses has been considered as 100% Aeronautical by the Authority. Amortization of runway recarpeting expenses, Fuel and Cargo Operating expenses 10.2.19 GIAL has considered the expense towards Amortization of runway recarpeting, Fuel and Cargo Operating expenses as 100% Aeronautical. The Authority finds the classification of the aforementioned expenses to be reasonable and proposes to consider the same. Further, the Authority notes that the classification of Fuel and Cargo expenses as 100% Aeronautical is as per Section 2(a) of the AERA Act Consultation Paper No. 01/2024-25 Page 176 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD 2008. 10.2.20 The Authority’s proposal for allocation of Total Aeronautical O&M expenses of LGBIA as compared to that submitted by GIAL has been summarized in the table below: Table 133: Allocation of O&M expenses submitted by GIAL and proposed by the Authority for the Third Control Period O&M expense allocation as per Allocation ratio proposed by Particulars The GIAL’s the Authority Authority’s Submission Proposal Manpower Expenses – AAI employees (up to Employee Headcount ratio of 100.00% 99.12% Deemed Deputation Period) AAI employees Manpower Expenses – AAI employees (Deficit 100.00% 100.00% Aeronautical Employee Cost) Employee Headcount ratio of Manpower Expenses – GIAL employees 100.00% 96.01% GIAL’s employees Utility expenses 100.00% 100.00% Aeronautical IT expenses 100.00% 90.00% Terminal Building ratio Rates and Taxes 100.00% 95.39% Gross Fixed Asset ratio Security expenses 100.00% 95.39% Gross Fixed Asset ratio Security Others 100.00% 95.39% Gross Fixed Asset ratio Corporate Allocation Cost 100.00% 97.29% Total Employee Headcount ratio Administrative Expenses – Others 100.00% 95.39% Gross Fixed Asset ratio Administrative Expenses – Collection Charges on 100.00% 100.00% Aeronautical UDF Insurance 100.00% 95.39% Gross Fixed Asset ratio Repairs and Maintenance 100.00% 95.39% Gross Fixed Asset ratio Other Operating expenses 100.00% 90.00% Terminal Building ratio Independent Engineer Fee 100.00% 100.00% Aeronautical Amortization of Runway recarpeting expenses 100.00% 100.00% Aeronautical Fuel Operating Expenses 100.00% 100.00% Aeronautical Cargo Operating Expenses 100.00% 100.00% Aeronautical One time escalation claimed by GIAL 10.2.21 One-time escalation claimed by GIAL for various Operating expenses in FY 2025-26 have been analyzed by the Authority. In this regard, the Authority considers Capitalization schedule proposed by it (refer Table 110), in which commissioning of NITB has been considered during the Third Control Period. Accordingly, the Authority proposes to consider proportionate increase for determining the one- time escalation in the expenses for the current Control Period. Further, the Authority notes that the escalation in operating expenses such as Utilities, Housekeeping and Upkeep expenses, Horticulture expenses and Outsourced manpower / Hiring expenses may not be directly proportional to the increase in the Terminal Building area due to technological innovation, advancements, and economies of scale. Hence the Authority proposes to consider 2/3rd (i.e. 66.67%) of the increase in total terminal area (2/3* 621%) for one-time escalation of expenses related to Terminal Building. The details of escalation rates submitted by GIAL and that proposed by the Authority for are shown in the table below: Table 134: One-time escalation claimed by GIAL and Increase % Proposed by the Authority Increase % proposed by the Type of Expense Increase % Claimed by GIAL Authority Electricity Charges FY 2025-26: One-time 414%* FY2025-26: 621 % (NITB commissioning) (Terminal Area increase) Rates & taxes FY 2025-26: One-time 414%* FY2025-26: 621 % (NITB commissioning) (Terminal Area increase) Consultation Paper No. 01/2024-25 Page 177 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD Increase % proposed by the Type of Expense Increase % Claimed by GIAL Authority IT Expenses FY 2025-26: One-time 100% FY2025-26: 100 % (NITB commissioning) (Terminal Area increase) Security expenses FY 2025-26: One-time 50% FY2025-26: 50 % (NITB commissioning) (Terminal Area increase) Other Operating Expenses FY 2025-26: One-time 414%* FY2025-26: 621 % (NITB commissioning) (Terminal Area increase) *Refer Table 127 (2/3* 621%) The Authority has evaluated the submission made by GIAL relating to various operational expenses and their growth over the Third Control Period and the analysis of such expenses is elaborated below: Manpower Expenses 10.2.22 The Authority, on its examination of GIAL’s submission towards Manpower expenses, observes the following: i. Manpower Expenses of AAI employees - GIAL has projected the expense towards specified number of AAI employees across all the five (5) tariff years in the Third Control Period as per clause 6.5.1 of the Concession Agreement entered into between AAI and GIAL, the extract of which has already been provided under paragraph 10.2.4. a. GIAL has claimed Manpower Expenses for ‘Select employees’ till the end of Deemed Deputation Period (refer table below for the department wise list) and also ‘Deficit Employee Cost’ for 104 employees (calculated at 60% of ‘Select employee’ number as stated in Clause 6.5.10 of the Concession Agreement) for the remaining portion of the Third Control Period. GIAL has also projected a growth rate of 10% year-on-year towards Manpower Expenses of AAI employees. The cadre wise details of AAI employee have been provided as part of Schedule S of the signed Concession Agreement. Further, the department wise detail has been provided by GIAL at section 13.2.15 as part of their MYTP submission. Table 135: Department-wise Select employees of AAI deputed to LGBIA as submitted by GIAL No. of Employees as on No. of Employees as on March Department March 31, 2023 31, 2024 Commercial 1 1 Engineering & Maintenance 43 41 Finance 6 6 Fire Services 51 51 Human Resource and Admin 19 18 Security 1 1 Terminal Management 12 12 Grand Total 133 130 b. The Authority observes that the Manpower Expense of AAI employees are accounted by GIAL, based on the invoice raised by AAI for the ‘Select Employees’ deputed at LGBIA, on a monthly basis. GIAL has arrived at the average annual employee cost of ₹ 24.09 lacs per annum. However, basis the actual expenses submitted by GIAL vide email dated April 22, 2024, the average annual employee cost has been calculated as ₹ 21.77 lacs in FY24, which the Authority proposes to consider. Consultation Paper No. 01/2024-25 Page 178 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD c. The Authority also observes that the Manpower Expenses of AAI employees were considered as 100% Aeronautical expenses by GIAL. d. The Authority proposes to consider the Manpower Expenses – AAI employees up to ‘Deemed Deputation Period’ and after the expiry (October 2024) of such period relating to ‘Deficit Employee cost’ according to the explanation provided in the relevant Clauses of the Concession Agreement for such expenses and accordingly, treat the same which has been explained in paragraph 10.2.5 and 10.2.6 e. The Authority observes that GIAL has submitted vide e-mails dated April 2, 2024 and April 22, 2024, that they have incurred actual Total Manpower expenses of AAI employees amounting to ₹ 27.64 crores for the FY 2022-23 and ₹ 28.30 crores in FY2023-24 respectively. In this respect, the Authority notes that GIAL has considered the same as 100% Aeronautical which the authority proposes to re-allocate based on the prescribed allocation ratio of 99.25% (FY23) and 99.06% (FY 24 and FY25) (refer Table 140) which works out to ₹ 27.43 crores for the FY 2022-23 and ₹ 28.03 crores for FY 2023-24. Further, the Authority proposes to consider the average annual employee cost as ₹ 21.77 lacs per annum basis the actual expenses incurred in FY24 as the base to forecast salaries for the remaining three tariff years, i.e., FY 2024-25 to FY 2026-27. f. Further, the Authority proposes to revise the 10% Y-o-Y increase in Payroll costs claimed by GIAL to 6% for the remaining three (03) tariff years of the Third Control Period, as approved by the Authority for other similar airports. g. The Authority further observes that post completion of Deemed Deputation period, GIAL needs to bear the costs of Deficit Employees (60% of Select Employees) and shall be considered for pass-through in the determination of the Aeronautical Charges and the same has been appropriately accommodated. h. The details of Manpower expenses – AAI employees claimed by GIAL and proposed by the Authority are summarized in the table below: Table 136: Manpower cost of AAI employees claimed by GIAL and proposed by the Authority Particulars Unit FY’23 FY’24 FY’25 FY’26 FY’27 Total As per GIAL AAI – employee’s salary % 10 10 10 10 10 growth rate claimed by GIAL AAI – employees Manpower ₹ in 27.64 32.52 31.85 30.26 33.28 155.55 Cost claimed by GIAL crores As per the Authority AAI – employee’s salary % - - 6 6 6 growth rate proposed by the Authority AAI – Employees Manpower ₹ in 27.64* 28.30** 15.78# + 25.39 26.91 Cost derived by the Authority crores 11.35^ Allocation ratio proposed by % 99.25 99.06 99.06# / 100 100 the Authority (Refer Table 100^ 140) AAI – Aero Employees ₹ in 27.43 28.03 26.98 25.39 26.91 134.75 Manpower Cost proposed by crores the Authority *as per actuals submitted by GIAL for FY 2022-23 **as per actuals submitted by GIAL for FY 2023-24 #for Deemed Deputation Period ^for Deficit Period Consultation Paper No. 01/2024-25 Page 179 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD ii. Manpower Expenses of Employees of GIAL GIAL has submitted the following regarding projected salary cost per employee per annum and increase in the total employee headcount: a. Salary cost projected per employee per annum - GIAL has submitted a weighted average employee cost of ₹ 14.00 lacs per annum (₹ 20.00 lacs per annum for executives and ₹ 5.00 lakhs per annum for non-executives) in FY 2023-24 and also projected an increase of 10% year-on- year (Y-o-Y) for each tariff year in the Third Control Period. As per the submission of GIAL, the average employee cost of ₹ 14.00 lacs per annum has been derived after considering the salary cost of projected recruitments for Senior-level positions like Chief Airport Officer, Chief Security Officer and Heads of Departments for Procurement, Legal, Customer Care, Experts for Quality, Corporate Communications and also the salary cost of other-level positions in various departments like Airside management, Security, Terminal Operations, Engineering & Maintenance, HR, Finance, etc. GIAL has further submitted that as per Clause 6.5.3. of the Concession Agreement, the Senior Personnel of AAI deputed to LGBIA shall remain only for a period not exceeding 3 months from the COD and shall be transferred on expiry of three months. The Authority examined Clause 6.5.3 of the Concession Agreement which states that: “The senior management staff of the Authority of the rank of deputy general manager and above (“Senior Personnel”) shall remain deputed at the Airport for a period not exceeding 3 (three) months from the COD. (i) On the expiry of such 3 (three) month period, the Senior Personnel shall be transferred out of the Airport and redeployed by the Authority. (ii) It is clarified that the Concessionaire shall not be liable to bear any costs in respect of the Senior Personnel, which costs shall be borne entirely by the Authority.” The Authority finds the average employee cost submitted by GIAL to be reasonable and proposes to consider the same. Further, the Authority proposes to rationalise the growth rate by considering only 6% Y-o-Y for all the remaining three (3) FYs, starting from FY 2024-25 in line with what has been considered for Manpower Expenses of AAI employees. The Authority observes that GIAL has submitted vide e-mail dated April 2, 2024 that they have incurred actual Total Manpower Expenses of GIAL’s employees amounting to ₹ 9.57 crores for the FY 2022-23. Further, GIAL vide email dated April 22, 2024 has submitted the actual expenses as ₹ 11.50 crores for FY2023-24. The Aeronautical portion of such expenses works out to ₹ 9.23 crores for the FY 2022-23 and ₹ 10.70 crores, which the Authority, proposes to consider for FY 2022-23 and FY 2023-24 respectively. b. Increase in Employee Headcount – GIAL has projected an increase in Employee Headcount from 85 as at the end March 2023 to 375 as at the end the Third Control period. The table below depicts increase in the total Headcount Y-o-Y with department wise break-up of employees. GIAL in its submission has considered the allocation as 100% Aeronautical. Consultation Paper No. 01/2024-25 Page 180 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD Table 137: Dept. wise Head Count of Employees as per GIAL’s submission for the Third Control Period Departments FY23 FY24 FY25 FY26 FY27 Justification (Nos) (Nos) (Nos) (Nos) (Nos) Chief Airport Office 2 3 4 4 5 As per Concession Agreement, Clause 6.5.3. AAI employees (CAO office) with designation over DGM and above have been transferred out by AAI and they are not associated with the Airport after 3 months from CoD. Accordingly, Airport Director and all HoDs have been transferred out and are not working at Guwahati Airport. CAO stands for Chief Airport Officer. He is responsible for overall operations and management of the Airport. Department is akin to erstwhile Office of Airport Director. He is supported by relevant staff for analysis, reviews, KPI management, regular review, action taken follow-ups, stakeholder management, etc. Composition includes CAO, 1 EA, 1 ES, & 1 ORAT Manager. Techno Commercial 6 8 9 10 11 AAI do not have any local purchase department at site. All (Procurement) the procurement at AAI is done centrally through tendering process. Techno commercial function is responsible for procurement of various requirement of user department, management of contract, RFP issue, onboarding of vendor, etc. Composition includes 1 HoD, 5 Support staff Corporate 1 2 2 2 3 As per Clause 18.1.1 (q), GIAL is requirement to have public communication relation officer who will interface with various stakeholders. GIAL has assumed to place one position to fulfill the mandated requirement along with 1 support staff Corporate Affairs 1 1 2 2 2 Position required to interact with various state government, local municipalities, utility boards, local police, land department etc. on day-to-day basis. Composition is 1 lead & 1 support staff Security 6 8 17 17 20 Currently there was one person deputed for carrying out Security function at the Airport. At present AAI was only performing pass section function with his support. However there are various activities which need to be performed by GIAL like CISF Documentation, Airport Security Program, Kerb Side Management, Traffic Management, Airport Operator Security Control Room, Tout Management, Security System Maintenance, Encroachment outside and perimeter area, Intelligence and Vigilance Gathering, Avsec Training and Compliances, Landside Operations, BCAS Compliance requirements. GIAL will be carrying out functions with a combination of on roll and outsourced employees. Sovereign agencies and security set up of the airport operator have clearly defined mandates. NACASP 2018 vide Para4.2.2(xxii) stipulates that the Airport Operator is responsible for implementation of security controls at the airports through the CSO. The Asset CSO is bestowed with all the powers to implement security controls at the airport level and overall coordination with other agencies at the airport(Para5.2.1(ii) of NCASP refers). GIAL has assumed 20 employees on rolls is a composition of 1 CSO, 6 Pass Section, 1 Avsec Audit and Compliances, 7 Loss Prevention and Automation, 5 landside operations and others. Other operations like Kerb side, Tout Management, Traffic Management, Encroachment Prevention, Security System Maintenance etc. are expected to be outsourced. Consultation Paper No. 01/2024-25 Page 181 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD Departments FY23 FY24 FY25 FY26 FY27 Justification (Nos) (Nos) (Nos) (Nos) (Nos) Legal 1 1 2 2 2 AAI does not have legal positions at the Airport. Composition includes 1 HoD and 1 department supporting staff. Safety - 1 2 2 2 As per Concession Agreement clause 18.15.4, GIAL is expected to create Airport Safety Management Unit (ASMU) and designate one of its officers to be in-charge of the ASMU. Composition includes 1 Aviation Safety Expert and 2 support staff & OHS staff. Quality 1 1 2 2 2 Under clause 23.1 of concession Agreement, GIAL is obligated to monitor and measure quality of service on the parameters prescribed in the Concession Agreement. Further as per Concession Agreement, GIAL is expected to maintain relevant ISO certification and other quality certifications for all the facilities controlled and managed by GIAL. Composition includes 1 Quality Expert 2 associates Information 2 5 8 9 10 AAI does not have Information technology team to support Technology the IT functioning of the Airport. IT is a backbone of the Aviation, and all the critical systems need to be running with zero downtime. Critical systems includes AODB, FIDS, PDAs, SAP, Business Analytics, Integration with ATC, VGDS, Radio Sets, Desktops, Laptops, Billing Software's, Document Management System, Access Control System etc. Composition includes 1 HoD, 9 Support staff. Airside Management 16 23 30 35 40 As per Clause 18.1.1 (d), (f) and (g), GIAL is responsible to maintain and operate Airside including Runway, Taxiways, Apron, Approach Areas etc. Also, it is mentioned in the CNS-ATM Agreement about the airside obligations to be performed by GIAL. GIAL is responsible to establish Apron Management Service, Airside safety, aerodrome safeguarding and aeronautical information services. Previously some of these services were performed by ANS team of AAI and some of the services were not done at all. Post CoD all these functions are to be performed by GIAL. Further these activities are strictly regulated by DGCA as part of legal framework of Aerodrome Operating License under CAR section 4, series F part 1. Lastly as a part of capex expansion plan there are new Airside facilities need to be made like Part Parallel Taxi Track, Second Part Parallel Taxi Track, Expansion of Apron 2, Extension of Runway, New Isolation Bay, etc. There will be requirement for additional manpower to operate these facilities. The composition includes In Charge Airside, Duty Managers, Duty Officers, Airside Executive, Airside Ground Maintenance, Aerodrome Licensing, Aerodrome Safeguarding, Wildlife Hazard Management Regulatory - - 1 1 2 New position to support in regulatory filing with AERA. Terminal and 22 23 44 44 46 NITB project is ongoing and is supposed to be commissioned Operation by Q4 FY 24-25. It is expected that there will be requirement for additional duty managers, duty officers, facilities, Terminal E&M, ORAT team, horticulture, ESG staff to cater to the increased area demand. Non-Aero Commercial 3 4 7 7 7 GIAL is expected to deploy various strategies/innovations to monitor the Non-Aeronautical Income and development of Consultation Paper No. 01/2024-25 Page 182 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD Departments FY23 FY24 FY25 FY26 FY27 Justification (Nos) (Nos) (Nos) (Nos) (Nos) city side area. There is likelihood of increase in Manpower over time. Human Resources and 5 5 6 6 6 GIAL is expected to consolidate and automate various Admin positions/functions, and will employee limited staff which will be comprising of HoD, HR Operations Talent Acquisition 2 person, Learning & OD, Admin, ER & Compliances Finance 5 5 8 8 8 Composition includes 1 HoD, and support staff for various functions under finance and accounts. Engineering & 3 13 30 30 30 Currently AAI has approx. 10-15 people each in Civil, Maintenance Technical and Engineering sections. GIAL is expected to outsource some of the non-core activities. Second there will be increase in Terminal Area by 5x in NITB. Increase in Airside Facilities, increase in landside facilities, Utilities etc, there will be requirement of more manpower in Engineering and Maintenance department to cater to these increased facilities. Considering all the above factor, GIAL is expected to consolidate the function and will have only 30 people on- rolls. Airline Marketing - 1 2 2 2 Specialized marketing personnels required to bring in additional airlines with increase in the capacity of the airport. Aviation Rescue and 8 8 84 84 88 As per AAI manual 2015, and TRA done there is requirement Fire Fighting (ARFF) of 92 Fire People (23 nos x 4 shifts) for Category 8 Airport for 24/7 shift operation, emergency response. TRA attached (Please refer Annexure R of MYTP for TRA). Environment & 1 1 2 2 2 As per ICAO/DGCA/MoEF guidelines to operate/maintain Sustainability Eco Friendly and sustainable Airport, manpower is required for meeting the regulatory compliances. ACI IV plus accreditation and target of Carbon neutral asset is to be achieved for addition executive is required for maintaining all the records in addition to the lead position. Horticulture 1 1 3 3 3 To maintain world class Passenger Experience and to maintain eco-friendly Airport. To increase green cover at the airport as per statutory guidelines. Land department 1 1 1 1 1 Personnel will be responsible for land matters ILHBS Screeners - - 59 77 83 New NITB New online baggage screening will be introduced. So certified screeners will be required Total Manpower 85 115 325 350 375 Requirement The Authority does not agree with GIAL’s contention that all employees cost is Aeronautical in nature. The Authority has referred the Study on the Efficient Operation and Maintenance Expenses of LGBIA, and accordingly reallocated employees between aeronautical, common, and non-aeronautical. The Authority observes that GIAL has estimated this increase in number of employees mainly towards functions relating to Security, Firefighting, Airside management, Terminal operations, Engineering and Maintenance and ILHBS Screeners, considering the commissioning of NITB in FY 2025-26 and that the deemed deputation period of the Select Employees deputed by AAI expires in the FY 2024- 25 (October 2024). In this background, the Authority examined the Aeronautical Employee Head Count of LGBIA for the period from FY 2016-17 to FY 2019-20 (Pre-COVID year) and notes that the 4-year average employee headcount is 149 and the same is given in below table: Consultation Paper No. 01/2024-25 Page 183 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD Table 138: Headcount of Aeronautical employees of LGBIA for the Period from FY’17 to FY’20 4 – Year Particulars FY’17 FY’18 FY’19 FY’20 Average Employee Headcount * 139 145 164 149 149 * Refer Table 19 of paragraph 4.4.3.e. of Study on Efficient Operation and Maintenance Expenses for LGBIA The Authority further observes that the Passenger traffic and ATM during the Third Control Period for LGBIA (refer Table 71) has crossed Pre-COVID level during FY 2023-24. The same has been presented in the following table: Table 139: Estimated Passenger and ATM traffic of LGBIA FY’20 Particulars (Pre- FY’23 FY’24 FY’25 FY’26 FY’27 COVID) Passenger Traffic (in lacs) 54.57 50.51 59.58 66.64 75.44 90.94 ATM Traffic (In ‘000s) 45.54 45.91 46.15 60.53 68.05 82.11 However, the Authority also considers the following pertinent factors such as:  NITB is expected to be commissioned in last quarter of FY24-25 as per GIAL submission.  There are existing employees of AAI i.e., ‘Select Employees’ deputed to LGBIA and  The previous airport operator, namely, AAI had been maintaining the prescribed ASQ rating of LGBIA with the aforementioned employee headcount (refer Table 164). Considering the growth projected in Passenger traffic and ATM and the current scale of operations, the Authority is of the view that, the Aeronautical Employee Head Count projected by GIAL which is at 375 towards the end of the Third Control Period, is not justified and the same needs to be rationalized. Further the Authority noted the GIAL headcount shared vide email by GIAL dated April 2, 2024 and compared it with the projections submitted during MYTP submission. Accordingly, the Authority has rationalized the headcount projections. Based on the above, the Authority has analyzed the Employee Headcount projected vis-à-vis the functions of each department mentioned in Table 137. The Authority proposes to consider actual headcount for FY2022-23 and FY 2023-24 as submitted by GIAL. Further, the Authority proposes the following revision in Aeronautical Employee Headcount projected by AO for the remaining three (3) tariff years of Third Control Period: (i) Security department: The Authority observes that certain security and safety activities may be suitably outsourced by GIAL, barring specific activities such as coordination with CISF, BCAS compliance etc. The Authority thus proposes to consider only 50% of the Employee Headcount projected by GIAL in the 3rd tariff year (FY 2024-25) onwards. (ii) Airside Management: The Authority observes that the headcount projected by GIAL for all the tariff years is not justified considering the projected traffic levels at the airport. The Authority also observes that ground handling activities at the airport have been outsourced. Based on the above factors, the Authority proposes to consider twenty five (25), thirty (30), and thirty five (35) employees in the last three tariff years of the Control Period as against 30 / 35 / 40 employees respectively, claimed by GIAL. (iii) Terminal Operations: The Authority observes that the number of Employee Headcount projected by GIAL is not justifiable as there are existing employees of AAI (i.e., Select employees deputed to LGBIA) at the Airport till the deemed deputation period. Hence, the Authority has Consultation Paper No. 01/2024-25 Page 184 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD rationalized the manpower for Terminal Operations for the FY2024-25 from 44 employees to 35 employees. The Authority further observes that since NITB shall be commissioned by FY2025- 26, as per the CAPEX plan proposed by the Authority for Third Control Period, the manpower may be increased in a staggered manner. The Authority proposes to consider forty (40) employees in FY2025-26 as against 44 employees claimed by GIAL, and forty six (46) employees in FY2026-27 as proposed by GIAL. (iv) Engineering & Maintenance Department: The Authority observes that there are existing employees of AAI (i.e., ‘Select Employees’ deputed to LGBIA) at the Airport during the deemed deputation and hence the Authority proposes to consider 75% of the Aeronautical Employee Headcount of Engineering & Maintenance department, projected by GIAL, for the third tariff year of the Third Control Period. For the remaining two tariff years of TCP, the Authority proposes to consider the number of employees as submitted by GIAL as the Deemed Deputation Period will end in FY 2024-25. (v) Aircraft Rescue and Fire Fighting (ARFF): The Authority observes that the employee headcount projected by the AO is not justified, with the fact that the same services are being delivered by existing employees of the AAI (i.e., Select employees to LGBIA) at the airport, at a lower manpower strength. The Authority thus proposes to rationalize the manpower in this department for FY2024-25 on the basis of historical manpower deployment. For next two tariff years, manpower has been increased in a staggered manner. Based on the above factors, the Authority proposes to consider sixty (60), seventy (70), and eighty (80) employees in the last three years of the Control Period as against 84 / 84 / 88 employees respectively, claimed by GIAL. (vi) Inline Hold Baggage Screening System (ILHBS): GIAL had proposed screeners with effect from FY2024-25 considering that NITB will be commissioned in FY2024-25. However, the Authority has proposed commissioning of NITB in FY2025-26. ILHBS will be operationalized along with the commissioning of NITB. Further, the Authority has rationalized the number of screeners and proposes to consider an headcount of fifty (50) and sixty (60) employees in FY 2025-26 and FY 2026-27 repsectively. Based on the above factors, the Aeronautical Employee Headcount proposed to be considered by the Authority for the Third Control Period is shown in the table below: Table 140: Employee Head Count of GIAL and revised EHCR proposed by the Authority for the Third Control Period GIAL The Authority’s Particulars FY’23 FY’24 FY’25 FY’26 FY’27 Classification Classification Aeronautical Employee Head 85 115 325 350 375 count claimed by GIAL as per MYTP Employee Headcount proposed by the Authority Chief Airport Office (CAO Aeronautical 2 2 4 4 5 Aeronautical office) Techno Commercial Aeronautical 3 4 9 10 11 Aeronautical (Procurement) Corporate communication Aeronautical Aeronautical 1 1 2 2 3 Corporate Affairs Aeronautical Aeronautical 4 3 2 2 2 Security Aeronautical Aeronautical 6 7 9 9 10 Legal Aeronautical Aeronautical 1 1 2 2 2 Safety Aeronautical Aeronautical - 1 2 2 2 Quality Aeronautical Aeronautical - 2 2 2 Information Technology Aeronautical Aeronautical 2 3 8 9 10 Consultation Paper No. 01/2024-25 Page 185 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD GIAL The Authority’s Particulars FY’23 FY’24 FY’25 FY’26 FY’27 Classification Classification Airside Management Aeronautical Aeronautical 16 19 25 30 35 Regulatory Aeronautical Aeronautical 1 1 2 Terminal and Operation Aeronautical Aeronautical 22 20 35 40 46 Non-Aero Commercial Aeronautical Non-Aeronautical 3 5 7 7 7 Human Resources and Admin Aeronautical Common 5 5 6 6 6 Finance Aeronautical Common 6 6 8 8 8 Engineering & Maintenance Aeronautical Aeronautical 3 12 23 30 30 Airline Marketing Aeronautical Aeronautical 2 2 2 Aviation Rescue and Fire Aeronautical 8 7 60 70 80 Aeronautical Fighting (ARFF) Environment & Sustainability Aeronautical Aeronautical 1 1 2 2 2 Horticulture Aeronautical Aeronautical 1 1 3 3 3 Land department Aeronautical Non-Aeronautical 1 1 1 1 ILHBS Screeners Aeronautical Aeronautical 50 60 Air Cargo Aeronautical Aeronautical 1 1 Total Employee Head Count of GIAL rationalized by the Authority 85 100 213 292 329 Direct Aeronautical Employees of GIAL 71 83 191 270 307 Direct Non-Aeronautical Employees of GIAL 3 6 8 8 8 Common Employees of GIAL 11 11 14 14 14 Total Aeronautical Employees of GIAL 82 93 204 284 321 Total Non-Aeronautical Employees of GIAL 3 7 9 8 8 Revised Employee Headcount ratio of GIAL derived by the Authority 96.47% 93.00% 95.77% 97.26% 97.57% 5-yr average of Revised EHCR of GIAL 96.01% Total AAI Employees 133 130 130 - - Direct Aeronautical Employees of AAI 107 105 105 - - Direct Non-Aeronautical Employees of AAI 1 1 1 - - Common Employees of AAI 25 24 24 - - Total Aeronautical Employees of AAI 132 129 129 - - Total Non-Aeronautical Employees of AAI 1 1 1 - - Revised Employee Headcount ratio of AAI derived by the Authority 99.25% 99.06% 99.06% - - Total Aeronautical Employees of AAI and GIAL 214 222 333 284 321 Total Non-Aeronautical Employees of AAI and GIAL 4 8 10 8 8 Total Employee Headcount (i.e., both AAI and GIAL employees) derived 218 230 343 292 329 by the Authority Revised Employee Headcount ratio of total AAI and GIAL derived by the 98.17% 96.43% 97.02% 97.26% 97.57% Authority 5-year Average of Revised Total Employee Headcount Ratio (both 97.29% AAI and GIAL employees) derived by the Authority *till Deputation Period (October 2024) The employee cost proposed by the Authority for GIAL’s own employees, based on the revised aeronautical employee headcount is shown below: Table 141: Manpower cost of Aero employees proposed by the Authority for the Third Control Period Particulars Unit FY’23 FY’24 FY’25 FY’26 FY’27 Total As per GIAL Employee Headcount claimed No. 85 115 325 350 375 by GIAL Consultation Paper No. 01/2024-25 Page 186 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD Particulars Unit FY’23 FY’24 FY’25 FY’26 FY’27 Total Salary Growth % claimed by % 10% 10% 10% 10% 10% GIAL Manpower Cost of GIAL’s ₹ in 9.57 14.38 28.52 44.92 53.07 150.46 employees claimed by GIAL crores As per the Authority Employee Head count proposed No. 85* 100** 213 292 329 by the Authority Salary Growth % proposed by % - - 6% 6% 6% the Authority GIAL – Employees Manpower ₹ in 9.57* 11.50** 19.84 31.21 40.68 Cost derived by the Authority crores Allocation ratio proposed by % 96.47% 93.00% 95.77% 97.26% 97.57% the Authority Aero Manpower Cost of ₹ in 9.23 10.70 19.00 30.35 39.69 108.97 GIAL proposed by the crores Authority *as per actuals submitted by GIAL for FY 2022-23 **as per actuals submitted by GIAL for FY 2023-24 Utility Expenses 10.2.23 The Authority examined the expenses towards Utilities and noted the following: i. Power expenses: The Authority observes that GIAL in its submission has considered the expenses towards Utilities after netting off the recoveries to be made from the Concessionaires for Non- aeronautical activities. The net utilities expenses thus arrived is considered as 100% Aeronautical. • The Authority observes that GIAL has assumed 16% of the total electricity cost as recoveries to be made from the Concessionaires. The Authority further observes that the power recovery percentage is significantly lower than that of comparable airports and proposes that the non-aeronautical operations should increase the power recovery from the Concessionaires, in a gradual manner. Accordingly, the Authority proposes that GIAL shall constitute a Committee to verify the bills relating to Power expenses and submit a report on the same to the Authority as part of Stakeholder comments / feedback. In case such report is not submitted by GIAL, the Authority proposes to consider power recoveries at a notional rate while issuing the tariff order of the Third Control Period. • The Authority observes that the actual Electricity costs incurred by GIAL for FY 2022-23 of ₹ 6.70 crores (after recovery) and proposes to consider the actual expenses of FY 2022-23. Further, GIAL has submitted the actual expenses as ₹ 9.20 crores (after recovery) for FY 2023-24, which seems to be on higher side and thus suitable justification was sought for the same from the AO. GIAL vide email dated April 15, 2024 stated that, the base rate for electricity which is charged as energy charges in monthly bill, was increased from ₹ 7.70 per unit to ₹ 8.10 per unit. Further, APDCL (Assam Power Distribution Company Limited) had increased FPPCA ((Fuel and Power Purchase Cost Adjustment) to ₹ 1.29 per unit in FY24 from ₹ 0.30 per unit in FY23. The Authority in view of the aforementioned response of GIAL proposes to consider the actual expenses for FY2023-24. • GIAL has proposed to increase the billable units by 621% in FY 2024-25 on account of increase in terminal area. The Authority as part of its review notes that for other similar airports, it had allowed the increase claimed by the respective AO which was in proportion to the increase in the area of the Terminal Building. Based on the same, the Authority proposes to consider as per the capitalization schedule an additional increase of 414% in billable units only for FY 2024-25 (refer growth rates Consultation Paper No. 01/2024-25 Page 187 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD mentioned in Table 134). • The Authority observes that GIAL, has claimed an inflationary increase of 5% on the per unit rate. The Authority proposes Y-o-Y increase of per unit rate towards inflationary effect as per Table 126. The details of Utility expenses claimed by GIAL and allowed the Authority are summarized in the table below: Table 142: Utility expenses claimed by GIAL and proposed by the Authority for the Third Control Period (₹ crores) Particulars FY’23 FY’24 FY’25 FY’26 FY’27 Total As per GIAL Total Utility Expenses 6.70 8.24 8.65 65.49 68.76 157.85 As per the Authority Total Utility Expenses 6.70* 9.20** 9.49 50.54 52.41 128.33 *as per actuals submitted by GIAL for FY 2022-23 **as per actuals submitted by GIAL for FY2023-24 The increase in Utility Expenses in FY26 is due to increase in terminal area (commissioning of NITB) and inflation effect. IT expenses, Rates & Taxes and Security expenses 10.2.24 GIAL as per the concession agreement is required to upgrade the existing IT capacity infrastructure. GIAL has based its expense projections on the basis of proportionate increase in GIAL’s own employee headcount. Further the Authority notes that GIAL has treated the cost as 100% Aeronautical. In respect of the Y-o-Y growth claimed by GIAL, the Authority proposes to revise the same as per inflation rate proposed in Table 83 above and also reallocate the expense based on the Terminal Building ratio of 90% Aeronautical (refer para 10.2.9). i. The Authority observes that the actual expenses incurred by GIAL on IT expenses for FY 2022-23 and FY2023-24 are ₹ 2.50 crores and ₹ 3.40 crores respectively, and proposes to consider the same. Further, the Authority proposes to consider actual IT expenses for FY 2023-24 as base for future projections Further, the Authority shall consider a one-time increase of 100% on account of increase in Terminal Area. The Authority further proposes to apply Y-O-Y increase towards inflation for the remaining three (3) tariff years on the derived expenses of FY 2023-24 (refer growth rates mentioned in Table 157). Table 143: IT expense of GIAL as proposed by the Authority for the Third Control Period Particulars Units FY’23 FY’24 FY’25 FY’26 FY’27 Total As per GIAL IT expenses claimed by ₹ in 2.50 7.00 19.78 41.09 44.02 114.39 GIAL crores As per the Authority IT expense proposed by the ₹ in 2.50* 3.40** 3.51 7.14 7.40 23.95 Authority crores Allocation Ratio proposed by % 90% 90% 90% 90% 90% the Authority Aero IT expense proposed ₹ in 2.25 3.06 3.15 6.43 6.66 21.56 by the Authority crores *as per actuals submitted by GIAL for FY 2022-23 **as per actuals submitted by GIAL for FY 2023-24 10.2.25 With respect to Rates and Taxes, GIAL has assumed a 5% y-o-y increase on account of inflation and a Consultation Paper No. 01/2024-25 Page 188 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD one-time increase of 621% on account of increase in terminal area. Further the Authority observes that the AO has treated the cost as 100% Aeronautical. The Authority proposes to reallocate the expense based on the Gross Fixed Asset ratio (95.39%). i. The Authority has noted the actual expenses of ₹ 0.31 crores incurred by GIAL on Rates and Taxes for FY 2022-23 and proposes to consider the same. Further, GIAL has submitted the actual expenses as ₹ 0.10 crores for FY2023-24. The Authority proposes to consider ₹ 0.10 crores towards Rates and Taxes for FY 2023-24 and use the same as base for future projections. The Authority notes that GIAL, has claimed 621% increase in FY 2024-25 on account of increase in Terminal area. The Authority finds the increase to be unreasonable and proposes an increase of 414% as per the justification provided in para 10.2.21. The Authority further proposes to apply Y-O-Y increase towards inflation for the next three (3) tariff years on the derived expenses of FY 2023-24 (refer growth rates mentioned in Table 157). Table 144: Rates and Taxes of GIAL as proposed by the Authority for the Third Control Period Particulars Units FY’23 FY’24 FY’25 FY’26 FY’27 Total As per GIAL Rates and Taxes claimed by ₹ in 0.31 0.75 0.79 5.71 6.00 13.56 GIAL crores As per the Authority Rates & Taxes expense ₹ in 0.31* 0.10** 0.10 0.53 0.55 1.60 considered by the Authority crores Allocation Ratio proposed by % 95.39% 95.39% 95.39% 95.39% 95.39% the Authority Aero Rates & Taxes proposed ₹ in 0.30 0.10 0.10 0.51 0.53 1.53 by the Authority crores *as per actuals submitted by GIAL for FY 2022-23 **as per actuals submitted by GIAL for FY 2023-24 10.2.26 As per GIAL’s submission expenses related to security includes outsourced manpower, security guards, security operation maintenance, surveillance vehicles, access controls and expenses related to other automation systems. GIAL has based their security cost increase in line with the forecasted growth in passenger traffic. In addition, GIAL has considered a one-time increase of 50% in expense on account of commissioning of NITB leading to increase in the terminal area. Further the Authority notes that GIAL has treated the cost as 100% Aeronautical. The Authority notes the dual escalation in the expenses wherein GIAL has considered both increase in traffic and terminal area. The Authority proposes to revise the Y-o-Y growth in security expenses, as per inflation rate proposed in Table 126 and also reallocate the expense based on the Gross Fixed Asset ratio of 95.39% Aeronautical (refer para 10.2.11 ) in line with similar airports. i. The Authority has noted the actual expenses on Security of ₹ 3.75 crores incurred by GIAL for FY 2022-23 and proposes to consider the same. Further, GIAL has submitted the actual expenses as ₹ 6.00 crores for FY 2023-24. The Authority proposes to consider ₹ 6.00 crores towards Security expenses for FY 2023-24 and use the same as base for future projections. The Authority notes that GIAL, has claimed 50% increase in FY 2024-25 on account of increase in Terminal area, which the Authority finds to be reasonable and justified. Hence, the Authority proposes to allow the same. Consultation Paper No. 01/2024-25 Page 189 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD Table 145: Security expense of GIAL as proposed by the Authority for the Third Control Period Particulars Units FY’23 FY’24 FY’25 FY’26 FY’27 Total As per GIAL Security expense claimed by GIAL ₹ in 3.75 6.00 6.11 9.97 12.02 37.86 crores As per the Authority Security expense proposed by the ₹ in 3.75* 6.00** 6.19 9.51 9.86 35.30 Authority crores Allocation Ratio proposed by the 95.39% 95.39% 95.39% 95.39% 95.39% % Authority Aero Security expense proposed by ₹ in 3.58 5.72 5.90 9.07 9.41 33.68 the Authority crores *as per actuals submitted by GIAL for FY 2022-23 **as per actuals submitted by GIAL for FY 2023-24 Corporate Allocation Cost 10.2.27 GIAL has claimed Corporate Allocation Cost of ₹ 12.89 crores towards Corporate Support Services received from the Holding Companies, namely, AEL and AAHL for the FY 2022-23 and has considered the employee headcount growth of GIAL as basis for Y-o-Y escalation. i. The Airport Operator (GIAL) had engaged an independent consultant, to conduct a study on Corporate Cost allocation. The Authority has noted the following points submitted by GIAL in support of their claim for Corporate cost allocation: • AEL provides various strategic functions/activities like corporate finance, legal, central procurement, green initiative, ESG, Information technology, human resource management, etc., and also includes various leadership functions. AAHL through its corporate structure, provides expertise and specialist domain knowledge in Airports Operation, Airside Management, Master Planning, Designing, Airport Development, Airport Regulatory, Hospitality, Customer management, Cargo Development and management, Airline Marketing, Non-Aeronautical etc. • AEL and AAHL incur costs at the corporate level to provide these services and support to various Group Companies (including Airports) and Airport companies. The major composition of these costs includes salaries and administrative costs. These costs (except shareholders services and non-Aeronautical services) are recovered by AEL and AAHL through a pre- determined, appropriate allocation method. • Similar corporate cost allocation process is used by other private airport operators’ holding entities, which provide corporate administration services to their respective Airport Operators, and their costs are allocated based on suitable drivers. Similarly, AAI also allocates its Central Head Quarters (CHQ) / Regional Head Quarters (RHQ) costs to various airports based on appropriate cost drivers. ii. The Authority observes that AEL on overall basis, extends support and guidance to various Group Companies and AAHL provides expertise and specialist domain knowledge to the Airport Companies, which are essential for the sustainable operations of the business. The major composition of the costs of these services includes salaries and administrative costs that are recovered by AEL and AAHL through an appropriate allocation method (refer para 10.2.14 ). Further, this process is consistent with the approach followed by other PPP airports for allocation of Corporate costs to the Airports. Based on the above factors, the Authority considers the apportionment of costs of AEL and AAHL to GIAL as Consultation Paper No. 01/2024-25 Page 190 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD reasonable. iii. The Authority notes that the actual expenses incurred by GIAL on Corporate Cost expenses for FY 2022-23 is ₹ 12.89 crores and its detailed break-up along with the basis of allocation as submitted by GIAL is as follows: Table 146: Actual Corporate Cost incurred with allocation basis submitted by GIAL for FY’23 (₹ crores) Admin Salary Particulars Department Allocation Key (Basis) Total Cost Cost AEL HR and Admin Ratio of Number of Employees of a SPV to 0.52 1.05 1.57 Total Adani Group Employees Finance, Tax and Ratio of Debt raised for a SPV to total Debt 0.27 0.54 0.81 Internal Audit raised for Adani Group, Ratio of Turnover of a SPV to Total Group Turnover and Ratio of Full Time Equivalents (FTE) allocated to a SPV to total FTEs IT Ratio of Number of IT users in a SPV to total 0.35 0.70 1.05 Group users Legal Ratio of Legal Budget of a SPV to Total 0.01 0.02 0.03 Legal Budget of all airports CMD Office & Ratio of a SPV PBT to Group PBT and 0.58 1.17 1.75 Support Staff Airport budgeted expenditure to Total budgeted expenditure Total (A) 1.72 3.49 5.21 AAHL HR & Admin Ratio of Number of Employees of a SPV to 0.28 1.11 1.39 Total Adani Group Employees Finance Ratio of Debt raised for a SPV to total Debt 0.17 0.67 0.84 raised for Airport Group Operations (Airline Ratio of Per Pax Revenue of SPV to total Per 0.77 3.09 3.86 Marketing, Operation, Pax Revenue Security, HSE, Regulatory) IT Ratio of Number of IT users in a SPV to total 0.09 0.34 0.43 IT users in all airports Inhouse Legal Team Ratio of Legal Budget of a SPV to Total 0.03 0.12 0.15 Legal Budget of all airports Cargo Development Ratio of Per Pax Revenue of a SPV to total 0.01 0.03 0.04 Per Pax Revenue of all airports CEO Office Ratio of Per Pax Revenue of SPV to total Per 0.20 0.79 0.98 Pax Revenue Total (B) 1.54 6.15 7.68 Total (A) + (B) 3.26 9.64 12.89 iv. Considering all the above, the Authority proposes to consider the actual expenses of ₹ 12.89 crores for FY 2022-23. v. However, the Authority observes that the aforementioned actual cost includes the costs of inhouse legal team, which is in addition to the cost of employees of Legal department, already considered under the manpower expenses of GIAL (refer Table 146 above) and is not justified. Hence, the Authority proposes to exclude ₹ 0.15 crores from the Corporate Allocation cost submitted by GIAL and consider the remaining amount of ₹ 12.74 crores for FY 2022-23. vi. Further, GIAL has submitted the actual expenses as ₹ 11.80 crores for FY 2023-24. The Authority finds the same to be reasonable and proposes to consider ₹ 11.80 crores towards Corporate Cost expenses for FY 2023-24. Consultation Paper No. 01/2024-25 Page 191 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD vii. GIAL has escalated expenses related to corporate allocation YoY basis growth in employee count. The Authority observed that salary cost constitutes the major portion of the Corporate cost and hence, proposed to rationalize the increase claimed by GIAL to 6% Y-o-Y across the last three (3) tariff years of the Third Control Period which is in line with the increase proposed for manpower expenses of AAI and GIAL. viii. The Authority observed that GIAL has considered corporate cost allocation as 100% aeronautical without any supporting basis for such allocation. In the absence of such basis and in line with the methodology followed by the Authority for similar airports, the Authority proposes to reallocate the expense basis the Total Employee Headcount ratio. Further, as the services provided by AAHL & AEL are mainly in the nature of provided specialized resources and knowledge and also it benefits whole airport ecosystem, the Authority is of the view that the cost needs to be allocated basis the Total Employee Headcount ratio. ix. The details of Corporate Allocation Expense claimed by GIAL and allowed by the Authority are summarized in the table below: Table 147: Corporate Cost Allocation expenses claimed by GIAL and Proposed by the Authority Particulars Units FY’23 FY’24 FY’25 FY’26 FY’27 Total As per GIAL Corporate Allocation expense ₹ in 12.89 15.00 42.39 45.65 48.91 164.85 claimed by GIAL crores As per the Authority Corporate allocation cost ₹ in 12.74* 11.80** 12.51 13.26 14.05 64.36 considered by the Authority crores Allocation Ratio proposed by the % 98.17% 96.43% 97.02% 97.26% 97.57% Authority Aero Corporate Cost expense ₹ in 12.51 11.38 12.14 12.90 13.71 62.63 proposed by the Authority crores *as per actuals submitted by GIAL for FY 2022-23 **as per actuals submitted by GIAL for FY 2023-24 Administrative Expenses 10.2.28 GIAL has projected an inflationary increase of 5% Y-o-Y for Administrative Expenses (Others) towards Professional & Consultancy, Sales & Marketing, Travelling & Communication, Printing & Stationery etc. In addition, a 5% Y-o-Y increase is provisioned as Contingency. For expenses related to collection charges on UDF, GIAL has escalated the same as per forecasted passenger growth. • In respect of UDF Collection charges, the Authority has observed that the actual expenses incurred by GIAL for FY 2022-23 and FY2023-24 are ₹ 0.98 crores and ₹ 1.45 crores respectively, and proposes to consider the same. The Authority proposes to consider increase in Collection charges for UDF in line with the growth in Passenger traffic proposed for the Third Control period for LGBIA, as per Table 71. The Authority proposes to apply such rates for the next three (3) tariff years on the actual expenses of FY 2023-24. • In respect of Other Administrative charges, the Authority observes that the actual expenses submitted by GIAL i.e., ₹ 13.56 crores includes recovery of electricity expenses amounting to ₹ 1.33 crores. The Authority proposes to exclude such expenses which have been recovered by the Airport Operator. Further, GIAL has submitted the actual expenses as ₹ 27.00 crores for FY2023- 24. The estimated expense value seemed to be on the higher side, and thus suitable justification was Consultation Paper No. 01/2024-25 Page 192 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD sought for the same from GIAL. GIAL vide email dated April 15, 2024 stated that, “the increase in administrative expenses is due to increase in professional fees for various activities for improvement in passenger experience and operations.” The Authority while acknowledging the aim to enhance passenger experience, also considers the financial impact on passengers given that such expenses may be ultimately passed through to passengers; and thus, proposes to not consider the actual expenses for FY24. Further, considering that LGBIA is a brownfield airport, the Authority proposes to consider inflationary effect as per Table 126 for the growth in Administrative expenses (other than Collection charges for UDF), across all the remaining four (4) tariff years in the Third Control Period. Further, the Authority is of the view that these expenses which are administrative in nature should be apportioned in the Gross Fixed Asset Ratio i.e., 95.39. Table 148: Admin expenses claimed by GIAL and proposed by the Authority for the Third Control Period Particulars Units FY’23 FY’24 FY’25 FY’26 FY’27 Total As per GIAL Collection charges on UDF ₹ in 0.98 1.64 1.67 1.89 2.27 8.45 crores Other Administrative Expenses ₹ in 13.56 34.00 37.40 41.14 45.25 171.35 crores Total Administrative Expenses ₹ in 14.54 35.64 39.07 43.03 47.53 179.80 crores As per the Authority i. Admin expenses (UDF Collection ₹ in 0.98* 1.45** 1.62 1.84 2.21 8.11 charges) proposed by the Authority (A) crores ii. Admin expenses Others considered by ₹ in 12.23* 12.14 12.52 12.98 13.46 63.3 the Authority (B) crores Allocation Ratio proposed by the % 95.39% 95.39% 95.39% 95.39% 95.39% Authority Admin expenses Others proposed by the ₹ in 11.67 11.58 11.94 12.39 12.84 60.42 Authority (B1) crores Total Admin expenses proposed by the ₹ in 12.65 13.03 13.57 14.22 15.06 68.53 Authority (A+B1) crores *as per actuals submitted by GIAL for FY 2022-23 **as per actuals submitted by GIAL for FY 2023-24 Insurance expenses 10.2.29 The Authority examined the expense claimed by GIAL towards Insurance and notes the following: • Insurance on Initial Asset Base – GIAL has considered insurance expense of ₹ 2.26 crores on existing assets in FY 2022-23 and an increase of 10% Y-o-Y on the same. Further, GIAL has submitted the actual expenses as ₹ 1.44 crores for FY2023-24. The Authority, on review of the actual expenses incurred proposes to consider the same, i.e., ₹ 2.26 crores for FY 2022-23 and ₹ 1.44 crores for FY2023-24. The Authority also proposes to consider Y-o-Y increase towards inflationary effect as per Table 126 on such actual expenses for the entire Third Control Period. Further, the Authority has derived the Aeronautical expenses by applying Gross Fixed Assets ratio (95.39%) as per Table 133. • Insurance on New Asset Base – GIAL has also claimed Insurance expense at the rate of 0.10% on new additions to the gross block based on market rates for each tariff year. The Authority reviewed the same and proposes to consider the expense at the same rate of 0.10% on the revised cumulative value of Capitalized Aeronautical Assets that are forming part of RAB (Table 96). Consultation Paper No. 01/2024-25 Page 193 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD • The Authority further proposes to compute insurance expenses on New Asset Base as per revised gross block additions determined in this Consultation Paper. Table 149: Insurance expenses claimed by GIAL and proposed by the Authority for the Third Control Period (₹ crores) Particulars FY’23 FY’24 FY’25 FY’26 FY’27 Total As per GIAL Insurance expenses claimed by GIAL 2.31 2.89 6.68 9.03 9.52 30.43 As per the Authority Insurance expense considered by the Authority 2.26 1.44 1.49 1.54 1.60 8.33 on Initial Asset Base (A) Allocation ratio proposed by the Authority 95.39% 95.39% 95.39% 95.39% 95.39% Insurance on opening net block of assets (A1) 2.16 1.38 1.42 1.47 1.52 7.94 Insurance on New Asset Base (B) 0.05 0.06 0.30 4.01 4.06 8.48 Insurance expenses allowed by the Authority 2.21 1.43 1.72 5.48 5.58 16.42 (A1 + B) Repairs and Maintenance expenses 10.2.30 The Authority examined the expenses towards Repairs and Maintenance and noted that the same has been projected towards Civil, Electrical, Plant and machinery, Electronics and Others. i. Repairs and Maintenance on Exisitng Asset Base - GIAL has submitted actual expenses of ₹ 19.51 crores and ₹ 19.76 crores in FY 2022-23 and FY 2023-24 repectively, towards Repairs and Maintenance for Opening Net block of Assets and an increase of 10% Y-o-Y (including expected increase in inflation by 5% and another 5% allowance provided for any contingency for change in scope, overtime, escalation etc.). ii. Repairs and Maintenance on New Capital Expenditure – GIAL has also claimed Repairs and Maintenance expense at the rate of 3% on the cumulative value of Capitalized Total Assets for each tariff year. iii. The Authority proposes to consider the actual R&M expenses incurred by GIAL in FY 2022-23 and FY 2023-24. The Authority proposes to consider inflationary increase as per Table 126 for FY2024-25. For FY2025-26 and FY2026-27, the Authority proposes to consider R&M expenses equivalent to 50% and 70% respectively of the amount proposed by the AO since new CAPEX being incurred by the AO will have Defect Liability Period and there will be blend of old and new CAPEX. Further, the Authority has derived the Aeronautical expenses for R&M expense, by applying the Gross Fixed Asset ratio (95.39% Aeronautical). The amount claimed by GIAL, and the estimate proposed by the Authority is shown in the table below: Table 150: R&M on Opening Net block of Assets claimed by GIAL and Proposed by the Authority for the Third Control Period (₹ crores) Particulars FY’23 FY’24 FY’25 FY’26 FY’27 Total As per GIAL Repairs and Maintenance – For Initial Asset Base 19.51 22.00 24.20 26.62 29.28 121.61 claimed by GIAL (A) Repairs and Maintenance – New Capital Additions - 1.74 4.09 109.69 171.23 286.75 claimed by GIAL (B) Consultation Paper No. 01/2024-25 Page 194 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD Particulars FY’23 FY’24 FY’25 FY’26 FY’27 Total Total Repairs and Maintenance – claimed by 19.51 23.74 28.29 136.31 200.51 408.36 GIAL (C = A + B) As per the Authority 19.51* 21.50** 22.17 68.16 140.36 271.69 Repairs and Maintenance Expenses – (D) 95.39% 95.39% 95.39% 95.39% 95.39% Allocation Ratio (E) R&M expenses considered by the Authority 18.61 20.50 21.14 65.01 133.89 259.14 (F=D*E) *as per actuals submitted by GIAL for FY 2022-23 **as per actuals submitted by GIAL for FY 2023-24 Other Operating expenses 10.2.31 GIAL has submitted the Other Operating Expenses and claimed an increase of 5% Y-o-Y for all five (5) tariff years and an additional increase 621% in FY 2025-26 on account of increase in Terminal Building area. GIAL has further submitted that the other Operating Expenses largely incudes Cleaning & Housekeeping Services, Pest Control Services, Cleaning of Public Toilet, providing biomedical waste management services, garbage collection services etc. The major agreements were entered during FY22-23 and hence in order to provide its annualized impact, a necessary increase factor of ~64% has been considered in FY23-24. • The Authority has observed the actual expenses incurred by GIAL on Other Operating expenses for FY 2022-23 as ₹ 13.43 crores and proposes to consider the same. Further, GIAL has submitted the actual expenses as ₹ 17.40 crores for FY2023-24 and the Authority proposes to consider and use the same as base for forecasting future expenses. In respect of Y-o-Y growth rate claimed by GIAL, the Authority proposes that the increase towards inflationary effect as per Table 126 should only be considered, instead of 5% increase Y-o-Y claimed by GIAL. • In respect of additional increase of 621% claimed by GIAL in FY26, the Authority proposes to consider increase of 414%, with regard to increase in Terminal Building area due to commissioning of NITB. Further, the Authority considering the nature of expenses proposes to allocate the cost as per Terminal Building ratio of 90% Aeronautical (refer para 10.2.17). Table 151: Other Opex claimed by GIAL and proposed by the Authority for the Third Control Period Particulars Units FY’23 FY’24 FY’25 FY’26 FY’27 Total As per GIAL Other Operating expenses ₹ in 13.43 22.00 23.10 167.63 176.02 402.18 claimed by GIAL crores As per the Authority Other Operating expenses ₹ in 13.43* 17.40** 17.94 92.84 96.27 237.87 considered by the Authority crores Allocation ratio proposed by the % 90 90 90 90 90 Authority Other Operating expenses ₹ in 12.09 15.66 16.15 83.55 86.64 214.09 proposed by the Authority crores *as per actuals submitted by GIAL for FY 2022-23 **as per actuals submitted by GIAL for FY 2023-24 Consultation Paper No. 01/2024-25 Page 195 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD Independent Engineer Cost 10.2.32 GIAL has claimed Independent Engineer Cost of ₹ 3.91 crores from FY23 till FY25 and claimed an increase of 5% Y-o-Y from FY26 onwards. As per the information provided, AAI appointed M/s IRCON International Limited as the Independent Engineer for 3 years with a total cost of ₹ 11.74 crores (₹ 3.91 crores annually). The extract of the relevant clauses is as below: Clause 24.1.2 states “The appointment of the Independent Engineer shall be made within 90 (ninety) days of the date of execution of this Agreement, and such appointment shall be valid for a period of 3 (three) years. On the expiry or termination of the said appointment, the Authority shall appoint an Independent Engineer for a further term of 3 (three) years in accordance with the provisions of Schedule K, and such procedure shall be repeated after expiry of each appointment.” Clause 24.3.1 states “The remuneration, cost and expenses of the Independent Engineer shall be paid by the Authority, and all such remuneration, cost and expenses shall be reimbursed by the Concessionaire to the Authority within 15 (fifteen) days of receiving a statement of expenditure from the Authority. Any amounts paid to the Independent Engineer shall be considered for a pass-through for the determination of the Aeronautical Charges by the Regulator.” 10.2.33 The Authority notes that AAI had appointed M/s IRCON International Limited as the Independent Engineer with effect from 22nd October 2021 with the responsibility of reviewing the projects being carried out by GIAL on site and submitting necessary reports to GIAL. 10.2.34 The Authority also notes that as per Clause 24 and Schedule K of the Concession Agreement, AAI is required to appoint the Independent Engineer initially for a period of 3 years and thereafter for every 3 years. AAI has executed the contract with the Independent Engineer at a fee of ₹ 11.74 crores. GIAL has projected the Independent Engineer Cost based on the same and together with considering an inflation of 5% for the last two tariff years for the Third Control Period. 10.2.35 However, the Authority proposes not to allow inflation of 5% and retain the amount originally awarded by AAI proportionately for the last two tariff years. The Authority also examined the actual expense of ₹ 3.91 crores and ₹ 3.52 crores for FY 2022-23 and FY 2023-24 respectively, and proposes to consider the same. Amortization of Runway recarpeting expenses 10.2.36 GIAL has claimed amortization of ₹ 49.08 crores projected towards expenditure on Runway Recarpeting works over a period of five (5) FYs starting from FY 2025-26 and based on the Depreciation Order No. 35 / 2017-18 dated January 12, 2018. Further, GIAL has submitted that the expense is inclusive of carrying cost on the unamortized balance of the expense incurred on re-carpeting of runway. 10.2.37 During the site visit, the Authority observed that the runway condition is appropriate, except turning pad areas which can be set right by repair of runway, for continued operation and in view of cost optimisation the AO should do cost benefit analysis. In view of the cost optimisation and existing runway condition, the Authority proposes not to consider any OPEX towards runway strengthening works during third control period, and if desired the Authority may consider such OPEX on incurrence basis subject to the reasonableness and efficiency of the OPEX at the time of tariff determination of next control period. Consultation Paper No. 01/2024-25 Page 196 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD Fuel Operating Expenses 10.2.38 Clause 19.3. of the Concession Agreement stipulates GIAL’s obligations towards providing aircraft fueling services (refer to paragraph 17.3.7 of Annexure 3 of Chapter 17 of this Consultation Paper) 10.2.39 GIAL has submitted the following assumptions regarding Fuel facility Operating expenses: • GIAL has projected that the open access facility operations will commence from December 2023 onwards (i.e., 3-month period in FY 2023-24) and continue till end of FY2024-25. Further, GIAL has proposed to build a new facility of approx. 4,000 KL with hydrant system of approx. 7 Kms. The new facility will be operational from FY25-26 onwards. • GIAL has estimated the Fuel Throughput volume at the rate of approximately 2.0 KL per ATM for the Total ATM traffic projected in each tariff year. • Further GIAL has submitted that they planned to outsource the Fuel facility operations to a third- party vendor who will manage the facility on Cost plus margin basis. • The charges payable to the Vendor by GIAL have been projected based on a ‘Minimum Guarantee’ amount up to specified quantity of 80,000KL (i.e., fixed amount per year) and beyond the specified quantity of 80,000KL, on the basis of agreed Rate/ KL (i.e., variable rate). The vendor rates projected by GIAL, based on experience of Lucknow Airport in FY22, are as follows: Table 152: Fuel O&M expenses claimed by GIAL for each FY for the Third Control Period Particulars Unit Quantity Rate (₹) Amount (₹ in Cr.) Fixed amount for up to 80,000KL per year Month 12 64,10,000 7.69 Fee beyond 80,000KL Per KL - 290.00 - • Additionally, GIAL had projected an increase of 5% towards inflation Y-o-Y on both the fixed amount and variable rate /KL payable to the vendor. • Apart from the above, GIAL had projected Rental cost of refuellers amounting to ₹ 0.66 crore in FY 2023-24 and ₹ 0.99 crores in FY 2024-25. The rental cost had been estimated for 4 month period in FY 2023-24 and half year period in FY 2024-25 after which, GIAL expects to have sufficient number of own refuellers to run the operations. The Authority examined all the above and summarised its view as under: a) The Authority has ascertained that GIAL till March 2024 is yet to commence open fuel access facility operations and has till date incurred zero costs on fuel operating expenses. GIAL vide email dated April 2, 2024 has stated that Fuel farm Operations at GIAL is expected to be commenced from July 2024. The Authority thus proposes to consider expenses for fuel operations from July 2024 onwards. b) The Authority proposes to consider the Fuel throughput Volume and related Operations and Maintenance Costs of LGBIA for the Third Control Period based on the growth rate proposed by the Authority for ATM traffic as per Table 71 and correspondingly derive the O&M expenses. c) The Authority proposes to undertake the growth rate towards inflationary effect as prescribed in Table 126 above, for both fixed and variable expenses during each year of the Third Control Period. Consultation Paper No. 01/2024-25 Page 197 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD Table 153: Fuel Opex claimed by GIAL and allowed by the Authority for the Third Control Period Particulars Unit FY’23 FY’24 FY’25 FY’26 FY’27 Total As per GIAL Fuel O&M expenses ₹ in - 3.6 10.3 10.3 11.7 35.93 claimed by GIAL crores As per the Authority ATM traffic in Nos. - 45395* 68050 82109 195554 - Fuel throughput per ATM in KL - 2 2 2 - Fuel throughput volume KL - 90,791 136,100 164,218 391,109 - (A) Fixed Fuel throughput KL - 60,000* 80,000 80,000 220,000 - volume (B) Variable Fuel throughput KL - 30,791 56,100 84,218 171,109 - volume (C = A -B) Growth rate proposed by the In % - 3.10% 3.70% 3.70% - Authority towards inflation Fixed Fuel O&M expenses ₹ in - 5.95 8.22 8.53 22.70 - (up to 80,000 KL) (D) crores Variable O&M expenses ₹ in - 0.91 1.73 2.69 5.33 - (above 80,000KL) (E) crores Fuel O&M expenses (F = D - 6.86 9.95 11.22 28.03 + E) Refuelers rentals Charges ₹ in - 1.98 0.00 0.00 1.98 - (G) crores Total Fuel expenses ₹ in 8.84 9.95 11.22 30.01 proposed by the Authority crores - - (H = F + G) *For 9 month period Cargo Operating Expenses 10.2.40 Clause 19.4.1. of the Concession Agreement stipulates GIAL’s obligations towards upgrading, developing, operating and maintaining the Cargo facilities in accordance with the provisions of the Concession Agreement. 10.2.41 GIAL has claimed Cargo Operating Expenditure of ₹ 20.63 crores for third control period towards in-house salary cost, outsourced O&M expenses and customs cost recovery by considering the FY 2023- 24 as base year of operations and on the assumption of commencing Cargo Operations from June 2023 onwards. GIAL has projected the Insourced salary and Customs Cost recovery based on the Manpower required and the Cargo O&M expenses on the basis of estimated Cargo Volume and Cargo cost / MT for each FY. GIAL has also claimed an increase of 10% Y-o-Y for all the expenses for the next three (3) FYs in the Third Control Period. 10.2.42 The Authority observes that GIAL has considered approximately ₹ 3,000 per tonne as basis for determining the O&M cost for LGBIA. This rate was estimated based on the experience of Ahmedabad and Lucknow airports. The Authority has examined the actual per tonne fee in Ahmedabad and Lucknow airports and proposes to accept the average of the said fees for the two airports, i.e., ₹ 2,860 as the per tonne fee for FY 2023-24. The Authority also proposes to escalate this fee at inflationary growth rate (refer Table 126) as against the increase of 10% submitted by GIAL for arriving at the O&M expenses for the remaining three (3) years of the current control period. The Authority further proposes to consider the cargo volume processed by GIAL as per Table 71 for the determination of O&M Consultation Paper No. 01/2024-25 Page 198 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD expenses. 10.2.43 The Authority observes that GIAL has projected salary costs for six (6) of their own employees comprising supervisory staff and duty managers at an average annual salary of ₹ 8 lakhs per employee which works out to a total in-house salary cost of approximately ₹ 0.5 crore per annum starting from FY 2023-24. Further, this cost has been projected to increase 10% Y-o-Y in each tariff year. The Authority notes that for the period June 2023 till March 2024, GIAL has incurred own staff expenses of ₹ 0.15 crores. The Authority proposes to consider the same and also to increase the annual average salary by 6% Y-o-Y (as against 10% claimed by GIAL) in line with that allowed for Manpower expense of AAI and GIAL for the remaining three (3) tariff years of the Third Control period. 10.2.44 The Authority examined the submission of GIAL and notes that apart from the salary cost of their own employees, GIAL has projected reimbursement of salary cost of Customs officials who will be handling the international cargo operations, under the head ‘Customs cost recovery’. The Authority notes that GIAL has estimated the salary cost of 5 Customs officials as per Para 7 of the Circular issued by the Department of Revenue, Ministry of Finance vide Circular No. 02/2021-Customs dated January 19, 2021 and arrived at ₹ 1.80 crores per annum. GIAL has estimated commencement of international cargo operations from new Integrated Cargo Terminal (ICT) facility from FY 2026-27, and thus considered salary cost only for that respective FY. The Authority notes that Customs Cost recovery is waived off based on achievement of certain volume threshold. While the Authority has currently considered the cost estimate provided by GIAL, the Authority directs GIAL to ensure that waiver of charges is obtained as soon as the volume limits are reached. 10.2.45 The Authority’s proposal as compared to GIAL’s submission is summarized in the table below: Table 154: Cargo O&M expenses claimed by GIAL and proposed by the Authority for the Third Control Period (₹ crores) Particulars FY’23 FY’24 FY’25 FY’26 FY’27 Total Claimed by GIAL Insourced Salary - 0.50 0.55 0.61 0.67 2.32 O&M expenses - 1.05 1.49 2.00 11.98 16.51 Customs cost recovery - - - - 1.80 1.80 Total Cargo O&M expenses - 1.55 2.04 2.60 14.44 20.63 Considered by the Authority Insourced Salary - 0.15 0.16 0.17 0.18 0.66 O&M expenses - 1.00 1.33 1.69 5.55 9.57 Customs cost recovery - - - - 1.80 1.80 Total Cargo O&M expenses - 1.15 1.49 1.86 7.53 12.03 Finance Charges, Working Capital Loan Interest and Annual Fee on Performance Bank Guarantee 10.2.46 GIAL has included a claim for Working Capital Loan Interest and Finance charges as a separate line item than the other operating expenses. The Authority notes that GIAL has computed working capital interest based on the forecasted recovery of revenue and payment of expenses and has considered the entire expense as aeronautical. As per the calculation by GIAL, there is a requirement for working capital for all tariff years of the Third Control Period. Financing Charges 10.2.47 The Authority has reviewed the computation of Financing Charges and notes that GIAL has Consultation Paper No. 01/2024-25 Page 199 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD considered finance charges at the rate of 1.50% of the debt drawn down during the current control period. GIAL has considered 65% of the total capital addition as being funded through debt for arriving at the debt draw down during the current control period. For the FY2022-23, financing charges as per the audited accounts submitted by GIAL was ₹ 0.59 crores. For the remaining four (4) tariff years, the Authority has recomputed the Finance Charges by considering 48% (refer para 8.3.2) of the revised total capital addition, i.e. ₹ 3799.70 crores (refer Table 111) as being funded through debt. As per this revised computation, the estimated finance charges amounted to ₹ 27.08 crores for the remaining four (4) years of the Third Control Period. The Authority proposes to consider ₹ 0.59 crores as financing charges for FY 2022-23 and ₹ 27.62 crores as financing charges for the FY2023-24 to FY2026-27. Working Capital Loan Interest 10.2.48 The Authority has reviewed the computation of interest on working capital loan. The Authority also reworked the cash flows based on the revised aeronautical operating expenses, traffic, and aeronautical revenues. As per this revised computation, the estimated interest on working capital loan amounts to ₹ 7.67 crores for the Third Control Period. The Authority, therefore, proposes to consider ₹ 7.67 crores during computation of ARR for the Third Control Period. Annual Fee on PBG 10.2.49 The Authority notes that GIAL has taken a Performance Bank Guarantee (PBG) of ₹ 115 crores for which GIAL has to pay an annual fee at 0.50% of the guaranteed amount. The Authority considers the same as part of the costs for the control period. 10.2.50 GIAL has submitted PBG expenses amounting to ₹ 0.58 crores for each tariff year of the Third Control Period and the Authority proposes to consider the same. The Authority further proposes to true-up the same based on actuals at the time of determination of Tariff for the next control period. 10.2.51 The Authority also proposes to consider the allocation of these expenses as given below: • Finance Charges based on the revised Gross Block Ratio • Working Capital Interest to be considered as Aeronautical as the expense is computed based on aeronautical operating expenses and aeronautical revenues. • PBG charges to be considered as Aeronautical based on the Clause 9.1.1 of the Concession Agreement which states that “The Concessionaire shall, for the performance of its obligations during Phase I hereunder, provide to the Authority, no later than 120 (one hundred and twenty) days from the date of this Agreement, an irrevocable and unconditional guarantee from a Bank for a sum equivalent to Rs. 115,00,00,000 (Rupees One Hundred and Fifteen crores) in the form set forth in Schedule E ("Performance Security"). Until such time the Performance Security is provided by the Concessionaire pursuant hereto and the same comes into effect, the Bid Security shall remain in force and effect, and upon such provision of the Performance Security, the Authority shall release the Bid Security to the Concessionaire.” 10.2.52 The Authority’s proposal as compared to GIAL’s submission is summarized in the table below: Table 155: Working Capital Interest, Annual Fees for PBG and Finance Charges claimed by GIAL and proposed by the Authority for the Third Control Period (₹ crores) Particulars FY’23 FY’24 FY’25 FY’26 FY’27 Total As per GIAL Finance Charges - 44.77 - - - 44.77 Consultation Paper No. 01/2024-25 Page 200 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD Particulars FY’23 FY’24 FY’25 FY’26 FY’27 Total Annual Fees for Performance BG 0.58 0.58 0.58 0.58 0.58 2.88 Working Capital Interest - 2.46 10.29 15.66 17.93 46.34 As per the Authority Finance Charges 0.59* 0.06 1.72 24.93 0.32 27.62 Annual Fees for Performance BG 0.58* 0.58 0.58 0.58 0.58 2.90 Working Capital Interest - - 3.56 1.92 2.19 7.67 *as per actuals submitted by GIAL 10.2.53 After incorporating the above observations by the Authority, the revised Total Aeronautical O&M expenses including Fuel and Cargo Operating Expenses of LGBIA have been presented in the tables below: Table 156: Total Aeronautical O&M expenses proposed by the Authority for the Third Control Period (₹ crores) Reference Particulars FY’23* FY’24** FY’25 FY’26 FY’27 Total Table Operating Expenses Manpower expenses – AAI employees Table 136 27.43 28.03 26.98 25.39 26.91 134.75 Manpower expenses – GIAL employees Table 141 9.23 10.70 19.00 30.35 39.69 108.97 6.70 9.20 9.49 50.54 52.41 128.33 Utility expenses Table 142 IT expenses Table 143 2.25 3.06 3.15 6.43 6.66 21.56 Rates and Taxes Table 144 0.30 0.10 0.10 0.51 0.53 1.53 3.58 5.72 5.90 9.07 9.41 33.68 Security expenses Table 145 Corporate Allocation Cost Table 147 12.51 11.38 12.14 12.90 13.71 62.63 Administrative Expenses - Others Table 148 11.67 11.58 11.94 12.39 12.84 60.42 Admin Expenses – Collection Charges on Table 148 0.98 1.45 1.62 1.84 2.21 8.11 UDF Insurance Table 149 2.21 1.43 1.72 5.48 5.58 16.42 Repairs and Maintenance Table 150 18.61 20.50 21.14 65.01 133.89 259.15 Other Operating expenses Table 149 12.09 15.66 16.15 83.55 86.64 214.09 Para 3.91 3.52 3.91 3.91 3.91 19.17 Independent Engineer Fee 10.2.35 Total Operating Expenses (A) 111.46 122.33 133.24 307.36 394.41 1068.80 Fuel Operating Expenses Fuel O&M Expenses - - 6.86 9.95 11.22 28.03 Table 153 Refuellers Rentals - - 1.98 0.00 0.00 1.98 Table 153 Total Fuel Operating Expenses (B) - - 8.84 9.95 11.22 30.01 Cargo Operating Expenses Insourced salary Table 154 - 0.15 0.16 0.17 0.18 0.66 O&M Expenses Table 154 - 1.00 1.33 1.69 5.55 9.57 Customs Cost Recovery Table 154 - 0.00 0.00 0.00 1.80 1.80 Total Cargo Operating Expenses (C) - 1.15 1.49 1.86 7.53 12.03 Consultation Paper No. 01/2024-25 Page 201 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD Reference Particulars FY’23* FY’24** FY’25 FY’26 FY’27 Total Table Finance Charges (D) Table 155 0.59 0.06 1.72 24.93 0.32 27.62 Annual Fees for Performance BG (E) Table 155 0.58 0.58 0.58 0.58 0.58 2.90 Working Capital Interest (F) Table 155 - - 3.56 1.92 2.19 7.67 Total Aeronautical O&M expenses 112.63 124.12 149.43 346.61 416.24 1149.03 (A+B+C+D+E+F) *as per actuals submitted by GIAL for FY 2022-23 **as per actuals submitted by GIAL for FY 2023-24 Note: The surge in O&M expenses in FY2026 and FY2027 is attributed to operationalization of NITB and increase in manpower due to completion of deemed deputation period. 10.2.54 It is to be noted that as per the true up of Second Control Period, AAI has incurred OPEX of ₹ 408.16 crores and handled maximum traffic of 5.05 MPPA in FY19-20. On the other hand GIAL for Third Control Period has forecasted OPEX amounting to ₹ 2037.03 crores and after rationalization the Authoity has allowed ₹ 1149.03 allowing appropriate inflationary increase and other factors. The Authority still bears that the proposed O&M expenses are substantially higher than the actual expenses incurred in Second Control Period . Therefore, the Authority expects GIAL to bring in further efficiencies in their overall O&M expenses so as not to burden the airport users. This would also be a direct violation of cost relatedness principle of ICAO. 10.2.55 Based on above considerations, the Authority proposes the following growth rates in Operation and Maintenance (O&M) expenses for Aeronautical Operating expenses, Fuel Operating expenses and Cargo Operating expenses, as compared to the projections submitted by GIAL. Table 157: Growth rates in Aeronautical O&M expenses proposed by the Authority for the Third Control Period Particulars FY’23 FY’24 FY’25 FY’26 FY’27 Operating Expense (A) Manpower Expenses – AAI employees - - 6% 6% 6% Manpower Expenses – GIAL’s employees - - 6% 6% 6% Utility expenses^ - - 3.10% 3.7% + 3.70% 414%* IT expenses - - 3.1% 3.7%+ 3.7% 100%* Rates and Taxes - - 3.1% 3.7% + 3.7% 414%* Security expenses - - 3.1% 3.70% + 3.7% 50%* Corporate Allocation Cost - - 6% 6% 6% Administrative Expenses - Others - - 3.1% 3.7% 3.7% Administrative Expenses – UDF Collection Charges# - - 11.86% 13.21% 20.55% Insurance – on Initial Asset Base - - 3.1% 3.7% 3.7% R&M Expenses - - 3.1% 207.48%@ 105.93%@ Other Operating expenses - - 3.1% 3.7% + 3.7% 414%* Amortization of Runway recarpeting - - - - - Fuel operating expense (B) Fuel O&M Expenses - - 3.1% 3.7% 3.7% Cargo operating expense (C) Cargo Operating Expenses – Insourced Salary cost - - 6% 6% 6% Cargo Operating Expenses – Other expenses - - 3.1% 3.7% 3.7% Consultation Paper No. 01/2024-25 Page 202 of 254OPERATION AND MAINTENANCE EXPENSES FOR THE THIRD CONTROL PERIOD * linked to terminal area increase # linked to passenger traffic ^ linked to per unit charge and billable units @ linked to gross block additions 10.3 Authority’s proposal regarding Aeronautical O&M expenses for Third Control Period Based on the material before it and on its examination, the Authority proposes the following with regard to the O&M expenses for the Third Control Period: 10.3.1 To consider total Aeronautical O&M Expenses including Operating Expenses, Fuel Operating Expenses and Cargo Operating Expenses for the Third Control Period for LGBIA as per Table 156. 10.3.2 To consider the actual total Aeronautical O&M expenses incurred by GIAL during the Third Control Period subject to reasonableness and efficiency, at the time of True up in the Fourth Control period. 10.3.3 Considering the size and scale of operations of the Airport, the Authority expects GIAL to bring in efficiencies in the incurrence of O&M expenses. Consultation Paper No. 01/2024-25 Page 203 of 254NON-AERONAUTICAL REVENUE FOR THE THIRD CONTROL PERIOD 11 NON-AERONAUTICAL REVENUE FOR THE THIRD CONTROL PERIOD 11.1 GIAL’s submission of Non-aeronautical revenue for the Third Control Period 11.1.1 GIAL in its submission dated July 28, 2023 to AERA had stated that it follows a Master Concessionaire model for managing commercial activities at the Airport. 11.1.2 GIAL had submitted that it outsourced all Non-aeronautical businesses (mentioned below) to the Master Concessionaire, Adani Airport Holdings Limited, vide Master Services Agreement executed on October 25, 2021, and effective from December 2021. As per the Agreement, the scope of the Master Concessionaire is to develop, operate, maintain, manage the Non-aeronautical businesses at LGBIA, in accordance with best-in-class standards and good industry practices, and at par with facilities at comparable airports as below: • Duty free stores • Food and beverages outlets • Retail outlets • Lounges • Advertising, sponsorship, and promotion opportunities • Car parks and ground transportation facilities • Airport hotels and transit hotels • Preferred partners association for including but not limited to pouring rights, services in air (Wi- Fi, Bluetooth, aroma etc.), music and video rights, mobile wallet, payment gateway and other as may be approved by GIAL • Business Center • City side development • Flight catering services • Foreign exchange services • Freight consolidators/forwarders or agents • Left luggage, lost and found, excess baggage • Messenger services • Porter service • Special assistance services (such as paid wheelchair services) • Vending machines • Meet and assist services • Provision of land and space for various stakeholders at Airport • Various passenger amenities, including but not limited to, banks, foreign exchange, SIM card, child-care room, kids play areas, car rental and hotel reservation counters, digital wallet tie-ups, ATMs, spas, and entertainment areas • Airport village comprising of various retail, food and beverage, entertainment and amenities Consultation Paper No. 01/2024-25 Page 204 of 254NON-AERONAUTICAL REVENUE FOR THE THIRD CONTROL PERIOD options; and • Any other services as may be mutually agreed by the parties or permitted pursuant to the Applicable Laws. 11.1.3 As per the terms of the Master Services Agreement, the Service provider (Adani Airport Holdings Limited) shall pay to GIAL an amount which is higher of the following: a) Minimum Guarantee amount of ₹ 21 crores per annum or b) The amount arrived at by multiplying the Revenue Share Percentage (10%) with Gross Revenue in that year. Further, it is stated in the Agreement that the Minimum Guarantee amount of ₹ 21 crores per annum shall remain unchanged for the first five years from the date of signing the Master Services Agreement. Thereafter, this Minimum Guarantee amount shall be increased at the rate of 50% of the Delta Consumer Price Index (CPI) every year. 11.1.4 Based on the above, the Non-aeronautical revenue submitted by GIAL for LGBIA is given in the table below: Table 158: Non-aeronautical revenue submitted by GIAL for the Third Control Period (₹ crores) Particulars FY’23 FY’24 FY’25 FY’26 FY’27 Total 1. Revenue from Master 21.00 21.00 21.00 21.00 21.00 105.00 Concession 2. Other revenues (not 2.28 0.53 0.55 0.58 0.61 4.54 covered under Master Service Agreement) Total 23.28 21.53 21.55 21.58 21.61 109.54 11.2 Authority’s examination regarding Non-aeronautical revenue for the Third Control Period 11.2.1 As per FY2022-23 financials submitted by GIAL, it had earned non-aeronautical revenue to the tune of ₹ 23.32 crores. The Authority proposes to consider the same. Further, GIAL has submitted actual NAR amounting to ₹ 22.07 crores for FY2023-24 which the Authoirty proposes to consider. 11.2.2 The Authority has examined the Non-aeronautical revenue submitted by GIAL for the Third Control Period and reviewed the Master Services Agreement entered into by GIAL with the Master Concessionaire - Adani Airport Holdings Limited with respect to scope of services outsourced to the Master Concessionaire and the revenue sharing arrangement. 11.2.3 The Authority notes that GIAL undertook a two-stage tendering process through e-tender mode vide Request for Proposal (RFP) dated August 17, 2021. 11.2.4 The Authority, in this regard examined the extract of the relevant clauses of the RFP which read as under: “6.2 Qualifying Eligibility Criteria Each Bidder shall satisfy the following qualifying Eligibility Criteria: (a) Technical Eligibility Criteria The Bidder must have: (i) (a) experience in operations or management or development of at least 4 (four) out of the following 6 (six) non-aero businesses at airports at the time of submission of the Technical Proposal, i.e. (I) in-flight catering; (II) duty-free retail; (III) retail and services; (IV) food and Consultation Paper No. 01/2024-25 Page 205 of 254NON-AERONAUTICAL REVENUE FOR THE THIRD CONTROL PERIOD beverage services; (V) car parking; and (VI) advertisement; or (b) is an operator of an airport where 4 (four) out of the 6 (six) non-aero businesses (as mentioned above) are being undertaken. (ii) experience of leasing out and/ or development and/ or management of commercial real estate with a built up area of at least 1,00,000 (one lakh) square meters. (b) Financial Eligibility Criteria Basis the audited balance sheet and profit and loss account along with schedules (“Audited Financial Statements”), the Bidder should have: (i) an average annual turnover of at least Rs. 750,00,00,000 (Rupees Seven Hundred and Fifty crores only) in the last 3 (three) financial years; and (ii) net worth as on March 31, 2021 of Rs. 250,00,00,000 (Rupees Two Hundred and Fifty crores only). “Net Worth” shall have the meaning as defined under the Companies Act, 2013. 11.2.5 From the qualifying criteria specified by GIAL, the Authority observes that: Technical Eligibility Criteria • GIAL has specified in their technical eligibility criteria that bidder is an operator of an airport where 4 (four) out of the 6 (six) non-aero businesses (as mentioned above) are being undertaken. o AERA observation of restrictive criteria: As per Govt. of India Guidelines for PPP development, the criteria to ask airport experience even for leasing out the airport has been dispensed with. Therefore, asking airport operator experience for Master Service Agreement is totally restrictive in nature. • GIAL has specified experience of leasing out and/or development and/or management of commercial real estate with a built-up area of at least 100000 (one lakh) square meters. o AERA observation of restrictive criteria: Specifying 100000 sqm commercial space is too high with respect to present scope of work. The total area of NITB is 1,46,000 sq.m., out of which the area allocated for NAR activites is around 15,000 sq.m. only. Financial Eligibility Criteria (i) Turnover • GIAL has specified Average annual turnover of at least ₹ 750 crores in the last 3 financial years and net worth as on 31.03.2021 of ₹ 250 crores. • AERA observation of restrictive criteria: As per Public Procurement Guidelines average financial turnover should be 30% of the estimate cost. So in place of ₹ 30 crores average annual turnover, GIAL has specified a turnover of ₹ 750 crores (which is 25 times). (ii) Net Worth Asking net worth of ₹ 250 crores is very restrictive for a work value of ₹ 100 crores (Approx.) as many Airport Operators like AAI etc. are specifying only Positive Net Worth. 11.2.6 Due to such restrictive criteria, only 2 agencies (out of these 2, one was related party), participated in the tender and work was awarded to agency quoting 10% revenue share percentage. 11.2.7 In fact, now a days other Airport Operators have dispensed with technical eligibility criteria in Non- Aeronautical activities tenders to attract more and more agencies and to encourage healthy competition. Consultation Paper No. 01/2024-25 Page 206 of 254NON-AERONAUTICAL REVENUE FOR THE THIRD CONTROL PERIOD 11.2.8 Pursuant to the above RFP, only two prospective bidders (domestic and global) had submitted their proposals to GIAL. The number of prospective bidders was low due to restrictive technical and financial criteria as mentioned in para 11.2.4. Based on technical qualification, financial parameters and evaluation criteria provided under the RFP, Adani Airport Holdings Limited (parent company of GIAL) was selected as the Service Provider, with whom GIAL had entered into a Master Services Agreement. The Authority notes that the revenues projected by GIAL are in line with the said Agreement. 11.2.9 The Authority notes that the total Non-aeronautical revenue projected by GIAL for the Third Control Period is only ₹ 109.54 crores (refer Table 158) which is substantially lower than the actual Non- aeronautical revenue earned by AAI in Second Control Period (FY 2016-17 till FY2020-21) which was ₹ 144.03 crores, and ₹ 154.05 crores till COD (FY 2016-17 till COD). 11.2.10 The following table and chart show the year wise NAR earned by AAI during the Second Control Period and the projections of GIAL for the Third Control Period: Table 159: Year wise NAR earned by AAI and projected by GIAL (₹ crores) Financial Year AAI GIAL FY’17 26.66 - FY’18 14.35 - FY’19 30.94 - FY’20 48.90 - FY’21 23.18 - Total (5 years) 144.03 - FY’23 - 23.28 FY’24 - 21.53 FY’25 - 21.55 FY’26 - 21.58 FY’27 - 21.61 Total (5 years) - 109.54 Figure 11: Year wise NAR earned by AAI and projected by GIAL (₹ crores) 48.9 30.94 26.66 23.18 23.28 21.53 21.55 21.58 21.61 14.35 FY’17 FY’18 FY’19 FY’20 FY’21 FY’23 FY’24 FY’25 FY’26 FY’27 AAI GIAL Consultation Paper No. 01/2024-25 Page 207 of 254NON-AERONAUTICAL REVENUE FOR THE THIRD CONTROL PERIOD Figure 12: Year-wise NAR per passenger earned by AAI and projected by GIAL (₹ per pax) 105.89 89.60 70.35 53.85 46.09 36.14 30.74 32.34 28.61 23.76 FY’17 FY’18 FY’19 FY’20 FY’21 FY’23 FY’24 FY’25 FY’26 FY’27 AAI GIAL 11.2.11 The Authority also observed that the NAR projected by GIAL for the Third Control Period is significantly lower as compared to that of other PPP airports (DIAL, MIAL, BIAL, GHIAL, CIAL), wherein the NAR projected by such PPP airports are at least 50% of the total O&M expenses projected by them for the respective Control Period. Whereas in the case of the GIAL, the Authority notes that the NAR projected by GIAL for the Third Control Period is ₹ 109.54 crores, which is significantly lower as compared to the O&M expenses submitted by GIAL, which is ₹ 2,037.03 crores (refer Chapter 10), and eventually defeats the ultimate purpose of PPP. 11.2.12 Guwahati, being the gateway airport for the tourist destinations of north-eastern states, witnesses high tourist footfall. The tourists at this airport thus have a natural propensity to purchase/spend on non- aeronautical activities at the airport. This behavior is reflected in the passenger’s spending pattern and have direct bearing on the NAR of the airport. Hence, there is a significant potential for non-aeronautical revenues and the aspect of appropriately harnessing the same by the AO and has been taken into consideration by the Authority in the non-aeronautical projections as brought out in Table 161. 11.2.13 LGBIA has been given on PPP mode to bring efficiencies in operations by increasing the non- aeronautical revenues by the Airport Operator so that the benefits may be passed on to the users through cross-subsidization. 11.2.14 The Authority takes cognizance of the fact that non aeronautical revenues projected for the Third Control Period by GIAL considers the pandemic and economic conditions on traffic which will reduce the consumer spending at the airport. However, the Authority is not convinced that the revenue from Master Services Agreement is remaining constant for the period, while all the other costs are increasing substantially across the Third Control Period. Further, the Terminal Building space will increase considerably as is planned in FY 2025-26 (due to commissioning of NITB) adding more area for Non- aeronautical services. 11.2.15 The Authority takes cognizance of the fact that there would be a gradual increase in Non-aeronautical operations through increase in the Non-aeronautical area within the Terminal Building in FY 2025-26, which will lead to increase in the Non-aeronautical revenues for the airport. Further, it is the responsibility of GIAL to ensure to achieve higher NAR in the Third Control Period than was achieved by AAI during the Second Control Period. In this context, there was no obligation on GIAL to accept the bid of Master Concessionaire offering such low revenue share. 11.2.16 When an airport operator takes an initiative, such as undergoing an open global competitive bidding Consultation Paper No. 01/2024-25 Page 208 of 254NON-AERONAUTICAL REVENUE FOR THE THIRD CONTROL PERIOD process, it is for the betterment of the airport and is in the interest of the airport users. The Holding Company (Group entity of Adani Enterprises Limited itself) was selected as the Master Concessionaire. However, this does not result in enhancing the material gains to the airport users by higher cross subsidization of NAR. It is pertinent to note that GIAL could have leveraged the technical know-how to bring in efficiencies in generating NAR without the Master Concessionaire. No advantages have been provided to the airport users due to the Master Concession Agreement. 11.2.17 Moreover, considering the positive outlook provided by the Expert Agencies, the outlook of the GDP growth predicted by the GoI and the encouraging trend in the traffic numbers reported in FY 2022-23 (5.05 MPPA) and FY 2023-24 (5.96 MPPA), the Authority noted that the passenger traffic has reverted to pre-covid levels in FY 2023-24. Further the traffic is expected to progressively increase during the Third Control Period (as also discussed in Chapter 6). 11.2.18 With the steady increase in passenger traffic and expansion of Terminal Building area (commissioning of NITB), the Authority foresees an increase in passenger related Non-aeronautical revenue across the Third Control Period. Further, the Authority expects GIAL to bring in efficiencies in Non-aeronautical operations as being followed by other PPP airports wherein the proportion of Non-aeronautical revenue projected by GIAL is equal or comparable to the quantum of O&M expenses, whereas, in the case of LGBIA the situation is peculiar wherein the projection of NAR is substantially lesser than O&M expenses. Further, this will impact the interest of the airport users as 30% of the Non-aeronautical revenue is used for cross subsidization. The Authority urges GIAL that it should make efforts to generate non-aeronautical revenue higher than that was earned by AAI during the Second Control Period. 11.2.19 The Authority noted that GIAL in its MYTP submission has estimated Revenues from space rentals to be ₹ 0.50 crores. GIAL has considered a 5% increase in these rates Y-o-Y. The Authority notes that the actual revenue from space rentals in FY 2022-23 is ₹ 0.44 crores. Further, GIAL has not provided any information about space rental from airlines for the FY2022-23. 11.2.20 The Authority further observes that out of the total actual non-aeronautical revenue ₹ 23.32 crores in FY 2022-23, ₹ 0.58 crores relate to Fair Value of Financial Instrument and proposes to not consider the same while determining NAR for FY 2022-23 as it is an IND AS adjustment. 11.2.21 Based on the above discussion the adjustment to the actual Non-Aeronautical Revenue for FY 2022-23 is as given below Table 160: Adjustment to Revenue from Non-Aeronautical Services considered by the Authority for FY 2022-23 (₹ crores) Particulars FY23 Actual Non-Aeronautical Revenue as submitted by GIAL (A) 23.32 Adjustment: Fair Value of Financial Instrument as per Ind AS (B) 0.58 Non-Aeronautical Revenue as per the Authority (A - B) 22.74 11.2.22 Based on the above considerations, the Authority has estimated the total Non-aeronautical revenues for the Third Control Period for LGBIA as follows: i. The NAR earned by AAI in FY 2019-20, which is a pre-COVID year, is considered as the base for estimating the NAR for LGBIA for the Third Control Period from FY2024-25 onwards. ii. The Authority has considered the actual revenue earned by GIAL for FY 2022-23 and FY2023- 24 as these FYs have already passed. iii. The Authority proposes not to consider ₹ 0.58 crores of Fair Value of Financial Instrument in Consultation Paper No. 01/2024-25 Page 209 of 254NON-AERONAUTICAL REVENUE FOR THE THIRD CONTROL PERIOD FY2022-23 as it relates to IND AS adjustment. iv. The NAR of ₹ 48.90 crores of FY 2019-20 of AAI has been assumed as base for FY 2024-25, since the traffic has reached the pre-COVID level of FY 2019-20 by the close of FY 2023-24. v. The Authority proposes to consider the impact of inflation as prescribed in Chapter 9 of the Consultation Paper. vi. The Authority proposes to consider the impact of terminal area increase with respect to NAR from FY2026-27 onwards. Further, the Authoirty proposes to consider an increase of one-third of the total terminal area increase due to operationalization of NITB, i.e. (1/3)*621% = 207% Table 161:Total Non-aeronautical revenues proposed by the Authority for Third Control Period (₹ crores) NAR of Particulars AAI for FY’23 FY’24 FY’25 FY’26 FY’27 Total FY’20 Total NAR 48.90* 22.74 22.07 48.90 50.71 157.55 301.97 % increase Inflation 3.70% 3.70% Terminal Area 207% * Refer Table 36 of this Consultation Paper Note: As submitted by GIAL, there is no space rent from airlines in the actual non-aeronautical revenue submitted by them for the FY2022-23 and FY2023-24. Non-Aeronautical revenue for the FY2025 – FY2027 has been projected on the basis of non-aeronautical revenue of AAI for the FY2019-20 (pre-COVID year) 11.3 Authority’s proposal relating to Non-aeronautical revenue for the Third Control Period Based on the material before it and its analysis, the Authority proposes the following with regard to Non-aeronautical revenue for the Third Control Period: 11.3.1 To consider Non-aeronautical revenues for the Third Control Period for LGBIA as per Table 161. 11.3.2 Non-Aeronautical Revenue will not be trued up at the time of tariff determination of next control period if it is lower than that proposed by the Authority in Table 161. Consultation Paper No. 01/2024-25 Page 210 of 254TAXATION FOR THE THIRD CONTROL PERIOD 12 TAXATION FOR THE THIRD CONTROL PERIOD 12.1 GIAL’s submission regarding Taxation for the Third Control Period 12.1.1 GIAL has submitted that the computation of income tax on aeronautical income, has been made on the prevailing Income Tax laws and rules. 12.1.2 GIAL has calculated the revenue generated from Regulated services, Non-aeronautical revenue Aeronautical operating expenses, interest and financing charges, and depreciation on written down value (WDV) of assets as per the Income Tax Act. After calculating the Profit Before Tax (PBT), a tax rate of 25.17% was applied, after setting off prior losses. The Aeronautical taxes submitted by LGBIA are shown in the table below: Table 162: Taxation submitted by GIAL for the Third Control Period (₹ crores) Particulars FY’23 FY’24 FY’25 FY’26 FY’27 Total Aeronautical Revenue with Revised Rates 154.58 430.04 1,204.91 1,426.73 1,811.14 5,027.39 Add: 30% of Non-aeronautical revenue 6.98 6.46 6.47 6.47 6.48 32.86 Less: O&M expenses 119.58 225.03 262.36 654.93 775.11 2,037.03 Less: Tax Depreciation 20.27 26.83 216.80 496.19 566.72 1,326.82 Aero Profit Before Tax 21.70 184.63 732.21 282.07 475.78 1,696.41 Tax rate (%) 25.17% 25.17% 25.17% 25.17% 25.17% Tax 5.46 46.47 184.30 71.00 119.76 426.99 12.2 Authority’s examination regarding Taxation for the Third Control Period 12.2.1 The Authority notes that GIAL has considered 30% Non-aeronautical revenues in the estimation of Aeronautical PBT, which was then used in the computation of Aeronautical taxes. The fact that a part of Non-aeronautical revenues is used for cross subsidization as per the Hybrid Till mechanism, doesn’t change the nature of such revenues to Aeronautical. Further, the cross subsidization as per the Hybrid till mechanism is done in order to reduce tariff pressure on passengers and to incentivize GIAL to make effective investments in Non-aeronautical generating sources. 12.2.2 Therefore, the Authority is of the view that: • 30% Non-Aeronautical revenues should not be treated as a subsidy for the Airport Operator as the airport operator has already earned it from Non-Aeronautical services and is meant as a cross subsidy to the airport user. • The consideration of 30% Non-Aeronautical revenues as part of revenues from Aeronautical services would result in undeserved enrichment to the Airport Operator effectively reducing the cross-subsidy benefit to the airport user from the present 30% Non-Aeronautical income. 12.2.3 The Authority thus proposes to consider only Aeronautical revenues and expenses in the calculation of Aeronautical PBT. 12.2.4 The Authority has also noted that GIAL has not considered the interest expense on the long-term borrowings while computing the Aeronautical PBT for the Third Control Period. This has resulted in estimating higher Aeronautical Profit and consequently, higher Aeronautical taxes. The Authority proposes to consider actual interest expense in FY23 as a base for forecasting expenses for future tariff years in the Third Control Period. This expense has been deducted for estimating the Aeronautical P&L. 12.2.5 The Authority has recomputed taxes of GIAL based on the changes proposed to the other building Consultation Paper No. 01/2024-25 Page 211 of 254TAXATION FOR THE THIRD CONTROL PERIOD blocks and based on the proposal discussed above on exclusion of Non-aeronautical revenue. 12.2.6 The Authority notes that as per clause 28.11.4 of the CA, the Adjusted Deemed Initial RAB will be reduced for over-recoveries of Aeronautical Revenues, or increased for under-recoveries, impacting Aeronautical Charges for the next Control Period. The Authority has considered that the compensation paid to AAI by GIAL for shortfall, will be claimed as a deduction in the Income Tax computation of GIAL and the same has been considered accordingly in the Income Tax computations. 12.2.7 The following table summarizes the Aeronautical taxes proposed by the Authority for the Third Control Period. Table 163: Taxation proposed by the Authority for the Third Control Period (₹ crores) Particulars Ref. FY’23 FY’24 FY’25 FY’26 FY’27 Total Aeronautical Revenue* A 154.62 176.00 572.06 671.61 839.64 2,413.93 Less: O&M expenses (refer B 112.63 124.12 149.43 346.61 416.24 1,149.03 Table 156) Less: Tax Depreciation C 20.51 21.47 33.61 219.02 373.36 667.97 Less: Interest Expense D 13.30 13.65 23.96 173.57 175.46 399.94 Less: Payment to AAI – PV of E 172.80 172.80 recovery as on March 31, 2023 (refer Table 42) Profit Before Tax F=A- (164.63) 16.75 365.06 (67.57) (125.43) 24.19 SUM(B:E) Previous Loss Adjustment G - 16.75 147.87 - - 164.63 Taxable profit H=F-G - - 217.19 - - Tax rate (%) I 25.17% 25.17% 25.17% 25.17% 25.17% Aeronautical Tax J=H*I - - 54.67 - - 54.67 Opening Losses K - (164.63) (147.87) - (67.57) Current period (loss)/profit L=F (164.63) 16.75 365.06 (67.57) (125.43) Closing Losses M=K+L (164.63) (147.87) - (67.57) (193.00) *This is subject to revision based on tariff rate card which is to be submitted by GIAL (refer para 14.2.8). For FY 2022-23 and FY2023- 24, actual revenues have been considered. **Computed using WDV method considering useful lives as per IT Act. 12.3 Authority’s proposal regarding Taxation for the Third Control Period Based on the material before it and based on its analysis, the Authority proposes the following with regard to Taxation for the Third Control Period. 12.3.1 To consider the Taxation for the Third Control Period for LGBIA as per Table 163. 12.3.2 To true up the aeronautical tax amount appropriately taking into consideration all relevant facts at the time of tariff determination for the Fourth Control Period. Consultation Paper No. 01/2024-25 Page 212 of 254QUALITY OF SERVICE FOR THE THIRD CONTROL PERIOD 13 QUALITY OF SERVICE FOR THE THIRD CONTROL PERIOD 13.1 GIAL’s submission relating to Quality of Service 13.1.1 GIAL has submitted that it will abide by the ASQ performance indicators mentioned in Annexure I to Schedule H in the Concession Agreement. Clause 23.7.1 of the CA states: “The Concessionaire shall participate in the user survey of ASQ undertaken by Airports Council International (ACI) or any substitute thereof, conducted every quarter and shall ensure that the Airport achieves and maintains a rating of at least 4.5 out of 5.0 and/ or shall appear within top 20 percentile of all airports, in its category in the World in such survey within 5 years from the COD and maintain the same throughout the rest of the Concession Period.” Clause 23.7.2 of the CA states: “The Concessionaire shall, within 21 days of the end of each calendar quarter, provide to the Authority a written report on the results of the user survey of ASQ for the immediately preceding quarter, together with its analysis of the results and the action, if any, that it proposes to take for improvement in User satisfaction.” 13.1.2 GIAL has further submitted that adherence and maintenance of these standards will require creation of significant infrastructure, ramp-up of human resource and increase in operations and maintenance costs and that GIAL has considered the cost implications, while preparing future projections as part of its MYTP submission. 13.2 Authority’s examination regarding Quality of Service for the Third Control Period 13.2.1 The Authority notes that:  As per section 13 (1) (d) of the AERA Act, 2008, the Authority shall “monitor the set performance standards relating to quality, continuity and reliability of service as may be specified by the Central Government or any Authority authorized by it in this behalf.”  As per section 13(1)(a)(ii), the Authority is required to determine the tariff for Aeronautical services taking into consideration “the service provided, its quality and other relevant factors.” 13.2.2 The Authority noted that the ACI ASQ survey results for LGBIA for the years 2020 to 2024 (Q3) is in the range of 4.48 to 4.95. Table 164: ASQ rating for LGBIA Year ASQ rating 2020 4.48 ASQ was not conducted due to lockdown on account 2021 – Q1 & Q2 of COVID-19 pandemic 2021- Q3 4.84 2021- Q4 4.86 2022 -Q1 4.88 2022- Q2 4.90 2022-Q3 4.78 2022-Q4 4.87 2023 -Q1 4.90 2023- Q2 4.90 2023-Q3 4.91 2023-Q4 4.95 2024 -Q1 4.92 Consultation Paper No. 01/2024-25 Page 213 of 254QUALITY OF SERVICE FOR THE THIRD CONTROL PERIOD Year ASQ rating 2024- Q2 4.94 2024- Q3 4.93 13.2.3 The Authority also notes that as per the Concession Agreement, GIAL is required to maintain an ASQ rating of at least 4.5 out of 5. In this regard, the Authority notes that GIAL has achieved ASQ rating for FY 2023 in the range of 4.90 to 4.95 which is above the prescribed rating of 4.5 as mentioned in the CA. 13.2.4 Based on the above factors, the Authority does not propose any adjustment towards tariff determination for the Third Control Period on account of quality of service maintained by the LGBIA. 13.3 Authority’s proposal relating to Quality of Service for the Third Control Period Based on the material before it and its analysis, the Authority proposes the following with regard to Quality of Service for the Third Control Period: 13.3.1 Not to consider any adjustment towards tariff determination for the Third Control Period with regard to Quality of Service of LGBIA. 13.3.2 GIAL should ensure that service quality at LGBIA conforms to the performance standards as indicated in the Concession Agreement over the Third Control Period. Consultation Paper No. 01/2024-25 Page 214 of 254AGGREGATE REVENUE REQUIREMENT (ARR) FOR THE THIRD CONTROL PERIOD 14 AGGREGATE REVENUE REQUIREMENT (ARR) FOR THE THIRD CONTROL PERIOD 14.1 GIAL’s submission regarding ARR for the Third Control Period 14.1.1 GIAL has submitted ARR and Yield per Passenger (YPP) for the Third Control Period as per the regulatory building blocks discussed. 14.1.2 The summary of ARR and YPP has been presented in the table below. Table 165: ARR submitted by GIAL for the Third Control Period (₹ crores) Particulars FY’23 FY’24 FY’25 FY’26 FY’27 Total Average RAB 152.55 191.40 2,010.85 4,674.63 5,440.58 Fair Rate of Return 14.76% 14.76% 14.76 % 14.76 % 14.76 % Return on average RAB 22.51 28.24 296.72 689.79 802.81 1,840.07 Total O&M expenses (including interest on 119.58 225.03 262.36 654.93 775.11 2,037.03 working capital & financing charges) Depreciation 23.11 32.83 117.76 284.13 366.46 824.29 Tax expense 5.46 46.47 184.30 71.00 119.76 426.99 Less: 30% NAR (6.98) (6.46) (6.47) (6.47) (6.48) (32.86) Add: True up for the period 28.81 28.81 from COD till March 31, 2021 ARR per year (₹ crores) 192.49 326.12 854.67 1,693.38 2,057.65 5,124.32 Discount factor (@ 14.76%) 1.00 0.87 0.76 0.66 0.58 PV of ARR 192.49 284.19 649.01 1,120.54 1,186.51 3,432.74 Sum Present value of ARR 3,432.74 3,432.74 (₹ crores) 14.2 Authority’s examination of Aggregate Revenue Requirement (ARR) for the Third Control Period 14.2.1 The observations and proposals of the Authority across the regulatory building blocks impact the computation of ARR and Yield. With respect to each element of the regulatory building blocks considered by GIAL in computation of ARR and Yield in the table above, the Authority proposes to consider the regulatory building blocks as discussed in the above chapters. 14.2.2 The Authority notes that GIAL has on-going capital expenditure projects and other planned works, which have resulted in a higher ARR for the Third Control Period. The existing traffic base is not sufficient for the complete recovery of ARR in the current Control Period and this would require a significant increase in tariff. Further, a significant increase in Aeronautical tariff, is also attributable on account of the fact that the new Aeronautical tariff proposed by the Authority may be implemented only by August 2024, thereby resulting in only lesser tariff years being available for recovery of the ARR. In this regard, the Authority would like to draw reference to the guiding principles issued by the International Civil Aviation Organization (“ICAO”) on charges for Airports and Air Navigation Services (ICAO DoC 9082), which lays down the main purpose of economic oversight which is to achieve a balance between the interest of Airports and the Airport Users. This policy document categorically specifies that caution be exercised when attempting to compensate for shortfalls in revenue considering its effects of increased charges on aircraft operators and end users. The said policy document also Consultation Paper No. 01/2024-25 Page 215 of 254AGGREGATE REVENUE REQUIREMENT (ARR) FOR THE THIRD CONTROL PERIOD emphasizes on balancing the interests of airports on one hand and aircraft operators, end users on the other, in view of the importance of the air transport system to States. This should be applied particularly during periods of economic difficulty. Therefore, the policy document recommends that States encourage increased cooperation between airports and aircraft operators to ensure that the economic difficulties facing them all are shared in a reasonable manner. This may also be read in conjunction with the objectives of the National Civil Aviation Policy (NCAP) 2016, which intends to provide affordable and sustainable air travel for passengers/masses. As per para 12 (c) of the NCAP, “In case the tariff in one particular year or contractual period turns out to be excessive, the Airport Operator and the Regulator will explore ways to keep the tariff reasonable and spread the excess amount over the future.” The above has also been conveyed by AERA vide its Order No. 14/2016-17 dated January 12, 2017. Further, it is pertinent to note that considerable investments in capacity have already been made which would be sufficient for the foreseeable future. Therefore, the subsequent control periods are expected to witness lower capital expenditure requirements while catering to a larger traffic base. Determination of Aeronautical charges and UDF requires a delicate balance between cost recovery and its potential impact on air traffic demand. This balance is crucial for the financial viability of the airport and its ability to sustain operations while also ensuring that the tariffs remain competitive enough to attract and retain airlines and passengers. Therefore, the Authority, based on the Tariff Rate Card to be submitted by GIAL would decide the balance between cost recovery and its potential impact on air traffic demand. Air Freight Station (AFS) 14.2.3 The Authority notes the Policy Guidelines on ‘Air Freight Station’ (AFS) issued by MoCA in October 2014. This Policy shall create an off Airport Common User facility equipped with fixed installations of minimum requirements and offering services for handling International Air Cargo in the form of Air Freight Stations with a mandate to enable the Cargo Industry as follows: • Off-Airport common user facility equipped with fixed installations of minimum requirements and offering services for handling and temporary storage of import/ export goods, loaded and empty Unit Load Devices (ULD) and Cargo in bulk/ loose for outright export. • Create an enabling environment for promoting International Air Cargo operations by reaching out to hinterland regions of the Country besides de-congesting the congested Air Cargo terminals in some gateway International Airports that face high dwell time. • Authorizing some of the Inland Container Depots (ICD) to cater to the International Air Cargo operations, the existing facilities in these ICDs could be fully utilized. 14.2.4 The Authority notes that the above Policy Guidelines on AFS has larger national intent and it aims to strengthen and develop air cargo logistics in the Country and the same is expected to reduce the bottlenecks in air cargo logistics and help in ease of doing business, particularly for exporters. 14.2.5 The Authority directs GIAL to submit a separate tariff rate in case the cargo is received from the approved AFS and factor it in the Tariff Rate Card. 14.2.6 The Authority also seeks comments from the stakeholders on application of tariff on AFS Cargo, as the Authority feels that the tariff on AFS Cargo should be significantly lesser than the tariff Consultation Paper No. 01/2024-25 Page 216 of 254AGGREGATE REVENUE REQUIREMENT (ARR) FOR THE THIRD CONTROL PERIOD levied on the General Cargo. 14.2.7 After considering the above, the Authority proposes the following ARR and YPP: Table 166: ARR proposed by the Authority for the Third Control Period (₹ crores) Table/ Particulars FY’23 FY’24 FY’25 FY’26 FY’27 Total Para Ref. Average RAB (A) Table 118 167.91 179.28 282.52 2,069.48 3,681.24 Fair Rate of Return (B) Table 123 12.21% 12.21% 12.21% 12.21% 12.21% Return on average RAB (C= 20.51 21.90 34.51 252.76 449.61 779.28 A*B) O&M expenses (D) Table 156 112.63 124.12 149.43 346.61 416.24 1,149.03 Depreciation (E) Table 116 13.93 17.37 22.99 104.88 178.51 337.68 Taxation (F) Table 163 - - 54.67 - - 54.67 Add: PV of Under-recovery of Table 41 172.80 172.80 AAI as on March 31, 2023 (G) Add: PV of Under-recovery of Table 62 5.29 5.29 GIAL as on March 31, 2023 (H) ARR (I = SUM (C:H)) 325.16 163.39 261.59 704.24 1,044.36 2,498.75 NAR (J) Table 161 22.74 22.07 48.90 50.71 157.55 301.97 Less: 30% NAR (K) 6.82 6.62 14.67 15.21 47.27 90.59 Net ARR (L = I – K) 318.34 156.77 246.92 689.03 997.09 2,408.15 Discount factor (@ 12.21%) (M) 1.00 0.89 0.79 0.71 0.63 PV of ARR/ Target Revenue as 318.34 139.71 196.10 487.64 628.86 1,770.64 on 31 March 2023 (N=L*M) Sum Present value of ARR (O) 1,770.64 Total Traffic (million Table 71 34.30 passengers) (P) Yield per passenger on Total 516.21 Traffic (YPP) (₹) (Q=O/P) Total Departing Passenger 17.15 traffic (R) Yield per Departing Passenger 1,032.42 (₹) (S=O/R) 14.2.8 The Authority notes that, it is necessary to have the individual year wise tariff card laying down the different aeronautical charges and the workings for the aeronautical revenues, in order to have a constructive stakeholder discussion and hence GIAL is directed to submit the detailed Annual Tariff proposals in line with the ARR and Yield arrived at by the Authority within 7 days of issue of this Consultation Paper. 14.3 Authority’s proposal regarding Aggregate Revenue Requirement (ARR) for the Third Control Period Based on the material before it and based on its analysis, the Authority proposes the following with regard to ARR for the Third Control Period: Consultation Paper No. 01/2024-25 Page 217 of 254AGGREGATE REVENUE REQUIREMENT (ARR) FOR THE THIRD CONTROL PERIOD 14.3.1 To consider the ARR and YPP for the Third Control Period for LGBIA in accordance with Table 166. 14.3.2 To direct GIAL to submit the Annual Tariff Proposal (Tariff Rate Card) within 7 days from issue of this Consultation Paper which will be put up for stakeholder consultations. Consultation Paper No. 01/2024-25 Page 218 of 254SUMMARY OF THE AUTHORITY’S PROPOSALS 15 SUMMARY OF THE AUTHORITY’S PROPOSALS PUT FORTH FOR STAKEHOLDER CONSULTATION Chapter 4: True up of AAI for the Second Control period from FY 2017 till COD 4.15.1 To consider Deemed Initial RAB as ₹ 158.80 crores on October 8, 2021, as per Table 26 4.15.2 To consider true up of RAB for the pre-COD period as per Table 24. 4.15.3 To consider true up of depreciation for the pre-COD period as per Table 23. 4.15.4 To consider true up of FRoR for the pre-COD period as per para 4.8. 4.15.5 To consider true up of Aeronautical O&M expenses for the pre-COD period as per Table 32. 4.15.6 To consider true up of Non-aeronautical revenue for the pre-COD period as per Table 36. 4.15.7 To consider true up of Aeronautical revenue for the pre-COD period as per Table 39. 4.15.8 To consider true up of Aeronautical Taxation for the pre-COD period as per Table 41. 4.15.9 To consider true up of ARR for the pre-COD period as per Table 42. 4.15.10 To consider the present value of under recovery of ₹ 172.80 crores for True up of AAI for the Pre-COD period as per Table 42 and readjust the same in the ARR for the Third Control Period. 4.15.11 To consider Adjusted Deemed Initial RAB as per Table 44 or based on formula provided in paragraph 4.14.2 as appropriate for actual date of payment. Chapter 5: True up of GIAL for the period from COD till March 31, 2022 5.12.1 To consider true up of CAPEX, depreciation and RAB for the period from COD till March 31, 2022 as per Table 50. 5.12.2 To consider true up of FRoR for the period from COD till March 31, 2022 as per Table 51. 5.12.3 To consider true up of Aeronautical O&M expenses for the period from COD till March 31, 2022 as per Table 56. 5.12.4 To consider true up of Non-aeronautical revenue for the period from COD till March 31, 2022 as per Table 58. 5.12.5 To consider true up of Taxation for the period from COD till March 31, 2022 as per Table 61. 5.12.6 To consider true up of Aeronautical revenue for the period from COD till March 31, 2022 as per Table 60. 5.12.7 To consider under recovery of ₹ 5.29 crores as per Table 62 for Post-COD period to be considered while calculating the ARR for the Third Control Period. Chapter 6: Traffic Projections for the Third Control Period 6.3.1 To consider the ATM, Passenger traffic and Cargo traffic for the Third Control Period for LGBIA as per Table 71. 6.3.2 To true up the traffic volume (ATM, Passengers and Cargo) on the basis of actual traffic in the Third Control Period while determining tariffs for the Fourth Control Period. Chapter 7: Capital Expenditure (Capex), Depreciation and RAB for the Third Control Period 7.7.1 To consider the revised Terminal Building ratio of 90:10 in line with the Study on allocation of assets between Aeronautical and Non-aeronautical assets for LGBIA, IMG norms and as approved for other Consultation Paper No. 01/2024-25 Page 219 of 254SUMMARY OF THE AUTHORITY’S PROPOSALS similar Airports. 7.7.2 To allow IDC during the Third Control Period and not to allow Financing Allowance as mentioned in Para 7.3.12. 7.7.3 To adopt the capitalization of Aeronautical Expenditure for the Third Control Period in accordance with Table 111. 7.7.4 To reduce (adjust) 1% of uncapitalized project cost from the ARR in case any particular capital project is not completed/capitalized as per approved capitalization schedule, as mentioned in para 7.3.11. The same will be examined at the time of tariff determination of next Control Period. 7.7.5 To examine the accounting of input tax credits in accordance with Chapter V of The Central Goods and Services Tax Act, 2017 and make necessary adjustments at the time of determination of tariffs for the Third Control Period. 7.7.6 To true up the Aeronautical Capital expenditure based on actuals subject to, cost efficiency and reasonableness at the time of determination of tariff for Fourth Control Period. 7.7.7 To adopt Aeronautical Depreciation as per Table 115 for the Third Control Period. 7.7.8 To true up the Depreciation of the Third Control period based on the actual asset additions and actual date of capitalization during the tariff determination of the Fourth Control Period. 7.7.9 To consider average RAB for the Third Control Period for LGBIA as per Table 118. 7.7.10 To true up the RAB based on actuals at the time of tariff determination for the Fourth Control period. Chapter 8: Fair Rate of Return (FRoR) for the Third Control Period 8.3.1 To consider the Cost of equity at 15.18%. 8.3.2 To consider the notional debt to equity (gearing) ratio of 48%:52% in line with target gearing ratio being considered in case of other PPP airports. 8.3.3 To consider cost of debt of 9% for the Third Control Period. 8.3.4 To consider FRoR of 12.21% for the Third Control Period based on above mentioned Cost of equity, Cost of debt and gearing ratio as per Table 123. Chapter 9: Inflation for the Third Control Period 9.3.1 To consider WPI inflation as per Table 126. Chapter 10: Operation and Maintenance Expenses for the Third Control Period 10.3.1 To consider total Aeronautical O&M Expenses including Operating Expenses, Fuel Operating Expenses and Cargo Operating Expenses for the Third Control Period for LGBIA as per Table 156. 10.3.2 To consider the actual total Aeronautical O&M expenses incurred by GIAL during the Third Control Period subject to reasonableness and efficiency, at the time of True up in the Fourth Control period. 10.3.3 Considering the size and scale of operations of the Airport, the Authority expects GIAL to bring in efficiencies in the incurrence of O&M expenses. Chapter 11: Non-aeronautical revenue for the Third Control Period 11.3.1 To consider Non-aeronautical revenues for the Third Control Period for LGBIA as per Table 161. 11.3.2 Non-Aeronautical Revenue will not be trued up at the time of tariff determination of next control period if it is lower than that proposed by the Authority in Table 161. Consultation Paper No. 01/2024-25 Page 220 of 254SUMMARY OF THE AUTHORITY’S PROPOSALS Chapter 12: Taxation for the Third Control Period 12.3.1 To consider the Taxation for the Third Control Period for LGBIA as per Table 163. 12.3.2 To true up the aeronautical tax amount appropriately taking into consideration all relevant facts at the time of tariff determination for the Fourth Control Period. Chapter 13: Quality of Service for the Third Control Period 13.3.1 Not to consider any adjustment towards tariff determination for the Third Control Period with regard to Quality of Service of LGBIA. 13.3.3 GIAL should ensure that service quality at LGBIA conforms to the performance standards as indicated in the Concession Agreement over the Third Control Period. Chapter 14: Aggregate Revenue Requirement (ARR) for the Third Control Period 14.3.1 To consider the ARR and YPP for the Third Control Period for LGBIA in accordance with Table 166. 14.3.2 To direct GIAL to submit the Annual Tariff Proposal (Tariff Rate Card) within 7 days from issue of this Consultation Paper which will be put up for stakeholder consultations. Consultation Paper No. 01/2024-25 Page 221 of 254STAKEHOLDERS’ CONSULTATION TIMELINE 16 STAKEHOLDERS’ CONSULTATION TIMELINE 16.1 In accordance with the provision of Section 13(4) of the AERA Act, 2008, the proposals contained in the Chapter 15 – Summary of the Authority’s proposals read with the relevant discussion in the other chapters of the Paper is hereby put forth for Stakeholders’ Consultation. 16.2 For removal of doubts, it is clarified and explained that the contents of this Consultation Paper may not be construed as any Order or Direction by the Authority. The Authority shall pass an order, in the matter, only after considering the submissions of the stakeholders in response hereto and by making such decisions fully documented and explained in terms of the provisions of the Act. 16.3 The Authority welcomes written evidence-based feedback, comments and suggestions from stakeholders on the proposals made in this Consultation Paper, latest by 06th July 2024. Secretary, Airports Economic Regulatory Authority of India Udaan Bhawan, 3rd Floor D Block, Rajiv Gandhi Bhawan Safdarjung Airport New Delhi – 110003 (Chairperson) Consultation Paper No. 01/2024-25 Page 222 of 254ANNEXURES 17 ANNEXURES 17.1 Annexure 1 – Summary of study on allocation of assets between Aeronautical and Non- aeronautical assets Background 17.1.1 RAB is one of the fundamental elements in the process of tariff determination. The return to be provided on the RAB constitutes a considerable portion of the Aggregate Revenue Requirement for an airport operator. To encourage the participation of the private sector in airport development and operations, investors must be fairly compensated for the capital outlays involved. At the same time, to safeguard the interests of the airport users, it must be ensured that the capital additions are efficient, their needs justified, and the return on investment provided solely on the assets related to the core operations (i.e., Aeronautical services) of the airport. Assets not directly related to provision of Aeronautical services, if considered as Aeronautical assets, would result in increased charges for the passengers, stakeholders and other users. Therefore, the diligent allocation of assets into Aeronautical and Non-aeronautical assets becomes an important part of the tariff determination process. 17.1.2 RAB evolves on a continuous basis, primarily due to the addition of capital assets required to meet the growing demand and ensure optimal level of service, replacement of obsolete assets at end of their useful life, sales or transfers of assets and depreciation. The allocation of an asset towards RAB depends upon the type of asset (building & civil works, plant & machinery, equipment, etc.), usage (provision of various services such as Aeronautical, Non-aeronautical, or Common), ownership (by airport operator, concessionaire or other entities) and useful life of the asset. Based on these factors, the rationale for allocation of each asset into the appropriate classification needs to be determined diligently. 17.1.3 Towards this objective, AERA has decided to conduct an independent study on allocation of assets and segregation between Aeronautical and Non-aeronautical components in respect of assets appearing in the Fixed Asset Register (FAR) of Guwahati International Airport Limited as on March 31, 2022, based on the audited financial statements for the year ended March 31, 2022 and the True up workings as submitted by AAI to the AERA up to COD (October 8, 2021). Classification of Assets 17.1.4 The study based on the analysis, classified the aggregate assets of LGBIA under the following categories: a. Aeronautical assets: All assets that are exclusively used for the provision of Aeronautical services/ activities have been classified as ‘Aeronautical assets’. Such assets would include runway(s), taxiways, drainage, culverts, aprons, etc. b. Non-aeronautical assets: All assets that are exclusively used for the provision of Non- aeronautical services/ activities have been classified as ‘Non-aeronautical assets’. Such assets would include land side development, commercial projects, etc. c. Common assets: All assets that cannot be directly allocated to either Aeronautical assets or Non-aeronautical assets have been classified as ‘Common assets’. Such assets as the name suggests, get utilised for both Aeronautical and Non-aeronautical activities. They would include terminal building, select terminal equipment, etc. Principles for segregation of assets 17.1.5 The study reviewed the various asset categories and developed a basis for classification of assets Consultation Paper No. 01/2024-25 Page 223 of 254ANNEXURES into aeronautical and non – aeronautical activities. The study also determined the appropriate proportion of the Common Assets that may be included as part of Aeronautical activity in order to determine the Aeronautical asset base. The principles of segregation used by the study are as follows: Aeronautical Assets • Assets required for the performance of the Aeronautical services at the airport. • Classification of aeronautical assets are taken as defined in the AERA Act. • Assets necessary to maintain the service quality of the airport are proposed to be considered as aeronautical except those located in the Non-aeronautical area. Non-aeronautical Assets • Assets required for the performance of the Non-aeronautical activities at the airport. Examples include car parking, advertisement, retail etc. Common Assets • Common assets are assets which are not directly attributable to either Aeronautical or Non- aeronautical services. These assets include the terminal building, air conditioning, furniture, administrative office of airport company, etc. • Common assets are bifurcated between Aeronautical and Non-aeronautical assets based upon Terminal Building ratio or Employee Head Count ratio or Staff Quarters ratio. The ratio of Aeronautical to Non-aeronautical as considered by the Study for the period from FY 2016-17 to FY 2020-21 are as follows: Table 167: The ratio of Aeronautical to Non-aeronautical considered by the Study for the period from FY’17 to FY’22 Particulars Ratio (Aeronautical: Non-aeronautical) Terminal Building ratio 89.02 : 10.98 Employee Head Count ratio (up to October 7, 2021) 90.45 : 9.55 Employee Head Count ratio (from October 8, 2021) 95 : 5 17.1.6 Details of adjustment to RAB The asset allocation study reviewed the various asset categories and developed a basis for segregation of various assets into Aeronautical, Non-aeronautical and Common. Based on the same, the Authority has reclassified some portion of assets submitted by AAI for true up of the Pre-COD Period. (i) Terminal building: Details of Asset: Expansion and Modification of Existing Terminal Building Allocation proposed by AAI: Aeronautical Observation: The assets pertaining to development of terminal building have been considered as Aeronautical assets by AAI. However, as these assets are within / pertaining to the terminal building, wherein both Aeronautical and Non-aeronautical activities are carried out, the same is Consultation Paper No. 01/2024-25 Page 224 of 254ANNEXURES reclassified as Common asset and segregated in the Terminal Building ratio (89.02:10.98). Allocation proposed by the Authority: Common Impact: Reclassifying these assets from Aeronautical to Common reduces the Capital Additions to the extent of ₹ 0.91 crores. (ii) Plant & Machinery: Details of Asset: VRV System, Solar plant, AC plant, Water Softening plant, Allocation proposed by AAI: Aeronautical Observation: The assets pertain to various machinery at several locations in the airport terminal have been classified as Aeronautical assets by AAI. As these assets are used for servicing both Aeronautical and Non-aeronautical activities within the terminal building, these are reclassified as Common assets and have been reallocated in the ratio of the Terminal Building (89.02:10.98). Allocation proposed by the Authority: Common Impact: Reclassifying these assets reduces the Capital Additions to the extent of ₹ 0.57 crores. (iii) Furniture & Fixtures: Details of Asset: Furniture and Fixtures at Administrative offices Allocation proposed by AAI: Aeronautical Observation: The furniture at the administrative offices in the terminal building have been classified as Aeronautical assets by AAI. As these assets are used by staff who perform both Aeronautical and Non-aeronautical activities, these assets are reclassified as Common assets and have been reallocated using the Employee ratio. Allocation proposed by the Authority: Common Impact: Reclassifying these assets reduces the Capital Additions to the extent of ₹ 0.09 crores. (iv) Tools and Equipment: Details of Asset: Sub-station equipment, DG set, Split AC, Lights, Fan, Baggage disinfectant system, Radio communication equipment, Breath analyzer. Allocation proposed by AAI: Aeronautical Observation: The assets pertaining to the various equipment at several locations in the airport have been classified as Aeronautical assets by AAI. As these assets are used for servicing both Aeronautical and Non-aeronautical activities within the terminal building, these are reclassified as Common assets and have been reallocated in the ratio of the Terminal Building (89.02:10.98). Radio communication equipment and Breath analyzer equipment at ATC Building have been classified as Aeronautical asset by AAI. However, since these assets are for ANS staff use, they have been reclassified as ANS assets. Allocation proposed by the Authority: Common / ANS Impact: Reclassifying these assets reduces the Capital Additions to the extent of ₹ 0.10 crores. (v) Office Appliances: Consultation Paper No. 01/2024-25 Page 225 of 254ANNEXURES Details of Asset: Computer, Printer, Scanner, DVD, Fox screen, DSLR Camera, Xerox machine, Handheld Multimeter Allocation proposed by AAI: Aeronautical Observation: Computers, Laptop, Printers, and DVD used in the terminal building have been classified as Aeronautical asset by AAI. As these assets are used by staff who perform both Aeronautical and Non-aeronautical activities, these assets are reclassified as Common assets and have been reallocated using the Employee ratio. Computers, Scanner, Fox screen, Xerox machine, DSLR Camera, DVD, and Handheld multimeter at the ATC tower and CNS section have been classified as Aeronautical assets by AAI. As these assets are for CNS use, the assets have been reclassified as ANS assets. Allocation proposed by the Authority: Common, ANS Impact: Reclassifying these assets reduces the Capital Additions to the extent of ₹ 0.05 crores. 17.1.7 The following table presents the impact of adjustments in Asset Addition/WIP Capitalization values due to reclassification of assets of AAI for the period April 1, 2016 to COD. Table 168: Impact due to reclassification of AAI assets as per Study (₹ in crores) Tariff Total Tariff Tariff Tariff Tariff Tariff Additions - WIP Year 6 Year 1 Year 2 Year 3 Year 4 Year 5 Capitalization (FY22 till (FY17) (FY18) (FY19) (FY20) (FY21) COD) Terminal - - (0.91) - - - (0.91) Building Computers (0.01) - - (0.03) - - (0.04) Machinery (0.03) (0.03) (0.05) (0.03) (0.43) - (0.57) Tools & - - (0.06) - (0.03) - (0.10) Equipment Furniture-Office - (0.08) (0.01) - - - (0.09) Office - - - - (0.01) - (0.01) Equipment Total Impact on (0.04) (0.11) (1.03) (0.07) (0.47) - (1.71) Additions 17.1.8 Accordingly, the year-wise impact on depreciation on asset additions as determined by the Study (due to reclassification and other adjustments) is summarized in the table below: Table 169: Impact on depreciation due to reclassification of AAI assets (₹ in crores) Depreciation on Tariff Tariff Tariff Tariff Tariff Tariff Total Additions during Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 the Year (FY17) (FY18) (FY19) (FY20) (FY21) (FY22 till COD) Terminal Building - - - (0.03) (0.03) (0.02) (0.08) Computers (0.001) (0.001) (0.002) (0.004) (0.011) (0.006) (0.03) Machinery (0.001) (0.003) (0.006) (0.008) (0.022) (0.020) (0.06) Tools & Equipment - - (0.004) (0.004) (0.005) (0.003) (0.02) Furniture-Office - (0.001) (0.012) (0.013) (0.013) (0.007) (0.05) Consultation Paper No. 01/2024-25 Page 226 of 254ANNEXURES Depreciation on Tariff Tariff Tariff Tariff Tariff Tariff Total Additions during Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 the Year (FY17) (FY18) (FY19) (FY20) (FY21) (FY22 till COD) Office Equipment - - - - (0.002) (0.001) (0.003) Total Impact of (0.002) (0.005) (0.025) (0.060) (0.083) (0.052) (0.23) Adjustments on Depreciation on Additions 17.1.9 Subsequent to the reclassifications and revisions in allocation ratios, the adjusted RAB has been derived by the Authority as under: Table 170: Adjusted RAB derived by the Authority post reclassification (₹ crores) FY’22 Particulars FY’17 FY’18 FY’19 FY’20 FY’21 till Total COD As per AAI Opening RAB (A) 84.00* 78.85 80.44 154.28 172.29 163.26 Additions to RAB during the year (B) 9.77# 8.84 83.77 31.33 4.82 10.26 148.79 Deletions from RAB during the year (C) 7.92 0.08 8.00 Depreciation for the year (D) 7.00 7.17 9.93 13.32 13.84 7.31 58.57 Closing RAB for the year (E=A+B-C- 78.85 80.44 154.28 172.29 163.27 166.21 D) As per Authority Opening RAB (F) 84.00* 78.81 80.30 153.13 171.13 161.73 Reclassification adjustments - Reclassification impact (0.04) (0.11) (1.03) (0.07) (0.47) (1.71) (other than depreciation) (G) - Depreciation impact on reclassification (0.00) (0.01) (0.03) (0.06) (0.08) (0.05) (0.23) (H) Total reclassification impact (I=G+H) (0.04) (0.12) (1.06) (0.13) (0.55) (0.05) (1.95) Additions as per Study^ (J=B+G) 9.73 8.73 82.74 31.26 4.35 10.26 147.07 Deletions as per Study (K=C) 7.92 0.08 0.00 0.00 0.00 0.00 8.00 Depreciation as per Study^ (L=D+H) 7.00 7.17 9.91 13.26 13.76 7.26 58.34 Closing RAB (M=F+J-K-L) 78.81 80.30 153.13 171.13 161.73 164.73 Average RAB (N=(F+M)/2 81.41 79.55 116.71 162.13 166.43 163.23 ^ does not include financing allowance * includes left out assets worth ₹ 16.59 crores and cost apportionment worth 1.90 crores in First Control Period # excludes left out asset and cost apportionment as the same has been included in Opening RAB 17.1.10 Reclassification of assets of GIAL as on March 31, 2022 The Authority has conducted an independent study on allocation of assets for the period FY 2016-17 till FY 2020-21 and used the outcome of the study to true up the RAB for the post COD period i.e.as on March 31, 2022 for GIAL. The Authority has considered the adjusted RAB of GIAL as on COD (which is ₹ 158.80 crores), Capital additions and corresponding depreciation based on the results of the Asset Allocation report (refer Consultation Paper No. 01/2024-25 Page 227 of 254ANNEXURES Annexure III & V for the detailed report on Study on allocation of assets between Aeronautical and Non-aeronautical assets for Guwahati International Airort). The asset allocation study reviewed the various asset categories and developed a basis for segregation of various assets into Aeronautical, Non-aeronautical and Common assets. Based on the same, the Authority has reclassified some portion of assets submitted by the AO for true up of the period from COD till March 31, 2022 which has been detailed hereunder: i. Furniture Details of Asset: MS Framework and Flax Allocation proposed by GIAL: Aeronautical Observation: The assets such as MS Framework and Flax, have been classified as Aeronautical assets by GIAL. However, since these assets are for the use of employees of GIAL, the same have been reallocated in the ratio of Employee Head Count of GIAL (95:5). Allocation proposed by the Authority: Employee Head Count Ratio Impact: Reclassifying these assets from Aeronautical to Common decreases the RAB to the extent of ₹ 0.002 crores. Reference: Para 4.9 of the Asset Allocation Study report ii. IT Equipment Details of Asset: Laptop, Desktop, Printer, Display, Server and Storage data center, other IT equipment, Software license and support, SITA license and project implementation Allocation proposed by GIAL: Aeronautical Observation: The assets such as laptops, desktops, printers, servers and storage, software license, have been classified as Aeronautical assets by GIAL. However, since these assets are for both aero and non-aeronautic activities of GIAL, the same have been reallocated in the ratio of Employee Head Count of GIAL (95:5). In addition, SITA License and Project Implementation which was classified as Aeronautical by GIAL is allowed to be considered as Aeronautical asset. Allocation proposed by the Authority: Employee Head Count Ratio / Aeronautical Impact: Reclassifying these assets from Aeronautical to Common decreases the RAB to the extent of ₹ 0.05 crores. Reference: Para 4.9 of the Asset Allocation Study report iii. Office Equipment Details of Asset: Video Controller, Telephone, IP Phone, Mobile, Security and Safety related equipment and accessories, Document Tray, and other Office equipment. Allocation proposed by GIAL: Aeronautical Observation: All office equipment has been classified as Aeronautical assets by GIAL. However, since these assets are for both aero and non-aeronautic activities of GIAL, the same have been reallocated in the ratio of Employee Head Count of GIAL (95:5). Allocation proposed by the Authority: Employee Head Count Ratio Impact: Reclassifying these assets from Aeronautical to Common decreases the RAB to the extent of ₹ 0.03 crores. Consultation Paper No. 01/2024-25 Page 228 of 254ANNEXURES Reference: Para 4.9 of the Asset Allocation Study report The following table illustrates the impact of adjustments in Asset Addition/WIP Capitalization values due to reclassification of assets of GIAL between COD and March 31, 2022. Table 171: Impact of Reclassification of Asset Additions by GIAL from COD till March 31, 2022 (₹ crores) Asset Category as per MYTP Reclassification Impact Furniture & fixtures (0.002) IT equipment (0.05) Office equipment (0.03) Software - Grand Total (0.08) 17.1.11 The Authority has proposed to consider the same rates of depreciation as applied by AAI for the period up to COD, on the assets transferred by AAI to GIAL for the period from COD to March 31, 2022. Further, the assets added by GIAL have been depreciated based on the useful life prescribed under Order No. 35/ 2017-18 dated January 12, 2018, of AERA. The Authority has proposed the useful life for all the assets of LGBIA post COD as per below table. Table 172: Useful Life proposed by GIAL and the Authority Useful life Useful life proposed by Asset Class submitted by the Authority* GIAL* Terminal Building 25 30 Runway, Taxiway and Apron 20 30 Cargo Building 25 30 Cargo Equipment 8 15 Boundary wall 5 5 Computer Servers, networks, etc. / Software 3 3 Computer End-user devices / IT equipment 3 3 Security equipment 7.5 15 Plant and Machinery 7.5 15 Other buildings 30 30 Access road 10 10 Furniture & fixtures 7 7 Vehicles 5 8 Office Equipment 5 5 *All numbers in years 17.1.12 Accordingly, the depreciation on Aeronautical assets of ₹ 0.33 crores as submitted by GIAL has been revised (post reclassification) to ₹ 0.32 crores, thereby resulting a reduction in depreciation of ₹ 0.01 crores. The following table illustrates the impact on depreciation due to reclassification adjustments in Asset Addition/WIP Capitalization values of GIAL from COD till March 31, 2022. Consultation Paper No. 01/2024-25 Page 229 of 254ANNEXURES Table 173: Impact on Depreciation due to Reclassification of Asset Additions by GIAL and Revised Useful Life as per the Authority from COD till March 31, 2022 (₹ crores) Asset Category as per MYTP Reclassification Impact Furniture & fixtures (0.0001) IT equipment (0.008) Office equipment (0.002) Grand Total (0.010) 17.1.13 Adjustments were also made in the depreciation of the assets handed over to GIAL by AAI for the post COD period, as per the asset reclassification carried out in this Study and the revised useful life as per Table 114. The total impact on depreciation in post COD period due to reclassification of assets has been summarized in the table below. Table 174: Total Impact on Depreciation due to Reclassification of Asset Additions from COD till March 31, 2022 (₹ crores) Particulars Values Impact Depreciation on pre-COD assets as per GIAL 16.50 Depreciation on pre-COD assets after reclassification as per Study 8.83 Impact on Depreciation for pre-COD Assets due to reclassification (7.67) Depreciation on post-COD assets as per GIAL 0.33 Depreciation on post-COD assets after reclassification 0.32 Impact on Depreciation for post-COD Assets due to reclassification and (0.01) revised useful life as per Study Total Impact on Depreciation for all Assets in post-COD period (7.68) 17.1.14 The Adjusted RAB and Depreciation determined by the Authority for the period from COD till March 31, 2022, post reclassifications and other adjustments are as follows: Table 175: Average RAB considered by the Authority from COD till March 31, 2022 (₹ crores) Particulars Amount Adjusted RAB as on COD, transferred to Guwahati International Airport Limited (A)* 158.80 Additions to RAB from COD to March 31, 2022, proposed by GIAL (Refer Para 5.4.3) 2.33 (B) Sub-total (C = A + B) 161.13 Reclassifications on asset additions Furniture & fixtures (D) (0.002) IT equipment (E) (0.049) Office equipment (F) (0.025) Consultation Paper No. 01/2024-25 Page 230 of 254ANNEXURES Particulars Amount Software (G) - Total reclassifications (H) Sum (D : G) (0.08) Adjusted RAB (I = C + H) 161.05 Depreciation on Initial RAB from COD to March 31, 2022, proposed by GIAL (J) 16.83 Adjustment in Depreciation for the period from COD to March 31, 2022 (K) (7.68) Total Adjusted Depreciation for the period from COD to March 31, 2022 (L= J + K) 9.15 Opening RAB as on 1st April’2022 for Third Control Period (M = I – L) 151.90 Average RAB N = (A+M)/2 155.35 * includes Aeronautical assets worth ₹ 155.64 crores and ANS assets worth ₹ 3.16 crores determined as per Study of Asset Allocation for Lokpriya Bordoloi International Airport, Guwahati. 17.1.15 Based on the revision of asset allocation methodology adopted for assets of LGBIA, a revision in the Aeronautical Gross block has been proposed. The year-wise revised value of assets from FY 2016-17 to FY 2020-21 has been summarized in the tables below: Table 176: Revised Gross block of Assets up to COD as per the Study report (₹ in crores) FY22 Particulars FY17 FY18 FY19 FY20 FY21 (up to COD) Aeronautical Gross block (opening) 183.50 273.19 281.84 364.58 395.84 400.19 (A) Non-aeronautical Gross block 23.00 25.39 25.53 27.04 27.64 27.65 (opening) (B) Left Out Assets-Aero (C) 87.88 - - - - - Left Out Assets-Non-Aero (D) 1.88 - - - - - Aeronautical Asset Additions (E)* 9.74 8.73 82.74 31.26 4.35 10.26 Aeronautical Asset Disposals (F)* 7.92 0.08 0.00 0.00 0.00 0.00 Non-Aeronautical Asset Addition 0.50 0.14 1.51 0.60 0.01 0.39 (G)# Aeronautical Gross block (closing) 273.19 281.84 364.58 395.84 400.19 410.44 (H=A+C+E-F) Non-aeronautical Gross block 25.39 25.53 27.04 27.64 27.65 28.04 (closing) (I=B+D+G) Total Gross block (J = H + I) 298.58 307.37 391.61 423.48 427.84 438.48 Aeronautical Ratio - (H/J) 91.50% 91.70% 93.10% 93.47% 93.54% 93.61% Non-Aeronautical ratio - (I/J) 8.50% 8.30% 6.90% 6.53% 6.46% 6.39% * Refer Study of Asset Allocation for Lokpriya Bordoloi International Airport, Guwahati # Refer Annexure V Table 177: Revised Gross block of Assets as on March 31, 2022 as per the Study (₹ in crores) ANS assets Additions Assets transferred Total as on Particulars transferred – Post from AAI on COD March 31, 2022 by AAI COD Aeronautical Gross block (A) 155.64 3.16 2.25 161.05 Non-aeronautical Gross block (B) 7.70 0.08 7.78 Total Gross block (C = A + B) 168.83 Aeronautical ratio 95.39% Non-Aeronautical ratio 4.61% Consultation Paper No. 01/2024-25 Page 231 of 254ANNEXURES 17.1.16 The Gross block of Aeronautical and Non-aeronautical assets as per AAI’s submission, as on October 8, 2021 was ₹ 412.17 crores and ₹ 25.47 crores, respectively. The revised Aeronautical and Non-aeronautical Gross block as on October 8, 2021 for AAI, after the proposed adjustments and reclassifications as per the Study, are ₹ 410.44 crores and 28.04 crores, respectively. 17.1.17 The Net block of the Aeronautical and Non-aeronautical assets transferred by AAI to GIAL as on COD, were considered as addition to the Gross block as on COD for GIAL as per the Study. The Gross Aeronautical assets and Non-aeronautical assets as on March 31, 2022 has been determined as ₹ 161.05 crores and 7.78 crores, respectively. Consultation Paper No. 01/2024-25 Page 232 of 254ANNEXURES 17.2 Annexure 2 - Summary of study on efficient Operation and Maintenance expenses Background 17.2.1 Establishing efficient Operation and Maintenance (O&M) expenses is an essential component in tariff determination for Aeronautical services. The allocation of O&M expenses as Aeronautical and Non- aeronautical expenses depends on the nature of expenses, type of assets which they service, the business function which they are deployed for, the end-user that benefits or avails services from those expenses, and reasonableness of the quantum of such expenses. 17.2.2 Towards this objective, AERA has decided to conduct an independent study on efficient Operation and Maintenance expenses, and their allocation as Aeronautical and Non-aeronautical components in respect of O&M expenses appearing in the extract of the audited trial balance of AAI for the period from FY 2016-17 to October 7, 2021 and the audited financial statements of Guwahati International Airport Limited for the period from October 8, 2021 (Commercial Operation Date (COD)) to March 31, 2022, and the True up workings as submitted to AERA by AAI up to October 7, 2021 and by the GIAL up to March 31, 2022. Comparison of Aeronautical O&M expenses approved as per Tariff Order for the Second Control Period vis-à-vis the actual expenses incurred by AAI and GIAL 17.2.3. The Study compared the Aeronautical O&M expenses as per approved tariff order of Second Control Period (SCP) with actual expenses incurred by both AAI and GIAL and analyzed the reasons for deviation in such O&M expenses. The details of O&M expenses approved as per tariff order and the actuals incurred during the Second Control Period, are shown in the table below: Table 178: Aeronautical O&M expenses of LGBIA for the Second Control Period - Approved vs. Actuals (₹ in crores) Particulars O&M Actuals as Variance Variance Total Actuals as Total Expenses per true-up (D = B-A) (%) Actuals as per true-up Actuals as as per submission (E = D / A) per true-up submission per true-up Tariff of AAI up to submission of GIAL submission Order for FY 21 of AAI till post COD of AAI and SCP (B) COD* till Mar’22 GIAL for (A) SCP till Mar ’22 Employee 160.5 131.82 -28.68 -18% 146.62 18.91 165.53 benefit expenses Administrative & Other 90.1 201.82 111.72 124% 250.25 16.53 266.78 expenses Repairs & Maintenance 89.0 62.42 -26.58 -30% 69.98 9.71 79.69 expenses Utility (Operating) 22.0 26.81 4.81 22% 29.81 2.62 32.44 expenses Other outflows 2.0 3.44 1.44 72% 3.52 0.09 3.62 Total Aeronautical O&M expense 363.6 426.31 62.51 17% 500.19 47.87 548.06 for Second Control Period Consultation Paper No. 01/2024-25 Page 233 of 254ANNEXURES 17.2.4. The Aeronautical O&M expenses approved by the Authority in the Tariff Order for Second Control Period amounted to ₹ 363.80 crores. The actual Aeronautical O&M expenses incurred as per AAI’s True up submission aggregates to ₹ 426.31 crores for Second Control Period. Aeronautical O&M expenses incurred by AAI in FY22 till COD stood at ₹ 73.89 crores. Thereby, the total Aeronautical O&M Expense incurred by AAI in SCP till COD amounted to ₹ 500.19 crores. The total Aeronautical O&M expenses as per GIAL’s True up submission for the period from post COD i.e., October 8. 2021 to March 31, 2022, aggregates to ₹ 47.87 crores. The total Aeronautical O&M expenses of ₹ 548.06 crores incurred as per true up submissions for the Second Control Period excluding FY2021-22, is drastically higher than the amount of ₹ 363.80 crores approved in the Tariff Order, indicating a deviation of 51%. i. It is noted that the major reason for the overall deviation of 51% in the total Aeronautical O&M expenses for the Second Control period, is the increase in the actual CHQ & RHQ expenses incurred by AAI which is higher by 155% till FY21. ii. On an overall basis, the actual employee benefit expenses for second control period are well within the range of values approved by AERA in the Tariff Order for the Second Control Period. Therefore, the employee expenses of AAI for the Second Control Period seem to be reasonable as part of this Study. iii. The A&G expenses incurred during the period significantly exceeded the projections of the Tariff Order. This expense has been examined in detail, and the underlying factors have been rationalized. iv. The Utility expenses expenses have exceeded the projections, primarily due to the rise in electricity expenses. Electricity expenses have increased since power tariff is determined by third-party utility vendors. Given the criticality of these expenditures to the core operations and the external factors influencing them, the actual utility expenses incurred has been considered reasonable for the purposes of this study. v. Repairs & Maintenance expenses, does not include any runway recarpeting expenses and are significantly lower compared to the corresponding expense approved by the Authority for the Second Control Period and hence is proposed to be allowed by the Study. Principles for segregation of costs 17.2.5 This Study segregates the O&M expenses of LGBIA into the following: • Aeronautical expenses: Expenses which are incurred for operation and maintenance of Aeronautical assets have been categorized as Aeronautical expenses. • Non-aeronautical expenses: Expenses which are incurred for operation and maintenance of non-aeronautical assets have been categorized as Non-aeronautical expenses. • Common expenses: Expenses for which the benefits or use cannot be exclusively linked to either Aeronautical or Non-aeronautical activities have been segregated as Common expenses. Expenses primarily incurred for provision of Aeronautical services but are also used for provision of non-aeronautical services are segregated as Common Expenses. Expenses which are used for general corporate purposes including legal, administration, and management affairs are treated as Common Expenses. 17.2.6 The Segregation of the various O&M expenses as per AAI’s submission is as below: Consultation Paper No. 01/2024-25 Page 234 of 254ANNEXURES Table 179: Segregation ratio for O&M expenses as per AAI’s submission Particulars FY 2016- FY 2017- FY 2018- FY 2019- FY FY 2021- 17 18 19 20 2020-21 22 till COD Employee Ratio 98.65:1.35 98.08:1.9 98.84:1.1 98.10:1.9 98.03:1.9 98.60:1.4 (Aeronautical : Non- 2 6 0 7 0 aeronautical) Year-wise specific allocation 95:5 95:5 95:5 95:5 95:5 95:5 ratio for CHQ & RHQ allocation of Admin Expenses (Aeronautical : Non- aeronautical) Year-wise specific allocation 98.65:1.35 98.08:1.9 98.84:1.1 98.10:1.9 98.03:1.9 98.60:1.4 ratio for CHQ allocation of 2 6 0 7 0 Retirement Benefits (Aeronautical : Non- aeronautical) Terminal Building ratio 89.67:10.3 90.5:9.5 90.6:9.4 92.32:7.6 92.81:7.1 92.58:7.4 (Aeronautical : Non- 3 8 9 2 aeronautical) Electricity ratio 84.79: 84.76: 84.74: 84.77: 84.75: 84.52: (Aeronautical : ANS : Non- 15.00: 15.05: 15.08: 15.08: 15.05: 15.19: aeronautical) 0.21 0.19 0.18 0.16 0.20 0.29 Staff Quarters ratio 49.11: 52.94: 60.83: 65.81: 64.58: 59.21: (Aeronautical : ANS : Non- 50.89: 46.08: 38.33: 33.33: 35.42: 40.79: aeronautical) 0 0.98 0.83 0.85 0 0 Vehicle Ratio 74.07: 75.86: 77.14: 82.6 : 83.33: 80.00: (Aeronautical : ANS : Non- 18.52: 17.24: 17.14: 13.04: 12.50: 15.00: aeronautical) 7.41 6.90 5.71 4.35 4.17 5.00 Details of adjustment to O&M expenses 17.2.7 The study on the basis of the expense classification and principles of segregation adopted, as can be seen in the above paragraphs, has considered re-segregation of Operation and Maintenance expenses to determine Aeronautical O&M costs. The study has proposed the following ratios: Table 180: Revised segregation ratio for O&M expenses as per the study FY’22- Particulars FY’17 FY’18 FY’19 FY’20 FY’21 COD Terminal Building Ratio 89.02% 89.02% 89.02% 89.02% 89.02% 89.02% Gross Fixed Assets ratio 91.50% 91.70% 93.10% 93.47% 93.54% 93.61% Employee Ratio 90.35% 89.53% 91.56% 90.59% 90.59% 90.10% 17.2.8 Based on the reclassification and change in allocation ratio, the Study has proposed the revised Aeronautical O&M expenses for the period FY 2016-17 up to COD as summarized in the table below: Consultation Paper No. 01/2024-25 Page 235 of 254ANNEXURES Table 181: O&M expenses submitted by AAI and as per Study for the SCP and pre-COD Period (₹ in crores) O&M expenses FY FY FY FY FY Total FY Total 2016-17 2017- 2018- 2019-20 2020-21 till 2021- till 18 19 FY21 22* COD O&M Expenses as per AAI Employee benefit / 16.64 24.02 32.05 32.42 26.69 131.82 14.80 146.62 Payroll Administrative and 13.95 35.45 42.92 59.68 49.81 201.82 48.43 250.25 General Repairs & 7.72 15.56 12.90 13.97 12.26 62.42 7.57 69.98 Maintenance Utilities & 4.46 5.03 6.05 6.16 5.12 26.81 3.00 29.81 Outsourcing Other Outflows 0.73 0.91 0.78 0.94 0.09 3.44 0.08 3.52 Total 43.49 80.97 94.70 113.17 93.97 426.29 73.88 500.19 O&M Expenses as per Study Employee benefit / 16.62 24.00 32.05 32.37 26.62 131.66 14.78 146.44 Payroll Administrative and 23.56 29.71 35.36 52.05 44.03 184.70 24.99 209.69 General Repairs & 7.63 15.37 12.82 13.81 12.03 61.66 7.33 68.99 Maintenance Utilities & 4.45 5.02 6.03 6.12 5.10 26.72 2.99 29.71 Outsourcing Other Outflows 0.73 0.91 0.78 0.94 0.09 3.44 0.08 3.52 Total 52.97 75.01 87.03 105.28 87.86 408.16 50.17 458.34 Impact 9.48 (5.96) (7.67) (7.89) (6.11) (18.13) (23.71) (41.84) * Up to COD (October 8, 2021) 17.2.9 The table below provides a summary of submission of GIAL, revision of OPEX as part of this study and net impact for the period 8th October 2021 to 31st March 2022: Table 182: Impact of proposed reallocation of GIAL’s Aeronautical O&M expenses (₹ in crores) Particular GIAL Submission Study Net Impact Total Aero % Aero Allocation Aero Expense Expense Basis Expense Manpower expenses - AAI 14.19 100% 14.19 Common (ER- 14.08 (0.11) employees AAI) Manpower expenses - 4.72 100% 4.72 Common (ER- 4.48 (0.24) GIAL employees GIAL) Utility expenses 2.62 100% 2.62 Aeronautical 2.62 0.00 IT expenses 1.49 100% 1.49 Common (ER- 1.41 (0.08) GIAL) Rates & taxes 0.32 100% 0.32 Common (GB) 0.31 (0.01) Security expenses 1.37 100% 1.37 Aeronautical 1.37 0.00 Corporate Allocation 4.24 100% 4.24 Common (ER- 4.00 (0.24) GIAL) Less: Legal Expenses Consultation Paper No. 01/2024-25 Page 236 of 254ANNEXURES Particular GIAL Submission Study Net Impact Total Aero % Aero Allocation Aero Expense Expense Basis Expense Administrative Expenses - 0.09 100% 0.09 Aeronautical 0.09 0.00 Collection Charges on UDF Administrative Expenses - 3.58 100% 3.58 Common 3.42 (0.16) Others (TB/ER/GB) Insurance 0.99 100% 0.99 Common (GB) 0.94 (0.05) R&M 9.71 100% 9.71 Common 9.29 (0.42) (TB/ER/GB) Others 2.83 100% 2.83 Common (TB) 2.52 (0.31) Independent Engineer Fees 1.69 100% 1.69 Aeronautical 1.69 0.00 Total 47.87 47.87 46.22 (1.65) TB – Terminal Building Ratio ER – Employee Ratio GB – Gross Block Ratio Rationalisation of O&M expenses 17.2.10 Based on the Internal Benchmarking analysis, it was observed that the Operation and Maintenance expenses for LGBIA for the period from FY 2017-18 to FY 2020-21 are higher than normal operating efficiency levels, as mentioned below: i. The key reason of such higher growth in O&M expenses is mainly due to pay scale revision and arrears disbursement to Guwahati Airport employees as per 7th Pay Commission report and increase in CHQ/RHQ allocation due to pay revision, inflation, and increase in revenues of Guwahati station. 17.2.11 It is proposed to rationalize such expenses to determine the efficient Aeronautical O&M expenses for the period from FY 2016-17 to FY 2021-22. Efficient Aeronautical O&M expenses 17.2.12 The year-wise summary of the reclassification and other adjustments to O&M expenses is provided in the table below. Table 183: Year-wise summary of reclassification and other adjustments to Aero O&M expenses (₹ crores) Particulars FY FY FY FY FY FY Total FY Total 2016-17 2017-18 2018-19 2019-20 2020-21 2021- till 2021- till 22* COD 22# Mar’22 O&M expenses as per true up submission of 43.50 80.96 94.70 113.17 93.98 73.89 500.19 47.87 548.06 AAI and GIAL (A) O&M expenses as per Study Employee 16.62 24.00 32.05 32.37 26.62 14.78 146.44 18.56 165.00 benefit expenses Administrative 23.56 29.71 35.36 52.05 44.03 24.99 209.69 13.20 222.89 and other expenses Consultation Paper No. 01/2024-25 Page 237 of 254ANNEXURES Particulars FY FY FY FY FY FY Total FY Total 2016-17 2017-18 2018-19 2019-20 2020-21 2021- till 2021- till 22* COD 22# Mar’22 Utilities and 4.45 5.02 6.03 6.12 5.10 2.99 29.71 2.62 32.33 Outsourcing expenses Repairs & 7.63 15.37 12.82 13.81 12.03 7.33 68.99 9.29 78.28 Maintenance expenses 0.73 0.91 0.78 0.94 0.09 0.08 3.52 2.55 6.07 Other Outflows 52.99 75.01 87.04 105.29 87.87 50.17 458.34 46.22 504.57 Total (B) Impact (B - A) 9.49 (5.95) (7.66) (7.88) (6.11) (23.72) (41.84) (1.65) (43.49) * Up to the date of COD (October 8, 2021) # From COD till March 31. 2022 17.2.13 Based on the reallocation of the O&M expenses, the downward adjustment in the Aeronautical O&M expenses for the period from FY2016-17 to FY2020-21 is ₹ 41.84 crores, and for the period from April 01, 2021 till October 8, 2021 (COD) is ₹ 1.65 crores. The total downward adjustment in the Aeronautical O&M expenses for the period from FY2016-17 till COD is ₹ 43.49 crores and the reallocated Aeronautical O&M expenses for the period FY 2016-17 to October 8, 2021, has been determined as ₹ 504.57 crores. The Aeronautical O&M expenses for the period from FY 2016-17 till COD is reduced by 7.93%. 17.2.14 As per the submission of GIAL the total Aeronautical O&M expenses for the period from COD to March 31, 2022, was ₹ 47.87 crores. Based on the reallocation of the O&M expenses, the downward adjustment in the Aeronautical O&M expenses for the aforesaid period is ₹ 1.65 crores and the reallocated Aeronautical O&M expenses (prior to rationalization) for the period from COD to March 31, 2022 has been determined as ₹ 46.22 crores. The Aeronautical O&M expenses for the period from COD up to March 31, 2022 is reduced by 3.45%. Consultation Paper No. 01/2024-25 Page 238 of 254ANNEXURES 17.3 Annexure 3 – Clauses of the Concession Agreement entered between AAI and GIAL 17.3.1. The Airports Authority of India (AAI) entered into a Concession Agreement with Guwahati International Airport Limited (GIAL) on January 19, 2021, for the Operation, Management and Development of LGBIA for a period of 50 years from the Commercial Operation Date (COD) i.e., October 8, 2021 in accordance with the terms and conditions mentioned in the Concession Agreement. 17.3.2. The relevant Clause of the Concession Agreement may be read as under: 3.1.1. “Subject to and in accordance with the provisions of this Agreement, Applicable Laws and the Applicable Permits, the Authority hereby grants to the Concessionaire, the concession set forth herein including the exclusive right, lease and authority to operate, manage and develop the Airport ("Concession") for a period of 50 (fifty) years commencing from the COD, and the Concessionaire hereby accepts the Concession and agrees to implement the Project subject to and in accordance with the terms and conditions set forth herein”. 3.1.2. Subject to and in accordance with the provisions of this Agreement, the Authority, Applicable Laws and the Applicable Permits, the Concession hereby granted shall oblige or entitle (as the case may be) the Concessionaire to: (a) the Right of Way, access and lease to the Site for the purpose of and to the extent conferred by the provisions of this Agreement. (b) finance the development and expansion of the Airport. (c) operate, maintain and manage the Airport and regulate the use thereof by third parties. (d) demand, collect and appropriate Fee from Users liable for payment of Fee for using the Airport or any part thereof and refuse entry of any such User if the Fee due is not paid. (e) perform and fulfil all of the Concessionaire' s obligations under and in accordance with this Agreement. (f) save as otherwise expressly provided in this Agreement, bear and pay all costs, expenses, Taxes and charges in connection with or incidental to the performance of the obligations of the Concessionaire under this Agreement; and (g) neither assign, transfer or create any lien or encumbrance on this Agreement, or the Concession hereby granted or on the whole or any part of the Airport nor trans fer, or part possession thereof, save and except as expressly permitted by this Agreement or the Substitution Agreement. 27.1.1. Subject to Clause 27.3, the Concessionaire agrees to pay to the Authority, during the Concession Period, a monthly concession fee calculated as follows (the "Monthly Concession Fee"): Consultation Paper No. 01/2024-25 Page 239 of 254ANNEXURES Where: "Per Passenger Fee for Domestic Passengers" means ₹ 160 (Rupees One Hundred and Sixty), as may be revised pursuant to Clause 27.3; "Per Passenger Fee for International Passengers" means 2 (two) times the Per Passenger Fee for Domestic Passengers; "Domestic Passenger Throughput" for any month shall mean the total domestic Passenger Traffic (embarking and disembarking passengers) as provided by the Authority by the 7th (seventh) day of the subsequent month in the form and manner as may be specified by the Authority from time to time. "International Passenger Throughput" for any month shall mean the total International Passenger Traffic (embarking and disembarking passengers) as provided by the Authority by the 7th (seventh) day of the subsequent month in the form and manner as may be specified by the Authority from time to time. Provided further that, in the first and that last month of the Concession Period,the International Passenger Throughput and Domestic Passenger Throughput shall be pro-rated by the number of the days in such months as reckoned with respect to the COD or Transfer Date, as relevant. 27.1.2. The Monthly Concession Fee paid/ payable by the Concessionaire to the Authority under and pursuant to the terms of this Agreement shall not be included as a part of costs for provision of Aeronautical Services and no pass-through would be available in relation to the same. 20.1.1 The Concessionaire acknowledges and agrees that only the Designated GOI Agencies are authorized to undertake the following services ("Reserved Services") at the Airport: (a) CNS/ATM Services; (b) security services; (c) meteorological services; (d) mandatory health services; (e) customs control; (f) immigration services; (g) quarantine services; (h) any other services, as may be notified by GOI; Provided that, subject to the Applicable Laws and the Applicable Permits, Consultation Paper No. 01/2024-25 Page 240 of 254ANNEXURES nothing in this Agreement shall restrict the Authority from requiring the Concessionaire to undertake any or all of the Reserved Services on such terms and conditions as may be mutually agreed between the Parties. 17.3.3. The relevant portion of Schedule T which pertains to the list of capital expenditure contracts already awarded by AAI and handed over to GIAL and Schedule U which pertains to the list of capital expenditure projects proposed / planned by AAI but not yet awarded and forming part of the terms of the Concession Agreement are given below: SCHEDULE T EXISTING CONTRACTS Consultation Paper No. 01/2024-25 Page 241 of 254ANNEXURES OPERATIONS CONTRACTS MAINTENANCE CONTRACTS Consultation Paper No. 01/2024-25 Page 242 of 254ANNEXURES Consultation Paper No. 01/2024-25 Page 243 of 254ANNEXURES DETAILS OF ONGOING CAPITAL WORK-IN-PROGRESS AND THEIR LIKELY POSITION IN 30.06.2019 AT THE AIRPORT Consultation Paper No. 01/2024-25 Page 244 of 254ANNEXURES Consultation Paper No. 01/2024-25 Page 245 of 254ANNEXURES OTHER WORKS (CIVIL) LAND LEASES AT THE AIRPORT Consultation Paper No. 01/2024-25 Page 246 of 254ANNEXURES SCHEDULE U List of Works Proposed by the Authority: Consultation Paper No. 01/2024-25 Page 247 of 254ANNEXURES 17.3.4. Carved-out Area - Annexure IV of Schedule A to the Concession Agreement provides details of the carved-out area for Cargo Terminal. Annex IV (Schedule A) (See Clause 10.1) Carved Out Assets and Areas It is clarified that the Site and Project Assets shall not include the following: SL. ASSET AREA OF LAND NO. IN SQ.M. (Approx.) 1. ATC TOWER 1,650 2. AAI OFFICES (OLD AAI OFFICE + INTEGRATED 21,00 OFFICE COMPLEX) 3. IOCL STAFF QUARTERS 15,100 4. MET OFFICE 6,100 5. TEMPORARY CARGO SHED 850 6. COMMON USE DOMESTIC CARGO TERMINAL 2,400 (CUDCT) 7. PROPOSED CUDCT -2 COMPLEX 6,000 8. AIDC CENTRE FOR PERISHABLE CARGO (CPC) 4,050 (Assam Industrial Development Corp.) 9. ADDITONAL LAND REQUIRED FOR CPC 4,050 10. EXISTING AIRLINE CARGO 1,300 11. MSSR (RADAR) 3,400 12. PROPOSED ATC CUM TECHNICAL BLOCK 8,150 13. PROPOSED AAI COLONY 40,500 TOTAL 1,14,750 Sq.m. (28.40 Acres.) 17.3.5. Clause 19.4.1. of the Concession Agreement relating to obligations of GIAL towards cargo facilities is reproduced below- (a) The Concessionaire shall upgrade, develop, operate and maintain the Cargo Facilities in accordance with the provisions of this Agreement, Applicable Laws, Applicable Permits, relevant ICAO Documents and Annexes and Good industry Practice. (b) Notwithstanding anything to the contrary provided in this Clause 19.4 and Clause 23.5, it is clarified that, where Cargo Facilities have been earmarked for AAICLAS in Schedule A (i) the Concessionaire will not be responsible for operations, development, maintenance and management thereof, nor shall the Concessionaire be bound by the obligations set out elsewhere in this Clause 19.4; and (ii) AAICLAS shall be granted access to the airside by the Concessionaire free of cost. (c) It is further clarified that, where Cargo Facilities have been earmarked for AAICLAS Consultation Paper No. 01/2024-25 Page 248 of 254ANNEXURES in Schedule A, there shall be no restriction on the upgradation and/ or development of Cargo Facilities by the Concessionaire, including on grounds of quantum of cargo volumes at the Airport, business potential or impact of such additional facilities on Cargo Facilities earmarked for AAICLAS. 17.3.6. Clause 19.2. relating to GIAL’s obligation towards Ground Handling Services is given below: “The Concessionaire shall provide or cause to be provided as per Applicable Laws and Good Industry Practice, at its own cost and expense, the infrastructure required for operation of the ground handling services required at the Airport for and in respect of the Users, like aircrafts, passengers and cargo, which shall include ramp handling, traffic handling, aircraft handling, aircraft cleaning, loading and unloading ("Ground Handling Services"). Such infrastructure shall include luggage conveyor belts, computer terminals, information technology backbone and associated facilities in accordance with the provisions of this Agreement, Applicable Laws and Good Industry Practice.” 17.3.7. The Clause 19.3. of the Concession Agreement is related to GIAL’s obligations towards providing aircraft fueling services, which has been reproduced below: “The Concessionaire shall provide, or cause to be provided, the infrastructure required for operation of fuelling services on equal access basis for all the aircrafts at the Airport in a transparent and non-discriminatory manner. Such infrastructure shall include tank farms and associated facilities in accordance with the provisions of this Agreement, Applicable Laws and Good Industry Practice.” 17.3.8. As per the Concession Agreement, the Estimated Deemed Initial RAB as on March 31, 2018, was determined to be ₹ 69 crores, which was due and payable by the Concessionaire to AAI. The terms of the Concession Agreement also provide for the value of ₹ 69 crores to be subject to reconciliation, True up and final determination by AERA. The extract of the relevant clauses from the Concession Agreement shall be read as under: Clause 28.11.3 states that: a) It is agreed by the Parties that the Concessionaire shall be liable to pay to the Authority an amount equivalent to the investments made by the Authority in the Aeronautical assets as of the COD and considered by the Regulator as part of the Regulatory Asset Base, subject to requisite reconciliation, true-up and final determination by the Regulator of the quantum of such investment (“Deemed Initial RAB”). b) The estimated depreciated value of investments made by the Authority in the Aeronautical assets at the Airport as on March 31, 2018, is ₹ 69,00,00,000 (Rupees Sixty Nine Crore) (“Estimated Deemed Initial RAB”). It is agreed by the Parties that the Estimated Deemed Initial RAB shall be due and payable by the Concessionaire to the Authority within 90 (ninety) days of COD. Clause 28.11.4 states that: Pursuant to the payment of the Estimated Deemed Initial RAB, and upon the reconciliation, true-up and final determination by the Regulator of the quantum of the investment under 28.11.3(a). any surplus or deficit in the Estimated Deemed Initial RAB with respect to the Deemed Initial RAB shall be adjusted as part of the Balancing Payment that becomes due and payable as per Clause 31.4 after the expiry of 15 (fifteen) days from such final determination by the Regulator, with due adjustment for the following ("Adjusted Deemed Initial RAB'"): Consultation Paper No. 01/2024-25 Page 249 of 254ANNEXURES a) reduced to the extent of over-recoveries, if any, of Aeronautical Revenues by the Authority until the COD, that the Regulator would provide for as a downward adjustment while determining Aeronautical Charges for the next Control Period; or b) increased to the extent of under-recoveries, if any, of Aeronautical Revenues by the Authority until the COD, that the Regulator would provide for as an upward adjustment while determining Aeronautical Charges for the next Control Period. The amount(s) to be paid by the Authority or Concessionaire shall be the present value of Adjusted Deemed Initial RAB calculated using the fair rate of return as determined by the Regulator for the time period from the COD to the date of actual payment of the Adjusted Deemed Initial RAB. Clause 28.11.5 states that: Upon reimbursement of such amount by the Concessionaire to the Authority, the Deemed Initial RAB will, in addition to the investments made by the Concessionaire, be considered for the purpose of determination of Aeronautical Charges by the Regulator. a) The Authority undertakes to make any required supporting submissions to the Regulator towards such consideration and determination by the Regulator. b) The Parties shall submit to and request the Regulator to separately identify the Deemed Initial RAB in future determinations of Aeronautical Charges with regard to consideration of depreciation, required returns, etc. 17.3.9. Clause 5.1.1 of the Concession Agreement which states that “Subject to and on the terms and conditions of this Agreement, the Concessionaire shall, at its own cost and expense, procure finance for and undertake the operations, management and development of the Airport, in accordance with the provisions of the Applicable Permits, Applicable Laws, this Agreement and observe, fulfil, comply with and perform all its obligations set out in this Agreement or arising hereunder”. 17.3.10. The relevant clause (6.4.5) of the Concession Agreement relating to GIAL’s obligation regarding CWIP handed-over by AAI as on COD and as set forth in Schedule T, has been reproduced below- “Notwithstanding anything to the contrary in this Clause 6.4, the Concessionaire shall be liable to pay to the Authority such amounts as may have been incurred by the Authority as on the COD in respect of the contracts relating to works-in-progress as have been set forth in Schedule T. Such amounts shall be intimated by the Authority with supporting documents and details within 30 (thirty) days of COD and shall be due and payable by the Concessionaire the Authority within a period of 90 (ninety) days thereon. The Parties shall constitute a committee comprising representatives of the Concessionaire, Authority and each of the counterparties under such contracts, which committee shall be responsible for: (a) facilitating any discussions and/ or interactions amongst AAI, the Concessionaire and the counterparties under such contracts, including in respect of any modifications to the works and (b) coordinating, facilitating, and monitoring the progress of such works-in-progress. The Consultation Paper No. 01/2024-25 Page 250 of 254ANNEXURES Concessionaire shall be responsible to incur any additional cost towards completion of such work-in-progress assets after COD. Upon reimbursement by the Concessionaire to the Authority, of amounts as may have been incurred by the Authority as on the COD for such work-in-progress assets as provided for above, and completion of such works-in-progress by the Concessionaire, such works-in-progress assets shall form part of the Airport. The amounts reimbursed by the Concessionaire to the Authority and additional amounts incurred by the Concessionaire for completion of such work-in-progress assets shall be considered as investments made by the Concessionaire in creation of such assets for the purpose of determination of Aeronautical Charges by the Regulator. In the event that any part of the amounts reimbursed by the Concessionaire to the Authority pursuant to this Clause 6.4.5 are not considered for pass-through by the Regulator due to any act or omission on the part of the Authority, the adjustment towards any differences in the amounts reimbursed by the Concessionaire to the Authority and the amounts considered for pass-through by the Regulator shall be undertaken as part of the Balancing Payment that becomes due and payable as per Clause 31.4 immediately after the determination of the Aeronautical Charges by the Regulator.” 17.3.11. The relevant clause 4.1.3. (h) of the Concession Agreement relating to GIAL’s obligation regarding Conditions Precedent required to be satisfied within 180 days of the agreement relating to works proposed by AAI and as set forth in Schedule U, has been reproduced below- Except as may have been specifically otherwise provided in this Agreement, the Conditions Precedent required to be satisfied by the Concessionaire within a period of 180 (one hundred and eighty) days from the date of this Agreement shall be deemed to have been fulfilled, when the Concessionaire shall, subject to the satisfaction of the Authority, have - (h) delivered to the Authority – (a) a list of Construction works it proposes to undertake in the first 7 (seven) Concession years having due regard to the works: a. Currently being implemented by the Authority; and b. Proposed to be implemented by the Authority as on the date of signing the Agreement and (as set forth in Schedule U), (b) the scheduled date for completion of such Construction works. 17.3.12. The relevant Clauses relating to the Independent Engineer’s appointment, duties & functions and remuneration are reproduced below: Clause 24.1 Appointment of Independent Engineer 24.1.1 The Authority (AAI) and the Concessionaire shall appoint a consulting engineering firm substantially in accordance with the selection criteria set forth in Schedule K, to be the independent consultant under this Agreement ("Independent Engineer"). The Independent Engineer shall be appointed in accordance with the provisions of Schedule K. 24.1.2 The appointment of the Independent Engineer shall be made within 90 (ninety) Consultation Paper No. 01/2024-25 Page 251 of 254ANNEXURES days of the date of execution of this Agreement, and such appointment shall be valid for a period of 3 (three) years. On the expiry or termination of the said appointment, the Authority shall appoint an Independent Engineer for a further term of 3 (three) years in accordance with the provisions of Schedule K, and such procedure shall be repeated after expiry of each appointment. Clause 24.2. Duties and Functions 24.2.1 The Independent Engineer shall discharge its duties and functions substantially in accordance with the terms of reference set forth in Schedule L. 24.2.2 The Independent Engineer shall submit regular periodic reports (at least once every month) to the Authority in respect of its duties and functions set forth in Schedule L. 24.2.3 A true copy of all communications sent by the Authority to the Independent Engineer and by the Independent Engineer to the Authority shall be sent forthwith by the Independent Engineer to the Concessionaire. 24.2.4 All communications required to be sent by the Independent Engineer to the Concessionaire shall be undertaken through the Authority. Clause 24.3 Remuneration 24.3.1 The remuneration, cost and expenses of the Independent Engineer shall be paid by the Authority, and all such remuneration, cost and expenses shall be reimbursed by the Concessionaire to the Authority within 15 (fifteen) days of receiving a statement of expenditure from the Authority. Any amounts paid to the Independent Engineer shall be considered for a pass-through for the determination of the Aeronautical Charges by the Regulator. 17.3.13. The relevant Paras relating to Role and functions of the Independent Engineer as stated in Schedule L of the Concession Agreement are reproduced below: 3. Role and functions of the Independent Engineer 3.1 The role and functions of the Independent Engineer shall include the following: (a) review of the designs, drawings, and documents as set forth in Paragraph 4. (b) review, inspection and monitoring of Construction Works as set forth in Paragraph 4. (c) reviewing and witnessing the Tests on completion of construction and assisting the Authority in issuing Completion Certificate/ provisional certificate as set forth in Paragraph 4. (d) review, inspection and monitoring of O&M as set forth in Paragraph 5. (e) review, inspection and monitoring of Divestment Requirements as set forth in Paragraph 6. (f) determining, as required under the Agreement, the costs of any works or services and/or their reasonableness. (g) determining, as required under the Agreement, the period or any extension thereof, for Consultation Paper No. 01/2024-25 Page 252 of 254ANNEXURES performing any duty or obligation. (h) assisting the Parties in resolution of Disputes as set forth in Paragraph 8. (i) undertaking all other duties and functions in accordance with the Agreement; and (j) assisting the Concessionaire in determining the Scheduled Completion Dates and Phase Milestones. 3.2 The Independent Engineer shall discharge its duties in a fair, impartial and efficient manner, consistent with the highest standards of professional integrity and Good Industry Practice. Consultation Paper No. 01/2024-25 Page 253 of 254APPENDICES 18 APPENDICES I. Appendix I - Study on Allocation of Assets for Lokpriya Gopinath Bordoloi International Airport, Guwahati (Second Control Period: FY 2016-17 – FY 2020-21 & FY 2021-22) II. Appendix II – Study on Efficient Operation and Maintenance Expenses for Lokpriya Gopinath Bordoloi International Airport, Guwahati (Second Control Period: FY 2016-17 – FY 2020-21 & FY 2021-22) Consultation Paper No. 01/2024-25 Page 254 of 254