Association of Private Airport Operators(APAO - AERA

12 CPI-X
Association ofPrivate Airport Operators
Response to A E/lA's Consultation Paper No. 321201/-/ 2 tlt, 03 Jail 20/2 Oil
determinution ofAeronautical Tarittin resoect ofIGI Alroort. New Delhi
12.1 The actual approach and methodology used by the Authority for determination ofX
(Escalation Factor) is not clearfrom the consultation paper.
29tll February 20/2
12.2 The tariff at 101 Airport is determined using the shared till inflation - X price cap
model. In the approach, the Authority determines the X Factor that equates the present
value of the target revenue over the regulatory period with the present value that results
from applying the forecast traffic volume with a price path based on the initial average
aeronautical charge, increased by Cl'I - X for each year.
12.3 The maximum average aeronautical charge in a particular year i is calculated as, AC j =
AC-I X (1 + CPI - X)
12.4 The X Factor is then calculated, as mentioned in point 2, using the following
equation,
II 11 III
RBj,l{WAc q '" OMj + J[)j+T 1" S. = 1: 1: ACjJxTij
I
(1+ WACq)i 1"'1 j...1 (l ot- WACJ:W
12.5 DIAL had submitted to the Authority that they did not consider any inflationary
increase and had assumed that the regulator would adjust the charges annually based on
the actual Cl'I data. DIAL provided a 5 year forecast of CPI-IW at 7% per annum based
on Survey of Professional Forecasters as published by RBI on its website.
12.6 The actual approach and methodology used by the Authority is not clear from the
consultation paper.
12.7 While the details of the methodology used by the Authority are not available, it is
expected that the Authority would provide adequate allowance for inflation in its
determination of tariff. It is proposed that the Authority may estimate the initial tariff
based on X Factor. The tariffs can then be adjusted for inflation annually based on the
initial tariff estimated using the X Factor.
12.8 Conclusion: APAO would request the Authority to provide details on its treatment
of inflation for the components in the price cap model and the resultant estimation
of X Factor. It is proposed that the Authority may estimate the initial tariff based
on X Factor. The tariffs can then be adjusted for inflation annually based on the
initial tariff estimated using the X Factor.
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