Annexure II - AERA

a. Land LeaseAgreement
As per Clause 3.1 (a) of the Land Lease Agreement dated 30th
September,2003, the land is permitted to be used for the purpose of
construction of Airport as per the provisions of the Concession Agreement
i.e. Project as defined therein.
As per Clause 3.1 (b) the land also has been permitted to use for other
commercial purposes including but not limited to the following:
"hotels, resorts, flight catering, air craft maintenance, cargo and logistics
centre, convention centre, golf courses, recreation and entertainment
facilities, industrial facilities, fuel farms, terminalling facilities, power plants,
storage and processing terminals, water treatment facilities, commercial
and residential complexes and to undertake any other lawful commercial
activity at the Airport. II
Thus it is clear that the purpose of land lease is twofold i.e. for (a) Airport
and (b) Non-Airport activities.
Hence, as per the provisions of the AERA Act, the Regulator is authorised to
determine charges pertaining to the aeronautical charges at the Airport and
as such the Regulator has no jurisdiction over the Non-Airport activities.
b. GoAP position on land
Annexure II-B
We understand that the Govt. of AP has written to AERA clarifying its
position on the Equity IRR and utilization of land broadly as under.
i. GoAP has categorically clarified that article 10 (3) of the Concession
Agreement gives the right to HIAL to set tariffs for non-airport facilities
and services. The concession does not envisage cross subsidy of Non­
Airport revenues to defray aeronautical charges.
ii. GoAP also clarified that Cargo, Ground Handling and Fuel should not be
regulated. GoAP also clarified that under clause 2.3b(i) of State Support
Agreement, its necessary to maintain an Equity Internal Rate of Return
of 18.33%. It was further clarified that 18.33% was not a cap on the
return on equity.
iii. GoAP also clarified that the land given was for the economic and social
development of the state and by reducing its market value from the
RAB, the desired objective will not be achieved.
CP No. 9/2013-14/T-12023(14)/1/2012- Tariff- Vol - III Annexure II-B Page 9 of 51
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