Annexure II - AERA

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NERA Economic Consultinq • Real estate activities (except hotels). On the. contrary, commercial activities that are excluded from the regulatory till are : • Retail activities (such as profits accrued by World Duty Free); • Real estate activities (only hotels). Annexure II-B CP No. 9/2013-14/T-12023(14)/1/2012- Tariff- Vol - III Annexure II-B Page 38 of 51 21
NERA Economic Consulting NERA Via Basento 37 Economic Consulting 2nd Floor Rome 00198, Italy Tel: +39 064888101 Fax: +39 06 485838 www.nera.com 1. Introduction LAND TREATMENT 28 March 2011 On January 2011, AERA (the Airport Economic Regulatory Authority) issued the Order No. 13/2010-11 which states that: "the scope of the RAE is that, in normal course, all airport assets will come under the scope of the single till. However, the Authority may, based on due consideration of relevant factors, exclude certain assets from the scope of RAE, provided that if such assets are integral to the airport, the Authority may decide not to exclude them from the scope of RAE. This approach is reasonable as it treats the airport as one business yet at the same time enables the Authority to insulate the users from non related activities, ifany, undertaken by the airports by suitably ring fencing the relevant assets'.' The Order provides the principles governing ring fencing to be followed by AERA: "Normally, the land is given free or on highly concessional terms by the government to the airport operator. (...) In many cases, the land is much in excess of the requirements purely for the airport development. The Authority also understand that the excess land is given by the government to make the airport viable and attractive as a worthwhile investment especially for the private investors who can exploit the land for the purposes of airport development. The Authority is mandated by the Act to ensure the financial viability of the airports. Hence it would be giving Fair Rate of Return to the investors on the capital, consistent with the risk profile of the airport in question. (. ..) The Authority thus considers that the benefits of land exploitation should go to the passengers and cargo facility users in terms ofmoderating the aeronautical charges. (. ..) It would not be feasible for the Authority to prescribe treatment for all such different forms of land transfers/alienation. After deliberating on all these factors, the Authority considers that the best way to capture the benefits of land exploitation for moderating the aeronautical charges is to make suitable adjustments itself It would therefore take into account the valuation of land (and any asset thereon) See article 7.2 of Order No . 13/2010-11 issued by AERA NERASrl tscntta CCIAA II 27/0912001 REA 987
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Annexure II - AERA

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