Annexure II - AERA

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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
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tscntta CCIAA II 27/0912001 REA 987