Annexure II CP 14-13-14 PDF

Annexure II
BANGALORE INTERNATIONAL AIRPORT LIMITED

Multi-Year Tariff Proposal FY2011-12 to FY2015-16
and Business Plan FY2011-12 to FY2020-21:
Financial Statements and Assumptions
Till mechanism adopted for tariff determination: Dual till
Submitted to the Airport Economic Regulatory

Authority (AERA)
September 2011
CP No. 14/2013-14- MYTP & ATP- BIAL-CP
Annexure II Page 1 of 381
MYTP - Financial statements and assumptions
Annexure II
Table of contents
1
Approach and consideration ....................................................................... 4

1.1
Approach .......................................................................................... 4
1.2
Consideration and applicability................................................................ 4
Financial statements ................................................................................ 5

2.1
Financials Aggregated ......................................................................... 5
2.2
Financials Aero ................................................................................. 8
2.3
Financials Non-Aero ........................................................................... 9
2.4
Calculated Aggregate Revenue Requirements (ARR) ...................................... 10
Assumptions .......................................................................................... 11
3.1
Bifurcation of Aero and Non-Aero assets and costs ........................................ 11
3.2
Capex assumptions ............................................................................. 11
3.3
WPI and CPI ...................................................................................... 11
3.4
Fair Return of Return (FRoR).................................................................. 12
3.5
Traffic ............................................................................................ 12
3.6
Service Quality parameters ................................................................... 12
3.6.1
Objective parameters .................................................................... 12
3.6.2
Subjective parameters ................................................................... 13
3.7
Revenue .......................................................................................... 13
3.7.1
Regulated charges......................................................................... 13
3.7.2
Other charges Aviation concession and non-aviation revenues ................... 13
3.8
Operating cost .................................................................................. 13
3.8.1
Personnel Expense ........................................................................ 13
3.8.2
O&M Costs .................................................................................. 14
3.8.3
Concession fee ............................................................................. 14
3.8.4
Lease rent .................................................................................. 14
3.8.5
Utilities ..................................................................................... 14
3.8.6
Insurance ................................................................................... 14
3.8.7
Marketing, Advertising & Others ........................................................ 14
3.8.8
OMSA fee ................................................................................... 14
3.8.9
General Administration Costs............................................................ 14
3.9
Treatment of Real estate business ........................................................... 14
Bangalore International Airport Limited (BIAL)

Page 2 of 18
Annexure II
List of Annexure
Annexure
Annexure
Annexure
Annexure
1: Auditor's certificate for bifurcation of fixed assets and costs ....................... 15

2: Revised Master Plan ....................................................................... 16
3: Traffic forecasts for Aviation Activity Forecasts by L&B ............................. 17
4: Audited Financial Statements ............................................................ 18

Page 3 of 18
Annexure II
1 Approach and consideration

1.1 Approach
The Bangalore International Airport Limited (BIAL) is governed by provisions of the provisions
of the Concession Agreement (C.A.) entered into between the Ministry of Civil Aviation,
Government of India and Bangalore International Airport Limited (BIAL) on 5th July 2004.The
details of the Business Plan of BIAL, as presented here, are based on the considerations
provided for in the C.A., Detailed Project Report and the related Project Financials, which
were duly acknowledged by the Government of Karnataka at the time of entering into the
State Support Agreement with BIAL.
In the Business Plan, the regulated charges include Landing Charges, Parking Charges,
Passenger Service Fee (PSF) and Users Development Fee (UDF). The rest of the revenues items
are classified as non-regulated charges such as Aviation Concessions, retail, commercial,
among others. Further, C.A. does not provide for any cross-subsidization of non-regulated
charges for determining the tariff of regulated charges. Therefore, the financial statements
and assumptions are developed taking this approach and the details of the formats, as
required under MYTP, are presented in this document.
1.2 Consideration and applicability

The enclosed financial statements are based on 10 years Business Plan that has been approved
by the BIALs Board. The Board has deliberated and considered the results for submission to
the AERA subject to the condition that any final scenario of tariff determination requiring
fresh equity infusion from the respective state promoters of BIAL would be subject to
approval of the Board and respective state governments.

Page 4 of 18
Annexure II
2 Financial statements
2.1 Financials Aggregated
Table 2-1: Profit and Loss Account (INR million)
Particulars
Revenue
Revenues from Regulated Services
Revenues from other than Regulated Services
Operation and Maintenance expenditure
Personnel
Operations & Maintenance
Concession Fee
Lease Rent
Utilities
Insurance
Mark eting, Advt. and others
OMSA Fee
General Administration Costs
Earnings before depreciation, interest and taxation (EBDIT)
Depreciation and Amortisation
Earnings before interest and taxation (EBIT)
Total interest and finance charges
Profit/loss before tax
Other income
Provision for taxation
Profit /(loss) after taxation
Balance Carried to Balance Sheet
2009-10
Actuals
2010-11
2011-12
2012-13
2013-14
2014-15
Forecasts
2015-16
2016-17
2017-18
2018-19
2019-20
2020-21
3,669
977
4,198
1,197
7,942
2,438
9,531
2,720
11,263
2,982
13,331
3,295
15,701
3,645
25,541
4,034
29,879
4,700
34,892
5,249
39,730
5,834
45,105
6,363
(583)
(297)
(204)
(64)
(200)
(28)
(59)
(110)
(132)
2,968
(1,338)
1,630
(1,035)
596
187
(5)
777
777
(671)
(322)
(231)
(64)
(211)
(26)
(14)
(82)
(141)
3,634
(1,347)
2,288
(1,263)
1,024
301
(4)
1,321
1,321
(897)
(405)
(415)
(63)
(239)
(36)
(152)
(185)
(726)
7,261
(1,440)
5,821
(1,368)
4,453
95
(910)
3,638
3,638
(1,083)
(435)
(490)
(63)
(246)
(45)
(177)
(221)
(308)
9,184
(1,863)
7,321
(1,379)
5,942
108
(1,210)
4,840
4,840
(1,414)
(702)
(570)
(63)
(266)
(46)
(203)
(243)
(339)
10,399
(2,239)
8,160
(3,261)
4,899
79
(996)
3,983
3,983
(1,679)
(729)
(665)
(63)
(273)
(61)
(234)
(282)
(373)
12,267
(2,821)
9,446
(2,867)
6,579
163
(1,348)
5,393
5,393
(2,211)
(1,192)
(774)
(118)
(280)
(65)
(269)
(313)
(410)
13,714
(3,639)
10,075
(2,474)
7,601
125
(1,545)
6,181
6,181
(2,381)
(1,249)
(1,183)
(130)
(300)
(103)
(380)
(502)
(431)
22,916
(5,465)
17,451
(8,680)
8,770
30
(1,760)
7,040
7,040
(3,294)
(2,421)
(1,383)
(134)
(440)
(107)
(439)
(553)
(453)
25,354
(7,103)
18,251
(7,839)
10,412
101
(2,103)
8,411
8,411
(3,524)
(2,501)
(1,606)
(138)
(440)
(112)
(506)
(653)
(475)
30,188
(6,685)
23,503
(11,218)
12,285
67
(2,470)
9,881
9,881
(3,771)
(2,582)
(1,823)
(142)
(440)
(115)
(569)
(750)
(497)
34,874
(6,816)
28,058
(10,447)
17,611
323
(3,587)
14,348
14,348
(4,037)
(2,666)
(2,059)
(147)
(452)
(119)
(639)
(856)
(521)
39,973
(6,988)
32,985
(10,919)
22,066
586
(4,530)
18,122
18,122
Note:
1.
2.
Results of FY1 2009-10 and FY2010-11 represents actual results while other years represents forecasted values
Expenses and losses are depicted with negative and shown in brackets
1 Financial Year (FY) refers to year starting from April 1 and ending on 31st March

Page 5 of 18
Annexure II
Table 2-2: Balance Sheet (INR million)

Particulars
SOURCES OF FUNDS
A)Shareholders' Funds
Capital
Total Shareholders' Funds
B)Reserves & Surplus
Profit & Loss Account Brought Forward
Profit & Loss Account for the Period
Total Profit & Loss Account
C)Loan Funds
Secured Loans (incl. ECB Restatement)
Unsecured Loan - SS
D)Working capital borrowings
TOTAL SOURCES OF FUNDS
APPLICATION OF FUNDS
A) Fixed Assets
Gross Block
less: Accumulated Depreciation
Net Block
Capital Work in Progress
Current Assets, Loans and Advances
Inventories
Sundry Debtors
Other Current Assets , Loans and Advances and others
Total Current Assets, Loans and Advances
DSRA Reserves
Cash and Bank Balances
Less : Current Liabilities and Provisions
Current Liabilities and Provisions
Net Current Assets
TOTAL APPLICATION OF FUNDS

2009-10
Actuals
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
Forecasts
2016-17
2017-18
2018-19
2019-20
2020-21
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
3,846
(1,511)
777
(733)
(733)
1,321
588
588
3,638
4,226
4,226
4,840
9,066
9,066
3,983
13,049
13,049
5,393
18,442
18,442
6,181
24,623
24,623
7,040
31,663
31,663
8,411
40,074
40,074
9,881
49,955
49,955
14,348
64,303
64,303
18,122
82,424
13,816
3,335
20,264
12,857
3,335
20,626
16,751
3,335
28,158
25,971
3,335
42,218
36,662
3,335
56,891
53,029
3,335
78,652
65,873
3,335
97,678
87,278
3,335
126,122
84,489
3,335
131,744
83,350
3,002
356
140,508
79,270
2,668
994
151,081
74,868
2,335
1,692
165,165
19,744
(2,485)
17,259
135
19,874
(3,832)
16,042
880
22,282
(5,271)
17,010
8,451
38,348
(7,134)
31,214
6,685
40,060
(9,373)
30,687
23,385
69,940
(12,194)
57,746
22,424
75,151
(15,834)
59,317
39,517
148,923
(21,299)
127,624
-
152,401
(28,401)
124,000
-
157,583
(35,086)
122,497
-
159,824
(41,902)
117,922
-
162,448
(48,890)
113,558
-
121
461
1,226
1,808
3,798
138
985
1,343
2,466
4,315
79
1,046
1,343
2,468
567
3,168
42
1,081
1,343
2,466
562
6,519
75
1,259
1,343
2,676
994
5,003
78
1,469
1,343
2,890
962
1,182
138
1,710
1,343
3,190
927
4,060
296
3,117
1,343
4,756
2,192
12,929
303
3,619
1,343
5,264
2,479
23,438
313
4,104
1,343
5,760
2,402
37,820
318
4,634
1,343
6,294
2,613
55,194
2,735
2,870
20,264
3,077
3,704
20,626
3,506
2,697
28,158
5,228
4,319
42,218
5,853
2,820
56,891
6,551
(1,518)
78,652
9,334
(1,157)
97,678
12,132
7,744
131,744
13,170
18,011
140,508
12,823
33,159
151,081
12,495
51,607
165,165
148
2,666
1,343
4,157
2,229
2,670
10,559
(1,502)
126,122
Page 6 of 18
Annexure II
Table 2-3: Cash Flow Statement (INR million)

Particulars
Cashflow from operating activities
Net Profit before taxation
Adjustment for :
Operating Profit before working capital changes
Adjustment for :
(Increase)/ Decrease in Inventories, Debtors and Other Current Assets
Increase/ (Decrease) in Current Liabilities and Provisions
(Increase)/Decrease in DSRA Reserves
Increase/(Decrease) in Work ing Capital loans
Net Work ing capital changes
Cash generated from Operation
Cash flow from investing activities
Purchase of Fixed Assets
Net Cash from/ (used in) Investing Activities
Cashflow from financing activities
Proceeds from LT Debt incl. Loss on restatement/Fin Lease
Proceeds from State Financial Support
Net Cash from/ (used in) Financing Activities
Net change in cash and cash equivalents
Cash and Cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period

Actuals
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
Forecasts
2015-16
2016-17
2017-18
2018-19
2019-20
2020-21
777
1,321
3,638
4,840
3,983
5,393
6,181
7,040
8,411
9,881
14,348
18,122
1,338
2,115
1,347
2,668
1,440
5,078
1,863
6,703
2,239
6,222
2,821
8,214
3,639
9,820
5,465
12,505
7,103
15,514
6,685
16,566
6,816
21,164
6,988
25,110
324
212
536
2,651
(658)
341
(317)
2,351
(3)
429
(567)
(140)
4,938
2
1,721
4
1,728
8,431
(210)
626
(431)
(16)
6,206
(214)
697
32
516
8,730
(301)
2,783
35
2,517
12,338
(967)
1,224
(1,302)
(1,044)
11,461
(599)
1,573
37
1,012
16,525
(508)
1,038
(287)
356
598
17,164
(496)
(347)
77
638
(127)
21,037
(535)
(328)
(211)
698
(376)
24,733
(236)
(236)
(875)
(875)
(9,979)
(9,979)
(14,301)
(14,301)
(18,412)
(18,412)
(28,919)
(28,919)
(22,304)
(22,304)
(34,255)
(34,255)
(3,478)
(3,478)
(5,182)
(5,182)
(2,241)
(2,241)
(2,624)
(2,624)
(304)
30
(274)
2,141
1,657
3,798
(959)
(959)
518
3,798
4,315
3,893
3,893
(1,147)
4,315
3,168
9,220
9,220
3,351
3,168
6,519
10,690
10,690
(1,515)
6,519
5,003
16,367
16,367
(3,822)
5,003
1,182
12,845
12,845
2,878
1,182
4,060
21,404
21,404
(1,390)
4,060
2,670
(2,789)
(2,789)
10,258
2,670
12,929
(1,139)
(334)
(1,472)
10,510
12,929
23,438
(4,080)
(334)
(4,414)
14,382
23,438
37,820
(4,402)
(334)
(4,735)
17,374
37,820
55,194
Page 7 of 18
Annexure II
2.2 Financials Aero

Particulars
Revenue
Aero revenues
Operation and maintenance expenditure
Personnel
Concession Fee
Lease Rent
Utilities
Insurance
Mark eting, Advt.,and others
OMSA Fee
Other income

Actuals
2009-10 2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
Forecast
2016-17
2017-18
2018-19
2019-20
2020-21
3,669
4,198
7,942
9,531
11,263
13,331
15,701
25,541
29,879
34,892
39,730
45,105
(467)
(252)
(147)
(49)
(150)
(21)
(50)
(110)
(112)
2,309
(1,070)
1,239
(828)
411
(5)
406
406
(538)
(274)
(168)
(49)
(158)
(20)
(12)
(82)
(120)
2,779
(1,077)
1,702
(1,011)
691
(4)
687
687
(720)
(322)
(318)
(49)
(179)
(27)
(120)
(148)
(618)
5,441
(1,147)
4,294
(1,152)
3,143
76
(644)
2,575
2,575
(868)
(332)
(381)
(49)
(184)
(33)
(141)
(178)
(262)
7,101
(1,512)
5,589
(1,083)
4,506
86
(919)
3,674
3,674
(1,134)
(551)
(451)
(49)
(199)
(34)
(164)
(198)
(288)
8,195
(1,813)
6,382
(2,780)
3,602
63
(733)
2,932
2,932
(1,346)
(573)
(533)
(49)
(205)
(46)
(191)
(233)
(317)
9,839
(2,295)
7,544
(2,282)
5,262
130
(1,078)
4,314
4,314
(1,773)
(1,031)
(628)
(90)
(210)
(49)
(221)
(260)
(349)
11,091
(3,237)
7,854
(1,843)
6,010
100
(1,222)
4,888
4,888
(1,909)
(1,083)
(1,022)
(100)
(225)
(77)
(327)
(442)
(367)
19,990
(4,871)
15,119
(7,988)
7,131
24
(1,431)
5,724
5,724
(2,642)
(2,101)
(1,195)
(103)
(330)
(80)
(378)
(488)
(385)
22,177
(6,242)
15,935
(6,234)
9,700
81
(1,956)
7,825
7,825
(2,826)
(2,170)
(1,396)
(106)
(330)
(84)
(437)
(579)
(403)
26,561
(5,875)
20,686
(9,521)
11,165
53
(2,244)
8,975
8,975
(3,024)
(2,240)
(1,589)
(109)
(330)
(86)
(494)
(666)
(422)
30,768
(5,993)
24,774
(8,795)
15,979
259
(3,248)
12,990
12,990
(3,238)
(2,313)
(1,804)
(113)
(339)
(89)
(556)
(763)
(443)
35,447
(6,142)
29,304
(9,351)
19,953
469
(4,084)
16,338
16,338
Page 8 of 18
Annexure II
2.3 Financials Non-Aero

Particulars
Revenue
Non Aero revenues
Personnel
Concession Fee
Lease Rent
Utilities
Insurance
Mark eting, Advt.,and others
OMSA Fee
Other income

Actuals
2009-10 2010-11
977
(115)
(45)
(58)
(15)
(50)
(7)
(9)
(20)
659
(268)
392
(207)
185
187
371
371
1,197
(133)
(48)
(64)
(15)
(53)
(7)
(2)
(21)
855
(269)
586
(253)
333
301
634
634
2011-12
2012-13
2013-14
2014-15
2015-16
Forecast
2016-17
2017-18
2018-19
2019-20
2020-21
2,438
2,720
2,982
3,295
3,645
4,034
4,700
5,249
5,834
6,363
(178)
(82)
(98)
(15)
(60)
(9)
(32)
(37)
(109)
1,819
(293)
1,527
(216)
1,310
19
(266)
1,063
1,063
(214)
(103)
(109)
(15)
(61)
(11)
(35)
(42)
(46)
2,082
(350)
1,732
(296)
1,436
22
(291)
1,166
1,166
(280)
(151)
(119)
(15)
(66)
(11)
(39)
(45)
(51)
2,204
(426)
1,778
(481)
1,297
16
(263)
1,050
1,050
(333)
(156)
(132)
(15)
(68)
(15)
(43)
(50)
(56)
2,428
(526)
1,902
(585)
1,317
33
(270)
1,079
1,079
(438)
(161)
(146)
(27)
(70)
(16)
(48)
(54)
(62)
2,624
(402)
2,222
(630)
1,591
25
(323)
1,293
1,293
(472)
(166)
(161)
(30)
(75)
(26)
(53)
(60)
(65)
2,926
(594)
2,332
(693)
1,639
6
(329)
1,316
1,316
(653)
(320)
(188)
(31)
(110)
(27)
(61)
(65)
(68)
3,177
(861)
2,317
(1,605)
712
20
(146)
586
586
(698)
(331)
(210)
(32)
(110)
(28)
(68)
(74)
(71)
3,627
(810)
2,817
(1,697)
1,120
13
(227)
906
906
(747)
(342)
(233)
(33)
(110)
(29)
(75)
(84)
(75)
4,107
(823)
3,284
(1,652)
1,632
65
(339)
1,357
1,357
(800)
(353)
(255)
(34)
(113)
(30)
(82)
(92)
(78)
4,527
(846)
3,681
(1,568)
2,113
117
(446)
1,784
1,784
Page 9 of 18
Annexure II
2.4 Calculated Aggregate Revenue Requirements (ARR)

The ARR for the first Control Period is calculated as under:
Table 2-6: Calculation of ARR (INR million)
Aggregate Revenue Requirement

Aggregate Revenue Requirement

Tariff Year 1 Tariff Year 2 Tariff Year 3 Tariff year 4 Tariff year 5
2011-12
2012-13
2013-14
2014-15
2015-16
11,196
7,509
9,045
12,506
16,989
Page 10 of 18
Annexure II
3 Assumptions
3.1 Bifurcation of Aero and Non-Aero assets and costs
The bifurcation of historical values of fixed assets and costs in Aero and Non-Aero is based on
the Auditors certificate issued after conducting agreed upon procedures. A copy of the
certificate is attached in Annexure 1. On the same basis, the projected fixed assets and costs
are bifurcated to estimate the future Aero and Non-Aero Assets.
The Aeronautical Assets, Non-Aeronautical Assets, Aeronautical Services and Non-Aeronautical
Services are as defined under Clause 1.1 and Clause 1.2 of the Annexure 1.
3.2 Capex assumptions
Historical fixed assets have been taken as per the books of accounts and records.
The RAB is based on capital expenditure estimates as per the Revised Master Plan.
Further details are provided under Annexure 2.
Depreciation has been considered as per the rates prescribed in the Companies Act,
1956. The financial statements have been prepared following Straight Line Method
(SLM) of depreciation.
The capital expenditure has been indexed based on Whole Price Index (WPI) of 2.7% on
year on year basis.
3.3 WPI and CPI
The WPI figures are derived based on the forecasted Producer Price Index (PPI) values
as provided by analysts projections.
The forecasted Consumer Price Index (CPI) values for the Control Period are
considered on the basis of analysts projections.
The forecasted values for the first Control Period are shown in table below:
Year
WPI
PPI
CPI
2011-12
7.7%
7.2%
6.8%
2012-13
7.6%
7.1%
6.5%
2013-14
6.2%
5.6%
6.0%
2014-15
6.0%
5.4%
5.7%
2015-16
5.8%
5.2%
5.5%

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3.4 Fair Rate of Return (FRoR)

The post-tax Cost of Equity (Ke) is calculated using the Capital Assets Pricing Model (CAPM)
method. Based on the internal estimates, the value of Ke is 24.4% for the first Control Period.
This is based on an average Debt/Equity (D/E) of 1.5 over the period FY2011-12 to FY 201516. To arrive at this figure, risk free rate is assumed as 7.91% and the equity risk premium is
10.36%. The value of asset beta is taken as 0.8.
The Cost of Debt has been considered on the basis of expected borrowing cost for each of the
projected years of the first Control Period. The respective Cost of Debt values for each year
of the Control Period ranges from 12.5% to 13.5%.
The weighted average gearing for the first Control Period is calculated based on the projected
values of debt and equity.
3.5 Traffic
The traffic forecasts used in the financial statements are based on the report submitted by
M/s Landrum and Brown (L&B) in August 2010. The report provides annual forecasts of
passenger traffic, air cargo tonnage, and aircraft movements for the twenty year period of
2009-10 to 2029-30. The report presented growth under various scenarios; Master Planning
Traffic Forecast is taken as most likely scenario and included in the financial forecasts. The
report is attached as Annexure 3 for reference purpose.
The report was prepared considering base year of 2009-10. For projecting the aviation activity
at the airport, the estimated traffic figures of the 2009-10 and 2010-11 have been replaced by
the actual traffic figures of 2009-10 and 2010-11 respectively. Thereafter, the base traffic
numbers are increased at the rates estimated in the L&B report taking base of 2010-11.
Other key assumptions for traffic estimates are as under:
Traffic band percentage is assumed to be 5%.
Domestic arrival to departure ratio is assumed at 50:50 for the first Control Period. In
case of international passengers, the arrival to departure ratio is 52:48 for the first
Control Period.
3.6 Service Quality parameters

3.6.1 Objective parameters
The key points regarding this parameter are mentioned in the Form 14 (a) of MYTP.

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Annexure II
3.6.2 Subjective parameters

Subjective quality parameters shall be attained as per C.A. Detailed are presented in
Form 14 (b) of MYTP.
3.7 Revenue
3.7.1 Regulated charges
The regulated revenues are increasing at a Compounded Annual Growth Rate (CAGR) of
18.58% over the first Control Period.
Landing charges: The landing charges for domestic and international aircrafts are
assumed at the rates prevailing in FY 2010-11 growing as per the growth rate of WPI
starting FY 2011-12 over the balance period of the first Control Period. The rise in the
landing revenues over the first Control Period is represented by a CAGR of 18.57%.
PSF (FC): Overall, the passenger service fee is assumed to grow at a CAGR of 18.57% in
the first Control Period.
UDF: The total revenue from UDF is expected to grow at a CAGR of 19.08% during the
first Control Period.
Parking charges: The parking revenue grows at a CAGR of 16.68% in the first Control
Period.
ATR2: INR 4,000 per landing per ATM has been considered.
3.7.2 Other charges Aviation concession and non-aviation revenues

The aviation concession revenues and non-aviation revenues are increasing at a CAGR of
10.56% and 10.58% respectively during the first Control Period.
The revenues for the aviation concessions and non-aviation revenues-other charges are as per
the existing agreements with the concessionaires. The revenues from aerobridge charges,
cargo, fuel farm, flight catering and ground handling activities are classified under Aviation
Concessions. Non-Aero revenues include retail, food and beverages, taxi etc.
3.8 Operating cost

The total operating expenses are increasing at a CAGR of 15.91% over the first Control Period.
3.8.1 Personnel Expense
The personnel cost is increasing by a CAGR of 25.29% in the first Control period. During this
period, the headcount is expected to rise by a CAGR of 11.76%. This increase is primarily on
account of existing and future expansion.
Aircrafts with seating capacity of less than 80 seats

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Annexure II
3.8.2 O&M Costs

During the first control period, the total O&M costs increase by CAGR of 31.01%. Maximum
increase is expected in the FY 2013-14 due to the existing and future expansion requirements
as captured in the Revised Master Plan.
3.8.3 Concession fee
The concession fee has been estimated at 4% of gross revenues. The Concession fee rises by a
CAGR of 16.84% over the first Control Period.
As per the Concession Agreement of BIAL, the concession fee for first 10 financial years from
the date of airport opening date (AOD) shall be payable in twenty equal half yearly
installments. The first such payment is due and payable in the 11th financial year from AOD.
3.8.4 Lease rent
Based on the Land Lease Deed with Karnataka State Industrial and Investment Development
Corporation (KSIIDC - Lessor), the total annual lease rent payable has been considered. The
CAGR for first Control Period is 16.71%.
3.8.5 Utilities
The utilities cost is increasing at a CAGR of 4.01%. The cost mainly comprises of power and
water.
3.8.6 Insurance
The total insurance premium cost is growing by CAGR of 15.77% for the first Control Period.
3.8.7 Marketing, Advertising & Others
The marketing and advertising costs are increasing by a CAGR of 11.82% during the first
Control Period.
3.8.8 OMSA fee
The component increases by a 14.03% in the first Control Period.
3.8.9 General Administration Costs
This cost head includes consultancy& legal, travel, office and others.
3.9 Treatment of Real estate business

The business plan for real estate has not yet been finalized and no investment has been made
as on date. Hence, the real estate business scenario has not been considered.

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Annexure II
Annexure 1: Auditor's certificate for bifurcation of

fixed assets and costs

Page 15 of 18
Annexure II
Annexure 2: Revised Master Plan

Page 16 of 18
Annexure II
Annexure 3: Traffic forecasts for Aviation Activity

Forecasts by L&B

Page 17 of 18
Annexure II
Annexure 4: Audited Financial Statements

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Annexure II
Revised Multi-Year Tariff Proposal FY 2011-12 to FY

2015-16
and
Business Plan FY 2011-12 to FY 2020 -21: Financial
Statements and Assumptions
Till type adopted for tariff determination: Dual till
Submitted to the Airport Economic Regulatory

Authority (AERA)
November 2012
Annexure II
Table of contents
1
Background and Introduction to Bangalore International Airport Limited ................ 6
Our Approach to MYTP re-submission ............................................................ 8
Assumptions and drivers used for various Regulatory Building Blocks ..................... 9
3.1
Project Cost, Regulatory Asset Base and Means of Financing ............................. 9
3.2
Means of Financing ............................................................................. 17
3.3
Cost of Debt ..................................................................................... 18
3.4
Cost of Equity ................................................................................... 20
3.5
Fair Rate of Return ............................................................................. 20
3.6
Depreciation ..................................................................................... 21
3.7
Traffic ............................................................................................ 23
3.8
Non-Aero Revenues ............................................................................. 23
3.9
Operating Costs ................................................................................. 23
3.9.1
Personnel Costs ............................................................................ 23
3.9.2
Operations and Maintenance Costs ..................................................... 25
3.9.3
Utility Costs ................................................................................ 35
3.9.4
Operation Maintenance and Support Fee .............................................. 36
3.9.5
Concession Fee ............................................................................ 37
3.9.6
Lease Rent ................................................................................. 37
3.9.7
General Administration Costs............................................................ 38
3.9.8
Insurance ................................................................................... 39
3.9.9
Marketing, advertising and others ...................................................... 39
3.10
Taxation .......................................................................................... 39
3.11
Pre-Control Period Shortfall for reimbursement ........................................... 40
3.12
WPI and CPI ...................................................................................... 42
3.13
Audit of Financial Model ....................................................................... 43
Financial statements ............................................................................... 44

4.1
Financials - Aggregated ........................................................................ 44
4.2
Calculated Aggregate Revenue Requirements (ARR) ...................................... 48

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Annexure II
List of Annexures
Annexure 1: Cost of Equity report by KPMG
Annexure 2: Audited Financial Statements 2011-12
Annexure 3 Financial Model audit report

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Glossary of Terms used:

AAI
Airport Authority of India
AERA
Airport Economic Regulatory Authority
AFL
Air Field Lighting
AMC
Annual Maintenance Contract
AOD
Airport Opening Date
AOCC
Airport Operation Control Centre
ARFF
Airfield Rescue Fire Fighting
ATC
Air Traffic Control
BIAL
Bangalore International Airport Limited
BOT
Build Operate Transfer
BHS
Baggage Handling System
BRS
Baggage Reconciliation System
CA
Concession Agreement
CCTV
Closed Circuit Television
CUTE
Common User Terminal Equipment
CPI
Consumer Price Index
CUSS
Common User Self Service
CPS
Central Parking Services
DG
Diesel Generator
DSCR
Debt Service Coverage Ration
DSRA
Debt Service Reserve Account
E&E
Elevators & Escalators
EPC
Engineering Procurement and Construction
ECB
External Commercial Borrowing
FF
Fire Fighting
FOD
Foreign Object Debris
FAS
Fire Alarm System
FROR
Fair Rate of Return
GOK
Government of Karnataka
HVAC
Heating Ventilation and Air Conditioning
IATA
International Air Transport Association
ICT
Information Communication Technology
IT
Information Technology
ITES
Information Technology Enabled Services
KSIIDC
Karnataka State Industrial and Infrastructure Development Corporation
KSPCB
Karnataka State Pollution Control Board

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Annexure II
LT
Light Tension
MCR
Microprocessor Constant Current Regulator
MOCA
Ministry of Civil Aviation
MoEF
Ministry of Environment and Forest
MOU
Memorandum of Understanding
MTBF
Mean Time between Failure
MYTP
Multi Year Tariff Proposal
NAR
Non Aero Revenue
NSPR
New South Parallel Runway
OFC
Optical Fibre Cable
OMSA
Operation Management Service Agreement
PAPI
Precision Approach Path Indicator
PBB
Passenger Boarding Bridge
PIDS
Perimeter Intrusion detection system
PLC
Programme Logic Controllers
PPI
Producer Price Index
PPP
Public Private Partnership
PSF
Passenger Service Fee
RAB
Regulatory Asset Base
RBB
Regulatory Building Block
RET
Rapid Exit Taxiways
SCADA Supervisory Control and Data Acquisition

SITA
Socit Internationale de Tlcommunications Aronautiques
SSA
State Support Agreement
STP
Sewage Treatment Plant
TRA
Trust & Retention Account
T1
Terminal 1
T2
Terminal 2
TMRS
Trunk Mobile Radio System
UDF
User Development Fee
UPS
Uninterrupted Power Supply
WPI
Wholesale Price Index

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1 Background and Introduction to Bangalore International Airport

Limited
The Airport Authority of India Act, 1994 was amended by the amendment Act 43 of 2003
with an object to encourage private participation and investment in Greenfield Airports by
providing managerial and financial independence and by lifting various restrictions. The
Government of India recognized the need to improve the standard of service and facilities
at the airports, and realized that the most effective way of improving services would be
to develop and/or build new airports in association with private investors.
Bangalore International Airport is Indias first privatized Greenfield airport. Bangalore
International Airport Limited (BIAL) is a Limited Company incorporated under the
provisions of the Companies Act, 1956. The main objects are to operate, maintain,
develop, design, construct, upgrade, modernize and manage airport at Bangalore.
The project is based on the Public Private Partnership (PPP) model and is structured on a
Build, Operate and Transfer (BOT) basis. The airport was commissioned on 24th May 2008
with initial capacity of 11.4 million passengers per annum (MPPA) and 3,50,000 tons of
cargo handling capacity per annum.
A Memorandum of Understanding (MoU) was signed during May 1999 between Government
of Karnataka (through KSIIDC) and Union of India (through AAI) and in principle approval
granted to Bangalore International Airport by MoCA. During June 1999, KSIIDC published
Invitation for Expression of Interest (EoI) through international competitive bidding for
Joint Venture Partners wherein 26% would be held by KSIIDC and AAI and the remaining
74% by JVPs and a steering committee was constituted for evaluation of EoI.
Subsequent to the above, various Project Agreements, as detailed below were executed:
Shareholders Agreement was signed between Bangalore International Airport Limited,

KSIIDC, AAI, Siemens Project Ventures GmbH, Larsen & Toubro and Flughafen Zrich
AG on 23rd January 2002.
Concession Agreement between Ministry of Civil Aviation and BIAL was signed on 5th
July 2004.
State Support Agreement between Government of Karnataka and BIAL was signed on
20th January 2005.
Land Lease Deed between KSIIDC and BIAL was executed on 30th April 2005
Financial closure was achieved during June 2005.
Operations & Management Services Agreement (OMSA) between Flughafen Zurich AG
(Unique) and BIAL was executed on 08th April 2005.

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Initial Shareholding pattern at the time of commencement of Airport and the present
shareholding pattern, is detailed as under:
Shareholder
Private Promoters:
1. Siemens Project Ventures GmbH
2. Flughafen Zurich AG Ltd.
3. L&T IDPL
4. GVK Group
Sub-Total
State Promoters:
1. Airport Authority of India (GoI)
2. Karnataka State Industrial Investment
Development Corporation Limited (GoK)
Sub-Total
TOTAL
Initial shareholding (%)
Present shareholding (%)
40%
17%
17%
Nil
74%
26%
5%
Nil
43%
74%
13%
13%
13%
26%
100%
13%
26%
100%
&
Extracts from Concession Agreement:

A Concession Agreement for development, construction, operation and maintenance of
the Bangalore International Airport was entered into between Ministry of Civil Aviation,
Government of India and Bangalore International Airport Limited (BIAL) on 5th July 2004.
Schedule 6 (Regulated Charges) of the Concession Agreement detailed the charges that
can be levied as below:
(i)
Landing, Housing and Parking charges (Domestic and International):

The charges to be adopted by BIAL at the time of airport opening will be higher of:
(a) The AAI tariff effective 2001 duly increased with WPI inflation index as set out
up to the airport opening date, or
(b) The then prevailing tariff at the other AAI airports.
(ii) Passenger Service Fee (Domestic and International):

The charges to be adopted by BIAL at the time of airport opening will be higher of:
(a) The AAI tariff effective 2001 duly increased with WPI inflation index as set out
up to the airport opening date, or
(b) The then prevailing Passenger Service Fee at the other AAI airports.
(iii) User Development Fee(UDF) (Domestic and International):
BIAL will be allowed to levy UDF, w.e.f. Airport Opening Date, duly increased in the
subsequent years with inflation index as set out hereunder, from embarking

Page 7 of 51
Annexure II
domestic and international passengers, for the provision of passenger amenities,

services and facilities and the UDF will be used for the development, management,
maintenance, operation and expansion of the facilities at the Airport.
Based on the provisions in the Concession Agreement, BIAL had made various submissions
to MoCA in connection with approval of levy of UDF with valid justification for charging
Rs. 675/- for domestic departing passengers and Rs. 955/- for international departing
passengers (excluding applicable taxes) from Airport opening Date (AoD). Based on the
discussions with Ministry of Civil Aviation (MoCA), the proposal for charging of UDF @
Rs.1070/- (incl. of applicable taxes) per international departing passengers w.e.f. AoD
(i.e., 24th May 2008) was approved by MoCA on ad-hoc basis (ref:
F.No.AV.20015/003/2003-AAI dated 3rd April 2008).
Further, BIAL had made several submissions to MoCA in connection with the levy of UDF on
domestic passengers. Based on the submissions, MoCA permitted to levy a UDF of Rs.
260/-(incl. of applicable taxes) per departing domestic passenger, with effect from 16th
Jan 2009 on ad-hoc basis (ref: F. No. AV.20036/007/2008-AD dated 9th January 2009).
2 Our Approach to MYTP re-submission

This document presents Multi-Year Tariff Proposal (MYTP) for first Control Period starting
from FY1 2011-12 to FY 2015-16 for tariff determination and key results from Business Plan
from FY 2011-12 to FY 2020-21.
As detailed above, the operations and business of BIAL is governed by the terms and
conditions of the Concession Agreement (C.A.) entered into between the Ministry of Civil
Aviation (Government of India) and Bangalore International Airport Limited (BIAL) on 5th July
2004 and related project agreements. In accordance with the C.A., the regulated charges
include landing charges, parking charges, housing charges, passenger service fee (PSF) and
user development fee (UDF). The rest of the revenue items such as Aviation Concessions,
retail, commercial are classified as non-regulated charges, among others.
Further, C.A. does not provide for any cross-subsidization of non-regulated charges for
determining the tariff of regulated charges. Therefore, the financial statements and
assumptions are developed taking this approach and the details of the formats, as required
under MYTP, are presented in this document.
Considering the provisions of C.A. and the requirements of Direction 5, the financial
statements are prepared and enclosed herewith.
BIAL submitted the Multi Year Tariff Proposal in September 2011. Consequent to the
submission, traffic scenarios and projections have undergone a significant change, with the
actual traffic for 2011-12 and Projections for 2012-13 reflecting a de-growth in traffic. In view
of this, projections required review and revision with respect to the Capital Expenditure
1 Financial Year (FY) refers to year starting from 1st April and ending on 31st March

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Plans, Means of Financing the Capital Expenditure and consequent changes in other
Regulatory Building Blocks (RBB). BIAL has carried out an assessment of these and the revised
MYTP is submitted herewith.
3 Assumptions and drivers used for various Regulatory Building Blocks

3.1 Project Cost, Regulatory Asset Base and Means of Financing
Initial Project Cost
BIAL commenced operations in May 2008. An initial Project cost of Rs. 1938 Crores relating to
the airport commissioned was capitalized on this date. Assets subsequently bought/
commissioned have been capitalized in the respective dates in the books. As at the start of
control period (1st April 2011) the Net book value of Fixed Assets was Rs.1595.7 crores. Work
in Progress carried in books as of 1st April 2011 of Rs. 97.3 Crores consists of costs incurred
towards various Maintenance Capex activities and Apron Extension which was planned as a
part of Phase 1 Project.
Of the above the WDV of assets relating to Aero business was Rs. 1300.7 Crores which has
been considered as opening Regulatory Asset Base (RAB) as prescribed in Direction 5.
Apron extension
- This involves construction of parking stands for aircrafts on the
western side of the airfield, in addition to the 42 Code E stands constructed earlier. These
additional stands are being built to meet the increase in demand for night parking stands at
BIA.
The demand for overnight parking is expected to grow to 38 stands for 42 aircraft by end of
2012 as the economic situation improves. This translates to a total demand for 65 apron
stands including overnight parking, operations, diversions and contingency, as given below.
Particulars
Total Stands
Current demand from Indian Carriers for overnight parking
32
Medium term demand for overnight parking
10
Current demand for international operation
13
Future demand for international operation
Requirement of non-scheduled, VIP, delay/diversion, technical grounding

etc.
2
Requirement of emergency operation
Total estimated demand
65

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Annexure II
In May 2010, BIAL had entered into a contract for construction of the additional stands. The
total investment estimated for the apron extension and related works is Rs.120 Crores. The
construction is proposed to be completed in phases by Q4 2012-13.
Out of the additional 24 Code C/10 Code E stands in the West Apron, 05 temporary stands
were operationalized on 30th Sept 2011 and 4 stands operationalized on 31st March 2012. The
remaining stands are likely to be handed over by Q4 2012-13.
Projects proposed to be executed
Basis
The company has also estimated the various Capital Expenditure Projects that need to be
executed to keep pace with the growth in Passenger, Cargo and ATM estimates, during the
first control period and has projected the costs to be incurred in line with the timing of the
Capital Expenditure. Airport development activities are projected based on the Jacobs
Consultancys Master Plan Update report dated August 2011, submitted earlier, which sets out
the vision for BIAL for the next 20 years and the strategy to translate the vision into facilities
development, necessitated based on the changes in demand, Economy and the aviation
Industry.
Methodology
The capital expenditure has been indexed based on Whole Price Index (WPI) of 2.7% on a year
on year basis. Financing Allowance as prescribed in Direction 5, at the cost of debt for the
year, has been estimated and considered for capitalization.
Depreciation has been computed on assets based on the defined depreciation rates. Average
RAB has been computed in line with the guidelines, for computing return on the same at Fair
Rate of Return (FRoR)
Overview of various Projects proposed
A brief overview of different Projects proposed to be executed during the first control period
is detailed below:
1. Terminal 1 (T1) expansion - Bangalore has experienced rapid growth in passenger volumes,
and will continue to realize significant growth over the 20-year planning period. In
2011/12, 12.7 million passengers (mppa) traveled through Bangalore, versus 1.8 million
annual passengers in 1995/96. The year-on-year growth for 2010 to 2011 represents an
annual growth rate of 9%, and CAGR of 14% per year for the past 15 years. International
traffic has been the fastest growing segment, increasing from a reported 1.2 percent of
total passengers in 1995/96 to nearly 20 percent currently. Growth has been particularly
robust since 2002/03, coinciding with ongoing deregulation of civil aviation in India, as
illustrated in Figure 1.1 below.
FIGURE 1.1

Page 10 of 51
Annexure II

14
International
12
Domestic
Passengers in mio
10
8
6
4
2
2011/12
2010/11
2009/10
2008/09
2007/08
2006/07
2005/06
2004/05
2003/04
2002/03
2001/02
2000/01
1999/00
1998/99
1997/98
1996/97
1995/96
Fiscal year
The expansion of the existing Terminal 1 has been designed to enhance the operational
performance in order to handle, inter-alia, the increase of passenger traffic from the
current 12.7 million passengers in 2011-12 upto approximately 17 20 million passengers
per annum, until the second terminal (T2) is planned to be operational.
BIAL commenced the next phase of development, which is the substantial expansion of
the existing T1. This expansion will cater to the expected growth of passengers, until the
second Terminal (T2) is planned to be operational, as illustrated in Figure 1.2. This is
based on the current projected forecast demand for the next 4 to 5 year period, which is
the estimated time period for planning, design and construction of the new T2.
FIGURE 1.2
Source: Landrum & Brown Traffic Report dated August 2010

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The terminal expansion program includes an extension by three grids (72m x 24m) on the east
and west sides of T1, East pier concourse, modifications to the existing T1, airside apron
expansion, ancillary facilities, and T1 kerb side and forecourt modifications.
The area of T1 is 73,627 sqm including the basement area, and is designed for IATA Level of
Service C. The existing layout provides a more or less balanced capacity for the domestic and
international processors of the different flows throughout the terminal building.
The design standards proposed would reflect the best industry practices and operating
standards. The facilities provided would also meet all relevant IATA standards. The total floor
area is planned to increase to approximately 150,556 sqm. Additional 7 Code C / 3 Code E and
1 Code F contact positions will be added improving the efficiency and level of service by
adding an East Pier to T1.
The Terminal 1 expansion Program includes minor improvements to the existing terminal
building, utility buildings and other related improvements to add capacity to meet the
forecasted demand. As there is a desire to expand the capacity of the overall operation
including airside, landside and terminal facilities, the improvements are divided to provide
further detail. The following are the proposed improvements:1)
2)
3)
4)
5)
6)
7)
Passenger Terminal Building Expansion and Modifications

Airside Apron Expansion
West New VVIP block
New energy centre
Expansion of chiller plant and utilities
Kerbside improvements on airside and landside
Terminal forecourt improvements
BIAL conducted consultation processes on the following with the stakeholders including
airlines:
a.
b.
c.
d.
Master Plan aviation activity forecast for BIAL on 06th May 2010
T-1 expansion project on 06th August 2010
T-1 expansion airline sign-off on 15th July 2011 and
Smile Bengaluru Consumer campaign from Sept 27th 2010
The project started on 01st August 2011 and is expected to be completed in phases by
March/June 2013.
2. Runway 2 including Taxiway and Apron Phase 1 and Phase 2
Bangalore has experienced rapid growth in passenger volumes, and will continue to realize
significant growth over the 20-year planning period. In 2011/12, 12.7 million passengers
(mppa) traveled through Bangalore, versus 1.8 million annual passengers in 1995/96. The

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Annexure II
year-on-year growth for 2010 to 2011 represents an annual growth rate of 9%, and CAGR of
14% per year for the past 15 years. International traffic has been the fastest growing segment,
increasing from a reported 1.2 percent of total passengers in 1995/96 to nearly 20 percent
currently.
The continued robust growth in the local Bangalore and broader Indian economy are expected
to be the primary drivers of domestic air travel at Bangalore. Bangalore has a large
population base, a diverse and a high value-added economy from which to stimulate air
travel. It is assumed that the Bangalore economy will at a minimum mirror and potentially
exceed the economic growth of India as a whole, over the forecast period.
In order to predict the impact these drivers will have on aviation activity and for the Master
Plan update, a forecast update was developed by Landrum and Brown, Inc. for Bangalore in
2010. The Forecast provides the basis for establishing a long-term master plan and as such,
supports decisions related to the planning and implementation of capital and operational
improvements necessary to efficiently serve air transportation demand throughout the
planning period. The Forecast was developed through an evaluation and analysis of several
key areas such as:
Airline schedules
Indian aviation industry trends
GDP growth and econometric analysis
Comparable airport trends
Airport maturation considerations
Growth in low-fare market vs. network carriers
Master Plan
In order to meet the projected demand, a master plan has been developed to accommodate
55 mppa over the planning horizon and has been phased accordingly in line with demand. A
new runway, new terminal and associated airfield and apron works are proposed to cater to
the passenger demand. The Land Use Plan was presented to the airlines on 28 March 2011 to
keep them informed of the Plan which materialized following their input on the airports
forecast. The stakeholder briefing included discussion on the capacity challenges and
development strategy, new runway and associated airfield development, passenger terminals,
roadways and external connectivity and the airports overall land use plan.
Existing Runway and Capacity Constraints
The existing airfield consists of Runway 9-27, which is 4,000 meters long and 45 meters wide,
Taxiway A, which runs parallel to the full length of Runway 9-27, three rapid-exit taxiways
0
9
A6
K
Figure : Existing Runway Configuration
A
H
A1
2
7
D
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(RETs), and one taxiway perpendicular to the runway. The existing airfield handles
approximately 26-28 aircraft movements per hour on typical busy weekdays and
approximately 32 movements per hour on special occasions. Taxiway A runs south of and
parallel to the existing runway along its entire length and provides the only means of
circulating between runway thresholds and the aircraft parking apron. An overview of the
existing layout of the Airport is provided in Figure below.
Existing Runway 09-27 Capacity
Physical and operational scenario
Hourly
Capacity*
36
Annual capacity (ATMs)
Existing configuration with improved air

traffic control procedures (reduced in-trail
separations and reduced departure-departure
separations)
45
170,000
Improved configuration with additional RETs

and improved air traffic control procedures
46
172,000
Existing configuration under existing air

traffic control procedures
136,000
Source: Jacobs Consultancy analysis, January 2011

*Hourly Capacity assumes 50% Arrivals
Need for Second Runway
Aircraft operations were projected to grow from 119,033 in 2012 to approximately 550,000
operations at the 2029-30 demand level, the planning horizon considered in the Master Plan
Update. Considering the current traffic trend, a second runway, the New South Parallel
Runway (NSPR), will be required by 2017/18. The need for the NSPR was also established in
prior planning studies and confirmed again in the Master Plan Update.
3. Second Terminal (T2) Phase 1 and 2
Bangalore International Airport Limited (BIAL) became operational in 2008. The initial phase
of development included a passenger terminal building (T1), a runway, entrance/ exit
taxiways, an isolation bay, airside road system, access roads, along with other ancillary
developments. BIAL is moving into the next phase of development, under which T1 is already
being expanded to cater to the growing demand, until the second Terminal (T2) is in
operation.
As part of next phase, further development at airport is being planned, based on the updated
forecast and Master Plan, which includes a new Terminal, second Runway and associated
development. BIAL intends to develop new terminal facilities to meet the passenger demand
and has initiated the process to appoint a lead consultant for the design of the Terminal 2 and
related projects. It is anticipated that the first phase of the new Terminal 2 for 20 mppa and

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related facilities (with provisions for future expansion to 35 mppa in Phase 2), will be
required to be operational by 2017-18.
BIAL had invited Expression of Interest from experienced, internationally reputable
Architectural consultancy firms to provide Architectural and Engineering Design Consultancy
Services for Terminal 2 (T2) and associated works at the Airport.
Maintenance Capex Projects
Maintenance Capex Projects are required to be undertaken to ensure that the existing
facilities are maintained and are geared to be able to perform till the intended useful life.
Following are the key maintenance Capex costs projected:
The major maintenance capex investments in Control Period 1 are:a. Disabled aircraft removal equipment - Disabled aircraft removal is a specialized activity
for which specific resources are required to ensure safety and business continuity. As BIAL
has only one runway it is critical to have the capability to remove the disabled aircraft
from the movement area. There is only one basic kit available in Mumbai for the entire
south Asia, which again is not compatible for Code F category aircraft. The procured kit
can be made available for other airports in the region on cost sharing basis. Use of this
equipment by concerned airline at BIAL will also be on rent basis.
b. Integrated crisis center cum Haj terminal To improve and provide adequate facility to
take complete command-control, coordination- communication of disaster scenarios,
resulting in efficient management of contingency.
c. Airside infrastructure mainly airfield pavement, strengthening of perimeter
wall,
replacement of the runway, taxiway, approach, threshold, PAPI lamps at a time once in
three years with the past trend, replacement of polycarbonate facias of all the 70
signages after a period of 8 years, considering the upgradation from CAT I to CAT III in the
year 2017-18.It is planned for this upgradation after the NSPR comes into existence and a
stabilisation period of one year after installation of NSPR
d. Electrical and electronic system at the terminal mainly replacement of UPS batteries,
light fixtures, LT control panels, automatic doors etc
e. Software licenses and implementation mainly SAP and HR related
f. Extension of Kerbside of Terminal 1 for Passenger Services, Retail and F&B.
Following is the summary of key costs to be incurred for different projects in the First Control
period
S#
Activity Name
1
2
Disabled aircraft removal equipment

Integrated crisis center cum Haj terminal

Cost proposed to be
incurred in First Control
Period Rs. Crore
8.00
6.00
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3
4
5
Airside infrastructure development

Terminal area infrastructure development
Extension of Kerbside of Terminal 1
5.84
6.72
35.00
The bifurcation of historical values of fixed assets and costs in Aero and Non-Aero is based on
the Auditors certificate issued after conducting agreed upon procedures. A copy of the
certificate has been submitted earlier. On the same basis, the projected fixed assets and
costs are bifurcated to estimate the future Aero and Non-Aero Assets.
The Aeronautical Assets, Non-Aeronautical Assets, Aeronautical Services and Non-Aeronautical
Services are as defined under Clause 1.1 and Clause 1.2 of the certificate submitted earlier.
Real Estate Development
1. Airport Business Hotel Project
The Bangalore International Airport at Devanahalli which opened on 24th May 2008 has
improved Bangalores transportation links with other Indian and international cities, and also
is becoming a major catalyst for regional economic development in Karnataka and poised to
be the Gateway to South India. A business hotel of international standards is an important
facility at each international airport.
Pursuant to the Land Lease Deed, BIAL has been granted exclusive lease hold rights to the
Project Site for aeronautical and non- aeronautical activities with the development of hotels
as one of the non-aeronautical activities expressly permitted therein.
In view of the aforesaid, BIAL intends the establishment of a premium business hotel and
conference facility at the Project site at standards compliant with international best
practices.
Pursuant to the above, various consortiums submitted their proposals against the tender
document and the consortium of EIH Limited and Larsen & Toubro Limited were awarded the
rights for design, construction, financing, commissioning, maintenance, management and
operation of the facility. A Framework Agreement for design, construction and operation of
Business Hotel facility at the New Bangalore International Airport limited was entered to by
BIAL with EIH Ltd and L&T Ltd on 16th November 2006. The Consortium incorporated a Joint
venture company, Bangalore Airport Hotels Limited under the Companies Act, 1956.
L&T had submitted an income statement in response to the tender for airport hotel which is
also part of the agreement. The original bid was for airport hotel with a height of 45 m, 321
keys and a total area of 273,404 sq.ft. Since then there has been changes in the specifications
due to reduction in building height and hence other options like reduction in rooms and also
additional land were explored.
BIAL has consented for commencement of construction by its letter dated 18th September,
2007. BIAL has issued in principle approval for lay-out and plan by its letter dated 16th

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October, 2007. Subsequent to the execution of Framework Agreement, on 14th November

2008, the Airports Authority of India has issued a no objection certificate with a height
clearance for only 30.36 metres above ground level.
In light of these restrictions, the Consortium has expressed to BIAL its inability to continue to
develop and operate the facility in accordance with the terms of the Framework Agreement
and sought certain additional concessions from BIAL or for a settlement of the cost incurred.
After a series of discussions, since the dispute was not resolved, it was agreed to go in for
arbitration to settle the disputes and hence currently the project is on hold and is undergoing
an arbitration procedure.
BAHL has paid a security deposit of Rs. 76.5 Cr in 2006 which was reflected as a part of
liability in the Financial Statements. In view of the pending disputes, this amount is proposed
to be repaid in 2012-13.
2. Future Real Estate development
Neither real estate activity nor investment is envisaged as the business plan for real estate
has not yet been firmed up and also no investment has been made as on date.
Hence, real estate business scenario has not been considered in the MYTP and the Business
plan submitted now.
3.2 Means of Financing

Business Plan submitted proposes that Debt will be drawn down to the extent of availability
subject to meeting the defined Debt Service Coverage Ratio of 1.4 as specified in loan
agreement and Gearing Mix of 70:30 (Debt:Equity) to be maintained between Debt and
Equity, both of which are defined across the various years. Pursuant to this, the pattern of
funding of Capex Projects in the first Control period is detailed below:
Particulars
Capex cost including
During Construction
Interest
Year 1
510.7
Year 2
866.7
Year 3
391.8
Year 4
583.7
Rs. Crores
Year 5
1585.0
Means of Financing
Debt
862.4
51.4
697.3
Internal Accruals
510.7
4.3
340.4
583.7
888.7
Funding Gap
The shareholders have indicated, vide Board Minutes dated 6th Sept 2011 that no further
Equity Infusion will be possible into the Airport and any scenario indicating Equity Infusion
requires the matter to be brought back to the BIAL Board.

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3.3 Cost of Debt

Following are certain key components and assumptions on existing facilities, new facilities
and existing & forecast cost of debt over the proposed five year regulatory period.
Existing Facility:
Initial phase of debt funding for the base airport project was substantially through rupee
loan. Amount remaining was funded through External Commercial Borrowing (ECB) loan.
Rupee loan funding arrangement was made for Rs. 1154.3 Crores and ECB loan from ICICI
Hong Kong for $ 50 mio.
The details split of existing loan funding is provided below:
Name of the Bank
Rupee Term Loan
State Bank of Mysore
Vijaya Bank
Canara Bank
Central Bank of India
Punjab National Bank
Sub-Total
ECB Loan
ICICI Hong Kong *
Sub-Total
Loan Availed (Rs. Crores)

221.8
301.8
280.7
250.0
100.0
1154.3
207.6
207.6
ICICI Hong Loan converted and presented at Exchange rate of $=Rs. 41.50
Certain key terms and conditions of existing rupee loan facilities & ECB loan are as
detailed below:
a. Existing rupee loan facilities
1. Repayment period: 10 years with a moratorium of 2.5 years
2. Repayment terms: Repayable in 30 quarterly installments commencing from 31st Oct
2010 and ending on 31st Jan 2018.
3. Interest pricing: Interest rate is driven by prevailing market conditions from time to time.
BIAL intends to arrive at a common interest rate for all lenders. However, few banks may
reset interest at different rates, and the highest interest charged by any lender at a given
point of time would be applicable to all other lenders, irrespective of their sanction rate.
4. Interest payment: Interest being serviced monthly.
5. Debt Service Reserve Account (DSRA): As per Loan Agreement, we are bound to maintain a
reserve of one quarter loan repayment amount & one month interest amount at all times
till final settlement of loans.

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6. Debt Service Coverage Ratio (DSCR) As per loan agreement, we are bound to maintain a
minimum DSCR of 1.4 till the expiry of the loan. The same will be reviewed by lenders on
a half yearly basis.
b. ECB loan:
1. Repayment period: 10 years with a moratorium of 2.5 years
2. Repayment terms: Repayable in 30 quarterly installments commencing from 31st Oct
2010 and ending on 31st Jan 2018.
3. Interest pricing: Six months libor + 150 basis points
4. Interest payment: Interest on ECB being serviced half-yearly, on 31st Jan and 31st July
every year.
5. Debt Service Coverage Ratio (DSCR) As per loan agreement, we are bound to maintain a
minimum DSCR of 1.4 till the expiry of the loan. The same will be reviewed by lenders on
a half yearly basis.
6. Debt Service Reserve Account (DSRA): As per Trust & Retention Account (TRA) agreement,
we are bound to maintain a reserve of one quarter loan repayment amount & one month
interest amount at all times till final settlement of loans.
II. Cost of debt for existing rupee loan facilities & ECB loan:
The existing cost of debt for rupee term loan & ECB loan till FY 2011-12 has been considered
as per actual borrowing rate for the respective years.
Future Expansion New Facility Requirements:
The details relevant to debt for funding future expansion (First control period- FY 2011-12 to
FY 2015-16) is covered under New facility.
Amount
(Rs. Crore)
1611.1
Debt facility
Proposed Rupee term loan
Forecast Cost of Debt For existing and Future facilities:

a. Existing rupee loan facilities
The forecast cost of debt for rupee term loan has been considered on the basis of expected
borrowing cost for each of the projected years of the first Control Period. The respective Cost
of Debt values for each year of the Control Period ranges from 11.5% to 13.5% as given below:
Cost of Debt (rupee loan)

2012
11.50%
2013
12.50%
2014
13.50%
2015
13.50%
2016
13.50%
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The weighted average cost of debt for rupee term loan upto FY 2010-11 was approx. 10 %.
This is rate has been recently reset upwards by rupee lenders at 11.5%.
Observing, the increasing trend in banks base rates, change in SBI PLR by 250 basis points
(from 12.25% to 14.75%) during August 2010 to Aug 2011, a nominal increase is assumed to
forecast the cost of debt for rupee loans.
b. ECB loan
The forecast cost of debt for ECB loan for the period from 2012-13 is assumed at 10.15%. This
is assumed based on indicative cost of complete hedge as conveyed by banks.
3.4 Cost of Equity

Cost of Equity has been computed based on the Capital Asset Pricing Model (CAPM) as
prescribed in Direction 5. As per the report received from KPMG, which is detailed as
Annexure 1 herewith, the estimated Cost of Equity for the first control period under Dual till
is 28.3%.
However, in line with the earlier submission the cost of Equity has been retained at 24.4% in
this revised submission also.
3.5 Fair Rate of Return

Based on the Projected cost of Debt as detailed above, a combined weighted average cost of
debt is computed based on weighted average cost of debt of the External commercial
borrowing and rupee term loans, which forms part of overall cost of debt. Borrowing received
from Government of Karnataka, as a State Support Loan has been considered as part of Debt.
The weighted average gearing for the first Control Period is calculated based on the projected
values of debt and equity, including accruals, at the end of each year.
FRoR is computed as mentioned below:
FRoR = (WG * Kd) + ((1-WG)*Ke)
Where:
WG Weighted average gearing of debt to total debt + equity
Kd Weighted average pre-tax cost of debt
Ke Post tax cost of equity computed using Capital Assets Pricing Model (CAPM) approach

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The FRoR calculation is mentioned in the table below:

Particulars
2012
2013
2014
2015
2016
Debt (in Rs. Crore)

Equity, including Reserves (in
Crore)
1461.7
2155.0
1983.2
1726.1
2148.7
849.8
1197.8
1600.5
2023.8
2595.6
D+E (in Crore)
2311.6
3352.8
3583.7
3749.9
4744.3
Kd
Kd
10.71%
10.71%
10.71%
10.71%
10.71%
Ke
Ke
24.40%
24.40%
24.40%
24.40%
24.40%
Individual yr gearing (G)
63.23%
64.27%
55.34%
46.03%
45.29%
Weighted average gearing (WG)

Weighted average Kd
FRoR
= (C*G)/(C)
Rd
Effective
value
53.42%
10.71%
17.09%
State Support Loan has been considered as a Viability Gap funding by Government of
Karnataka. While this has been considered as Interest Free Debt in the above computation,
we request that a return may be considered on the same by the Regulator.
3.6 Depreciation
Depreciation measures the decline in the useful economic value of the asset due to use or
obsolescence.
Depreciation Companies Act
Depreciation has been provided on Straight Line Method (SLM) on the capitalized value of
assets including Interest during Construction. The rates of depreciation prescribed in Schedule
XIV of the Companies Act, 1956 are considered at minimum rates. If Managements estimate
of the useful life of a fixed asset at the time of acquisition of the asset or of the remaining
useful life on a subsequent review is shorter than envisaged in Schedule XIV then the
depreciation is provided at a higher rate based on the Managements estimate of the useful /
remaining useful life.
The depreciation rates determined by the Management of BIAL are as set out below:
Category of Asset
Buildings
Engineering structures
Plant and machinery
Office equipment
Computers
Furniture and fixtures

Rate of depreciation per annum

3.33% - 5%
3.33% - 5%
4.75% - 16.21%
10.34% - 25%
16.21% - 25%
6.33% - 10%
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Category of Asset
Vehicles

9.5% - 20%
Assets individually costing up to Rs.5000/- are fully depreciated in the year of purchase and
depreciation on additions and disposals during the year is provided on proportionate basis.
Intangible Assets:
Intangible assets are recognised only if it is probable that future economic benefits that are
attributable to the asset will flow to the enterprise and the cost of the asset can be measured
reliably.
Computer software licences are capitalised on the basis of costs incurred to acquire and bring
to use the specific software. Operating software is capitalised and amortized along with the
related fixed asset. Other software is amortized, on a straight line method, over a period of
three to five years based on Managements assessment of useful life.
The Company had incurred certain legal and other expenses during the construction period
towards various agreements, viz. Concession Agreement, Communication, Navigation and
Surveillance and Air Traffic Management (CNS/ ATM) Agreement, Operations and Management
Services Agreement, State Support Agreement and Land Lease Agreement which are
capitalised as Intangibles Others and are amortized over a period of 30 years. The
amortization period and method used for intangible assets are reviewed at each financial year
end.
Depreciation Tax Laws
Depreciation has been computed on the asset value capitalized as per books as per the WDV
methodology as prescribed in Income tax Act at the rates specified therein, for the purpose of
computing Income Tax on the Profits earned.
Depreciation Prescription as per Direction 5
Depreciation has been computed on asset value computed which comprises of the projected
cost of asset and the Financing allowance computed as per the Directions. Rate of
Depreciation as determined by the company has been considered on such asset value,
considering a salvage value of 10% on the asset cost, in line with the specifications in
Direction 5.
For the purpose of considering Depreciation under Dual Till, depreciation has been
computed on Aero Assets based on the ratios defined and certification from auditors
submitted by us earlier in September 2011
The depreciation considered in the MYTP for the first control period is detailed below:
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Rs. Crore
Particulars
Depreciation as per regulatory
books
2011-12
2012-13
2013-14
2014-15
2015-16
100.8
106.0
136.9
162.8
159.5
3.7 Traffic
The traffic forecasts used in the financial statements are based on the actual traffic figures
for the period 2011-12 and the likely forecast made by the Management for 2012-13 and 201314. For the subsequent 2 years i.e 2014-15 to 2015-16, traffic is projected based on the
forecast growth % submitted by M/s Landrum and Brown (L&B) in August 2010. The report
provides annual forecasts of passenger traffic, air cargo tonnage, and aircraft movements for
the twenty year period of 2009-10 to 2029-30. The report presented growth under various
scenarios - Master Planning Traffic Forecast is taken as most likely scenario and included in
the financial forecasts. The report has been submitted earlier by us in September 2011.
However, we have also undertaken a revised study of traffic with L&B so as to capture the
recessionary trends that are witnessed with.
Other key assumptions for traffic estimates are as under:
Traffic band percentage for passengers is assumed to be 5%.

Domestic arrival to departure ratio for Passenger traffic is assumed at 50.75:49.25 for the
4 years from 2012-13 in the first Control Period. In case of international passengers, the
arrival to departure ratio is assumed at 50.09:49.91 for the first Control Period.
3.8 Non-Aero Revenues

Non-Aeronautical Revenue has not been considered for computation of the Aggregate Revenue
requirement, in line with the Dual Till approach.
3.9 Operating Costs

3.9.1 Personnel Costs
BIAL considers the human resource as its strongest asset and has a well-structured HR
department which caters to the manpower requirement and employee relations. The
headcount projections are based on the requirements for existing business and future
expansion plans. Head count is assumed to increase by 10% year-on-year from 2013-14, over
the likely headcount for 2012-13 for the balance period in MYTP.
Head count for the 5 years in the First Control Period for the existing Phase is detailed below:

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(in nos.)
Particulars
2011-12
2012-13
2013-14
2014-15
2015-16
Vice- Presidents
14
13
15
17
19
General Managers
33
40
44
49
54
Senior Managers
224
246
271
299
329
Managers
260
322
355
391
431
Executives
178
203
224
247
272
Assistants
25
10
11
12
14
735
836
922
1017
1121
10%
10%
10%
President / Sr Director
TOTAL
% increase Y-o-Y
An increase of 10% has been considered in Headcount for average increase of 1.4 Mio
passengers as per the Projections.
The projected additional head count requirement considering the future expansions planned
is detailed below.
In Nos
Level
Project
2014-15
T1 expansion
General Managers
Senior Managers
Managers
13
Executives
36
TOTAL
49
The table below represents the personnel cost for the first control period for Aero segment.
UOM 2011-12 2012-13 2013-14 2014-15 2015-16
Personnel cost Rs. Crore
63.7
74.2
93.9
116.0
139.9
Man power cost has been assumed to increase by 10% in first control period year-on-year
based on CPI increase and promotions. The increase in personnel cost considers the
competitive environment by addressing the attrition levels being currently experienced. The
airport industry is unique and requires skilled talent and is getting matured over the period of

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time. Also, Bangalore being an IT hub, cost of manpower and attrition rates are generally
higher as compared to other Metro cities.
Personnel cost relating to Aero Revenues, under Dual Till Mechanism has been derived as a %
to total Personnel cost based on the number of employees directly related to Aviation
services as defined in Budget and Cost Centre break-up
3.9.2 Operations and Maintenance Costs
BIAL aims at ensuring the activities relating to operation are maintained at best levels, by up
keeping the machinery and equipment. The state-of-the-art process implemented at BIAL also
aims at benchmarking the service quality levels to the international standards through
maintaining the facilities. For meeting the growing expectations, BIAL has set-up a separate
Engineering & Maintenance department which is one of the most crucial functions to ensure
that the airport functions in a safe, efficient and smooth environment.
Engineering and maintenance department basically meets the requirements of infrastructure
facilities on Landside, Airfield, utilities and maintenance of IT enabled services. Certain key
areas call for round the clock support and maintenance viz., Airside planning, Airport
Operation Control Centre (AOCC), Airfield Rescue Fire Fighting (ARFF), Baggage Handling
Systems, Safety Health and environment, terminal operations and so on.
IT and ITES are handled by a separate department having specialized skill set which provides
IT solutions for all the users at the airport.
Maintenance department looks after the entire repair and maintenance of airfield covering
runways, taxiways, aprons, parking bays, aerobridges, hangers, drains, general airfield
upkeep, power sub-stations, water and waste management and all allied airside
infrastructure for all the civil, electrical and mechanical works.
The Actual O&M expenditure for the first 3 years is plotted below:
Sl.
Particulars
No.
1
O&M Expenditure
2008-09
29.7
Actual
2009-10
29.7
2010-11
32.2
O&M expenditure forecast for MYTP, relating to Aero Revenues is detailed below:
Rs. Crore
MYTP - 1st Control Period
#
Particulars
2011-12
2012-13 2013-14
2014-15
1 O&M Expenditure - Aero
27.8
36.4
33.7
60.7

2015-16
66.7
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The O&M expenditure includes the operation and maintenance expenditure towards facilities
at landside, airfield, utilities, ICT and others.
O&M % defined for different categories of assets over the first control period is as under:
Asset Category
Phase 1
Phase 2
Landside
1.53%
1.92%
Airfield
0.73%
2.00%
Utilities
1.71%
3.17%
Increase in O&M Cost on account of increased wear and tear, expiry of defect liability period
and Y-o-Y WPI increases.
O&M relating to Aero Revenues, under Dual Till Mechanism has been derived as a % to total
O&M cost based on the analysis of underlying assets on which O&M activities are carried out
Overview of various Maintenance Activities carried out
A. Engineering & Maintenance:
Engineering and Maintenance Department is responsible for maintenance upkeep as well as
for the post AOD (Airport operation day) maintenance construction activities, with updated
design, as per suggested amendments to increase the service level in the airport. This
department looks after the entire repair & maintenance of the airport site.
Maintenance activity covers complete 4008 acres (approx.) of land area as required to be
maintained as per international regulations. It includes Air side, Land side & Utilities.
The activities for upkeep has special focus on runway, taxiway, aircraft stands at apron,
runway lighting system, High Voltage power network and operation/ serviceability of the
equipment installed in it, land side roads, parking, centralized HVAC for almost all
buildings.
The area of activity not only covers operation/providing of utility services (like water
supply, rain water storm water drains, sewage collection and treatment, power supply to
buildings, fire water pumping) but also keeping the service level high.
The departmental activities are not limited to Infrastructural engineering installations but
main elements of great concern in daily airport operation like nature conservation &
greenery, prevention of bird strike & cleaning, wild life conservation also.
Runway maintenance, is one of the main weekly maintenance activity performed on the
airport and covers almost all critical areas.

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Under the Maintenance department, there are various sub-functions which relate to the
maintenance of earmarked activities. These sub function (fund center) contribute to the
overall maintenance costs. The activities undertaken are unique which required specialized
engineering & technical skills. The main functions are as under.
AIRSIDE
Airfield Civil Division: is responsible to achieve 100% serviceability, ensuring effective
maintenance of Air side civil structures and development of infrastructure as per
safety & regulatory norms of an international airport. Air field civil department also
maintains clear, clean, distress free airfield pavement for its smooth operations. They
maintain civil structures established for air navigation equipment to achieve highest
efficiency.
The regular activities includes Runway friction test using Airport Surface Friction
tester
Rubber deposit removal using Track jet
Maintaining Airside pavements and structures with proper preventive, corrective
and emergency maintenance
Monitoring & maintenance of all distress reports of Airside Civil Structures.
Checking conspicuity of Airfield markings and repainting.
This department looks after regular maintenance & usually services the request of the
operation department for the following works:
Runway marking painting
Pavement repairs
Joint filling
Fencing
Gate repairs
Drain cleaning
Building painting
Fence maintenance etc.,
Most of these works are carried out based on requirement and past experience of the
domain department. The estimation of these expenses is based on the historical spends
achieved during the preceding year and the future likely trends.
Airfield Electrical division: Maintains the electrical installations in all airside zones which
are used for flight operations. The scope of maintenance task is enormous; it includes
Runway & Taxiway Lighting systems, Runway Edge, End/Threshold, Taxiway, PAPI,
Approach Lighting, Guidance Sign Boards, MCRs connected to Airfield ground lighting
circuits and its control & monitoring system. Other than this Airfield electrical
Department also maintains 400Hz Power Supply Units, Apron Lighting /High masts,
Perimeter/Street Lights, Stand Identification Sign Boards, Mobile Lighting Masts consists of

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DG, Airside Access sliding gates and LT supply of air side navigational & ancillary
buildings. Meeting the compliance to amendment to the regulatory requirements will also
be responsibility of the Team.
The preliminary cost of this function, comprises of regular maintenance related to AFL
including replacement of approach lights, power backup etc. Apart from above, necessary
inventory levels & consumables are also maintained internally as these are required for
conducting speedy & efficient maintenance.
Vehicle and Equipment division is responsible for the procurement, maintenance and
operation of the entire vehicle and Equipment fleet belonging to BIAL. The division
consistently strives towards creating and implementing process that not only enhances
service levels, but also results in cost effectiveness.
Major cost includes repair & maintenance of
CMC for Fire tenders & other supporting fighting vehicles
AMC for Followme vehicles
AMC for Runway rubber removal vehicles
AMC for Runway marking machines
AMC for Runway friction tester
Heavy earth moving machines & general consumables.

Apart from above, necessary inventory levels & consumables are also maintained internally
as these are required for conducting speedy & efficient maintenance.
Wildlife Control: This division is responsible to give safe flying environment for smooth
flight operations. This division provides/uses various bird scaring methods to avoid
aircraft bird collision/strike at the airside. The division takes care of approximately
1443 acres of area by using different bird scaring techniques during the day light
conditions with staff and an outsourced team of labors at the airside.
LANDSIDE
Landside Civil Division: Is responsible to maintaining the Civil Infrastructure in the
Landside which includes the Passenger Terminal Building, Access Roads & Parking Area,
ATC Tower, Administration Building, AC Plant Building, Power House North, MPSS Building,
Raw Water Pump House, Security Cabins, Sewage Treatment Plant, Fire Water Pump Main,
Fire Water Pump Satellite, Booster Pump House, Potable Water Pump, Switch Yard, Public
amenities Building, Police Help Center, Pass office, CISF Barak, Waste Dup Yard,
Horticulture Office & Stores, E&M Office, Project Offices of Airside Execution, Landside
Execution, Design. This division ensures seamless availability and 100% serviceability of all
civil facilities on a 24x7 basis.
Also, this team is responsible for executing Capex activities such as modification to
existing system, expansion & enhancement of facilities as and when the requirements

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arise along with taking up the maintenance activities for concessionaires like F&B,
Retailers etc., through annual maintenance contracts.
This department takes care of the entire repair & maintenance which includes AMCs for
Civil & Manpower.
Landside Building Maintenance (Electrical) is responsible for maintaining electrical
installation in Landside which includes Passenger Terminal Building, Administration
building, Airlines Building, Utility Building, Car Parking, Access Roads etc. This division is
also responsible for maintaining of emergency power supplies to data centers, other IT
Systems, Automatic doors, Screening systems, Signage's etc.
This department takes care of the entire repair & maintenance which includes AMCs for
Electrical & Manpower etc.
Mechanical division: The prime role of mechanical department is to ensure the
serviceability of various mechanical installations at airside & landside zones. The area
includes Heating, Ventilation & Air-Conditioning (HVAC), Baggage Handling System (BHS),
Fire Fighting (FF), Elevators & Escalators (E&E) and Passenger Boarding Bridges (PBB).
The major Maintenance expenditure here in for AMCs & CMCs is for
AMC for Baggage handling system maintenance
AMC for Passenger boarding bridges maintenance
AMC for Fire Fighting System and Elevators & Escalators
CMC for Air conditioning system
CMC for Elevator & Escalators
Mechanical maintenance of mechanical items etc.,
Apart from above, necessary inventory levels & consumables are also maintained
internally as these are required for conducting speedy & efficient maintenance.
Landside Services Landside Services Division takes care of Cleaning, Housekeeping, Pest
Control Services and Waste collection of entire airport on landside. This includes
Passenger Terminal Building (PTB), VIP Terminal & Landside Ancillary Buildings. Cleaning
of Car Parks, Main and Secondary Access Roads, Lawns and Building surroundings also falls
under the scope of Landside Services. The work also includes waste collection from the
buildings.
Major maintenance expenditure includes AMC for pest control, housekeeping & waste
collection.
Airside Services & Waste Disposal: The Division carries out every day cleaning tasks with
available resources at the Airfield as per adequate frequencies. Activity revisions are part

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of routine practice to acquire the way of excellence. Strategic Waste Management

Logistics are practiced in Waste collection and disposal process. Hazardous Waste
Management Practices are followed at par with best practices. Various activities are in
practice within the division like Scheduled Cleaning Operations, Machinery Maintenance,
Supervisory routine and Quality inspections, Customer Satisfaction Survey, Corrective
Action, Employee Trainings and Developments (including Service Providers), Skill based
Manpower Deployment, Material Management confined to C&WD, Waste Segregation and
Management.
Major maintenance expenditure includes AMC of contracts for pest control, housekeeping
& waste collection
UTILITIES
Power system: is responsible for the power distribution network established at the
airport in the form of 66/11KV substation at the airport and 11 KV ring systems routed to
various areas within the complex and supplying the power to various airport applications
as well as the requirements of concessionaries such as cargo, catering, fuel farm etc.
Considering the 24 X 7 operation of the airport, continuous availability of power supply
with high reliability is of prime importance.
Power system team caters to the regular preventive maintenance works of all the HV
equipment, DG sets & AMCs of operation maintenance of power system equipment.
Water & Waste water division: Potable water pump house, raw water pump house are
the key areas of operation for this division in which potable water is sourced from
Bangalore Water Supply and Sewerage Board (BWSSB) and distributed in airport, where
as the raw water is sourced from three sources viz., BWSSB, BIAL Sewage Treatment
Plant (STP) and Rain Water Harvesting System of Airport.
Environmental division: This division looks after the monitoring of ambient air quality
across the airport, noise monitoring and stake monitoring; maintenance of all storm
water drainage network etc. Also compliance of all environmental parameter to
statutory body like MoEF, KSPCB, forest dept. etc. are the responsibility of this team. All
the portable water & waste water parameters are tested internally with laboratory
which is approved by KSPCB.
Major maintenance expenditure is towards AMC of Water & waste water system, disposal &
scientific processing of solid waste.

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Information & Communication Technology Department (ICT):

Background
To put it in perspective, the business model followed in AAI Airports (till private airports
came in) was for respective airlines and concessionaires to design and deploy and manage
their own systems and services. This resulted in siloed approach and the airlines/
concessionaires were NOT leveraging the benefits that accrue with Shared Common
Infrastructure that most International Airports deploy now.
Bangalore International Airport being one of the Greenfield airports readily opted to don the
role of a Service Provider for ICT services and delivered services through the BIAL ICT
department. This approach has allowed all airlines and concessionaires to dispense with their
own dedicated IT set up be it outsource or insource; but to consume the services, serviced
through enterprise class devices and managed on 24x7 basis by BIA ICT department. The
Common Infrastructure also avoids disparate Infrastructure Installations at different points in
time in a Secure Airport Environment.
Also to be noted is the fact that the model chosen at BIAL is an Insource model for the Service
delivery and ICT department is fully responsible to carry out all the phases of Service Delivery
Plan, Design, Installation and Operations and Maintenance for all the ICT services deployed
on 24x7 basis. For the Terminal expansion many of the ICT services are delivered and Project
management is done by ICT department itself.
BIAL ICT from AOD 25th May 2008, has been the ICT service provider and has ensured to not
only match any IT Company as a service provider but has also set a benchmark for Airport
ICT services with consistent high availability and Service uptime of all ICT services
(99.99% or 100% uptime). As a service provider, BIA has adhered to industry standards and
benchmarks like ITIL standards and ISO 20000 standard for IT services and delivery models.
Most airports have engaged an External Service provider to extend common PAX services
(CUTE, CUSS and BRS) and charge Airlines directly on per boarded passengers basis.
However, BIAL is providing these services directly to the Airlines. BIAL has NOT raised any
Invoices on Airlines till date for these Passenger services directly. ICT department strives to
add value to Customer experiences and does engage with airlines and concessionaires
periodically and based on mutually agreed terms may introduce new services on an ongoing
basis, to enhance the value proposition both to the passengers as well to the airlines.
Objectives:
To provide a common Passenger IT services to enable all passengers to have the same
experience be it low cost airline or full fare airlines.
To keep enhancing Customer experiences and to meet life style needs with self service
offerings to make the airport journey seamless.
To provide Shared Common IT Infrastructure for Airlines and concessionaires for any
business applications.

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To provide an Integrated IP Platform for the end-users data exchange ( IP v4 & IP v6 )

To provide a Closed user group Communication platform - Radios
To provide various managed IT Services for Airlines and concessionaires from a
bouquet of ICT services.
To professionally manage on a 24x7 basis and benchmark BIA ICT to any other IT
service provider in the Industry for Quality of Service and Service Standards.
Bird eye view of IT Services
Some of the common ICT services that are extended to all clients in the Airport campus for
airport services and airport operations are listed here under:
Airline/ Passenger Services:
1. CUTE services
2. CUSS services
3. BRS services
4. Public Announcement services
5. Airport Operations Database and Flight Information services
6. Internet / Wi-Fi Services
7. Trunk Mobile Radio services
8. IP Voice services
9. FAS Fire Alarm Services
10. Electronic Safety and Surveillance Services CCTV and Access Control Services
To support, the above services BIAL ICT provides other Shared Infrastructure and Services like
Data Networks, IT security, Systems, Database services, Storage services, hardware services,
Help Desk Services etc.
Apart from the above listed common services, Tailored ICT services are provisioned based
on specific customer requirements and deployed and managed again on 24X7 basis.
The services are charged on pay per use basis for the backend services. For example if an
entity needs managed firewall services, it takes the services as a managed services like from
any other IT company/ service providers with similar SLAs.
The pricing model is based on aggregation of all service costs for a given IT service and costs
compounded over the total depreciation period. A service fee is computed and charged to the
cost unit provided (Radios, Data ports, Telephones, etc.,). ICT invoices are then raised on
monthly basis only for the Non-aviation services for their back offices.
ICT Team Verticals
Any entity (Airlines or concessionaires) would incur costs to maintain an in-sourced or
outsourced ICT service provider to manage be it CUTE, BRS, CUSS services or any other ICT
services.

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To manage centrally, BIA ICT department has multiple ICT sub-verticals to manage end to end
the ICT services on 24x7 basis and the same is listed below:
ICT Networks: (Passive) Responsible for the OFC (optical fiber networks) and Copper
networks in the campus as only BIAL is responsible to deploy and manage and lease it to
clients as needed.
ICT Networks: (ACTIVE) by aggregating the requirement of all clients in the campus, ICT
department has deployed Enterprise class Network systems (CORE Switches) and access
switches that enhances the performance in terms of throughput or very high MTBF, as
individual organizations could not have justified the capex cost for such a class of hardware
and services. So BIA ICT has fully leveraged shared Infrastructure by aggregating the
requirements of all users.
Wi Fi Networks- BIA has deployed Wi Fi both for Passengers in the Terminal and to facilitate
business applications and this fiscal has since deployed Wi Fi in the Tarmac as well to cater to
Airlines new generation aircrafts and business needs.
Note: Networks becomes the backbone for all ICT services and have deployed a converged IP
Networks.
ICT Voice Communications
IP Voice - ICT department has deployed IP Voice for all users and provides the handset
based on actual user needs and in location of their choice.
IP TMRS (TETRA) Trunk Mobile services are deployed for captive usage for airport users
to seamlessly coordinate for airside operations.
IP TV & MATV As an Airport ICT provides for TV for PAX in the Public viewing areas of
the airport/ Security hold area and for clients in their back office.
Master Clock this is required to synchronize all Servers for all services.
IT
- Information Security
Firewall services
Managed internet and Firewall services
Intrusion detection and prevention services
Enterprise UNIX & Storage Systems

Responsible up to L2 level for ALL Unix Systems- Underlying Infrastructure for AODB,
Middleware, ERP Services
Responsible up to L2 level for all Airport/ Enterprise Storage Systems
Responsible up to L2 Level for Backup systems
Hardware
Hardware support for All Windows based Servers, Desktops, Laptops, Peripherals like
Printers, OHP etc.

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Support for end-user computing environment.

Responsible for managing BIAL Helpdesk services
Enterprise Systems Microsoft Technologies
Microsoft Operating systems ( Servers 2008R2 & Desktops / Laptops ( Win 7)
MS Office 2010
MS Exchange 2010
MS Lync Server
Beta Partner for MS on new MS technologies
Airport Applications
Responsible to support Airport common services like CUTE, BRS, CUSS
Responsible to manage and support airport critical applications Airport Operational Data
base; Location Management and Resource allocation etc
SITA message handlers
ATC message handlers
Database Services (Oracle, DB2, MS SQL)
Responsible for the mission critical Airport Operations database
Other Databases supporting various IT Applications
Customer facing Airport portal
Enterprise Applications (Different technologies & programs)
Responsible for supporting the Middleware to interconnect disparate systems and
interchange and exchange data points. ( Deployed IATA AIDX OPENS standard)
In-house software applications like Emergency reporting application
Slot management Application support
ICT infra Systems
This group is required to maintain such ICT Infra Systems like
o Public Address system
o FAS Fire Alarm System
o FSS Fire Suppression System
o ACS Access Control System
o Physical Security System CCTV, Video Mgt & Video Analytics system (PIDS
Perimeter Intrusion system as and when it gets deployed)
o AMS Attendance Monitoring system
o CLS Casual Labour token system & Visitor Management system
ICT Infras Infra system
ICT Infra department is also tasked to support all IT components of the INFRA Solutions
like:

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o
o
o
o
BHS Baggage Handling system (IT hardware and software; PLC

(Programme Logic controllers)
BMS Building management systems (all IT components of the solution like above)
SCADA
AFL
ICT Business Group

To support all Business needs for all clients for different ICT service requirements
Tasked for Customer Relationship management
To conduct Surveys among customers
Customer fulfillment
ICT Services management
ICT Contract Management
ICT Stores
To manage Multiple ICT stores
Responsible for receipt and issuance of GRAN for all ICT assets
Responsible for all import / export requirements for ICT
Reconciliation of ICT assets
ICT Audit
ICT being a service provider, need to carry internal Audits and liaise with external
Auditors
To liaise with all Certification Audits and anchor the processes
To liaise with BIAL third party audit
3.9.3 Utility Costs
Utility costs comprise of power and water costs. The utility costs are after netting off of the
recoveries from the concessionaires. During the year 2013-14 increased power consumption is
due to the future expansion plans (i.e., apron & T1) and increased requirement by the
concessionaires.
The utility costs considered in the MYTP submitted for the first control period, relating to
Aero Revenues is detailed below:
Rs. Crore
Particulars
2011-12
2012-13
2013-14
2014-15
2015-16
Power
14.5
15.4
21.0
27.7
28.9
Water
1.7
1.8
2.5
2.6
2.8
16.2
17.2
23.5
30.3
31.7
TOTAL

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The increase in utility cost is mainly on account of increased consumption due to increased
passengers and future expansion plans.
3.9.4 Operation Maintenance and Support Fee
The OMSA between Flughafen Zurich AG (Unique), Switzerland and BIAL was entered on 8th
April 2005 for various services, as part of Project agreement to be provided by Unique to BIAL
as per Schedule-1 of the said agreement. The services include:
a. Staffing requirement at preparation phase,
b. Construction management support,
c. Preparation for start-up (i.e., security, safety management, emergency planning and
maintenance procedures),
d. Preparation of operational, commercial and financial management,
e. Environmental issues and
f. Operating plan
The agreed term of the agreement is upto the seventh anniversary from the date of
commencement of commercial operations of the Airport and period may be extended subject
to mutual agreement of the parties.
The fees payable to Unique comprises of 3 elements (Schedule-1 of OMSA):
(a) Input fees for engaging the services of experts and sub-contractors (input fee during
project implementation and operations will be Euros- 4239.28).
(b) Performance fees for achieving levels of economic and service quality performance
(not to exceed 2% of EBITDA in any one year); and
(c) Fixed fees as per the terms set out in the agreement (not to exceed Euro 857,200).
The OMSA fee considered in the MYTP submitted to AERA for the first control period, under
dual till is detailed below:
Particulars
2011-12
2012-13
6.18
10.17
OMSA fees (Rs. Crore)
2013-14
13.02
2014-15
15.47
2015-16
15.79
The increase is mainly on account of performance fee for achieving the economic levels and
service quality.
Requirement for truing up: While OMSA fee has been projected, based on the costs proposed
to be reimbursed, as OMSA Performance fee is based on the EBIDTA of the company, which is
directly dependent on Revenue, based on the Yield computed with WPI based increase, we
submit that the actual OMSA fee be trued up as a T+2 correction.

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3.9.5 Concession Fee

The Concession Agreement was entered into between Ministry of Civil Aviation, Government
of India and BIAL on 5th July 2004.
For grant of concession, exclusive right and privilege to carryout various activities as listed in
Concession Agreement (Article-3), BIAL has to pay to Government of India (GoI) a fee
amounting to 4% of Gross Revenue annually. The payment terms, Account, provisional
payment, interest and taxes have been detailed in Article 3.3 of the Concession agreement.
As per the Concession Agreement of BIAL (Article 3.3.5), the concession fee for first 10
financial years from the date of airport opening date (AOD) shall be payable in twenty equal
half yearly installments. The first such payment is due and payable in the 11th financial year
from starting of the operations of airport (i.e., 24th May 2008).
Based on the above, the concession fee provision considered, relating to Aero Revenues in the
MYTP submitted for the first control period is detailed below:
Rs. Crore
Particulars
2011-12
Concession fees
27.74
2012-13
28.97
2013-14
36.52
2014-15
45.10
2015-16
47.82
The concession fee @ 4% on gross revenue payable to GoI has been considered and provided as
year-on-year expenditure. The increase in the concession fees is on account of projected
increased gross revenue to BIAL.
Under Dual Till mechanism, Concession fee relating to Aero business has been computed
based on the revenues generated from Aero activities
Requirement for truing up: While Concession fee has been projected, based on the costs
proposed to be reimbursed, as this is directly dependent on Revenue, based on the Yield
computed with WPI based increase, we submit that the actual Concession fee be trued up as a
T+2 correction.
3.9.6 Lease Rent
The Land Lease Deed was executed between Karnataka State Industrial Investment and
Development Corporation (KSIIDC) and Bangalore International Airport Limited (BIAL) on 30th
April 2005, wherein KSIIDC leased / sub-leased to BIAL free from encumbrances and / or
encroachments, of all that piece and parcel of land measuring 3884 acres and 25 guntas and
further agreed to lease out 133 acres and 16 guntas together with all rights, liberties,
privileges, benefits, rights of way, paths, passages pertinent to the site to hold, possess, use
and enjoy the site and or any part thereof, in accordance with the provisions of the Deed.

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However, KSIIDC handed over the possession of 124 acres 6-guntas in the years 2006 & 2007
and subsequently an Additional Land Lease Deed dated 31st December 2011 has been executed
and registered.
As per the Land Lease Deed the lease rent payable to KSIIDC is nominal lease rent of one
rupee per annum up to Airport Opening Date (AoD) and lease rent @ 3% on the land value of
Rs. 211.7792 Crore on land parcel of 4008 acres and 6 guntas from AoD i.e., 24th May 2008 till
the end of 7 years, @ 6% for the 8th year after AoD and every year following 8th year lease rent
equivalent to preceding year lease rent plus @3%.
Based on the above, lease rent considered, relating to Aero Revenues, in the MYTP submitted
for the first control period is detailed below:
Rs. Crore
Particulars
2011-12
2012-13
2013-14
2014-15
4.90
4.90
4.90
4.90
Lease rent
2015-16
9.00
Under Dual Till mechanism, Lease rent relating to Aero business has been computed based
on the underlying asset base.
3.9.7 General Administration Costs
The General Administration costs category majorly includes costs towards Consultancy &
Legal, Travel and Office Costs. These costs are attributable basically to meet the day-to-day
running and administration of the airport.
The General Administration Costs considered, relating to the Aero Revenues, in the MYTP
submitted for the first control period is placed below:
Rs. Crore
Particulars
2011-12
2012-13
2013-14
2014-15
2015-16
Consultancy & Legal
9.52
12.16
13.37
14.71
16.18
Travel Costs
3.49
3.66
4.02
4.42
4.86
Office Costs
6.21
6.97
7.67
8.43
9.28
19.22
22.79
25.06
27.56
30.29
TOTAL
Normal increase of 10% y-o-y has been factored from 2012-13 forecasts to meet inflation and
other contingencies.
General Administration costs relating to Aero Services under Dual till mechanism has been
determined as a % of the total cost.

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3.9.8 Insurance
The total insurance premium cost projected for the first control period is as detailed below
and is determined based on the asset values in the respective years. Insurance cost relating to
Aero Revenues is detailed below
Rs. Crore
Particulars
Insurance
2011-12
2012-13
2013-14
2014-15
2015-16
2.76
3.00
3.63
3.72
3.80
Under Dual Till mechanism, Insurance cost has been considered in proportion to the value of
assets.
3.9.9 Marketing, advertising and others
The cost relating to Marketing, advertising and other expenses etc. projected for the first
control period is as detailed below.
Rs. Crore
Particulars
2011-12
2012-13
2013-14
2014-15
2015-16
Marketing and Sales

Collection
Cost
and
discounts
1.78
1.99
2.15
2.33
2.52
2.48
3.04
3.38
3.85
4.36
Bad debts
1.57
30.21
11.71
13.64
15.71
3.10 Taxation
Direction 5 details that the Tax payments projected for the first control period will be
computed and added as a reimbursement in arriving at the Aggregate Revenue Requirement.
The computation of projected income tax payments has been made based on the prevailing
Income Tax laws and rules.
Tax Computations also considered MAT provisions and 80IA of Income tax act. BIAL is eligible
for Income Tax holiday for a continuous 10 year period in the first 15 years. BIAL proposes to
avail of this benefit from 2012-13 and accordingly the tax payment projections for the first
control period is based on Minimum Alternate Tax computed on Book profits, as given below:
Particulars
Taxation
Payment

2011-12
2012-13
2013-14
2014-15
2015-16
105.6
78.4
92.0
98.8
134.2
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relating
Tax considered for reimbursement as part of Dual Till is tax computed on the Profit computed
from Aero Segment.
3.11 Pre-Control Period Shortfall for reimbursement

Based on the provisions in the Concession Agreement, various submissions with detailed
justifications were made to the Ministry of Civil Aviation (MoCA) in connection with levy of
UDF at BIAL. Further to the discussions, MoCA approved Rs.1070/-(incl. of applicable taxes)
per departing international passengers on adhoc basis during April 2008 to be applicable from
the Airport Opening Date (AoD i.e., 24th May 2008).
As desired by the MoCA, BIAL submitted various submissions for approval towards levy of
domestic UDF. Based on the justification furnished and detailed discussions, MoCA approved
Rs. 260/- (incl. of applicable taxes) as against proposed levy of Rs. 675/- per departing
domestic passengers on adhoc basis during January 2009.
BIAL had a carried forward loss of Rs.53.28 crore as of pre-AoD. Post approval for levy of UDF
on adhoc basis from AoD, Operations resulted in a loss of Rs.97.03 crore during the first year
of its operation (i.e., FY:2008-09) and the accumulated loss aggregated to Rs.150.31 Crore as
up to 2008-09 (as per the audited accounts). BIAL had ensured high quality in performance
standards and is expanding the infrastructural facilities to meet the increasing demand of
both passengers and airlines.
BIAL has submitted its Multi Year Tariff Proposal (MYTP) for determination of tariff by
considering fair return as well for the previous period (i.e., pre-control period FY 2008-09 to
FY 2010-11). By this it is ensured that the adhoc UDF so approved was re-tracked and
applicability of revised rate of UDF prospectively, after notification of regulatory powers to
the Authority. UDF is a revenue enhancing measure and the rate thereof is so determined so
as to ensure fair rate of return on the RAB.
It is quite evident that the adhoc UDF so approved was insufficient and BIAL was not able to
obtain a fair rate of return on RAB resulting in loss during the first year of operation itself.
It is essential to maintain and up-grade the facilities to provide / meet the international
performance quality standards as per IATA for all the stakeholders. One of the functions of
the Authority is to maintain the economic and viable operation of major airports. In order to
achieve this objective, BAIL needs to be duly compensated with assured return for the entire
period under consideration i.e., from inception.

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Hence a shortfall of Rs. 241.6 Crore has been claimed for the Pre-control period and added to
the Aggregate Revenue Requirement for the first year in the first control period. Regulatory
Building Blocks considered for the Pre-control Period is as detailed below:
Particulars
2008-09
2009-10
2010-11
Cost of Debt
6.66%
7.72%
8.12%
Cost of Equity
24.4%
24.4%
24.4%
Fair Rate of Return
RAB considered for Return

(Rs. Crore)
Return on RAB (Rs. Crore)
Depreciation (Rs. Crore)
Operating Costs (Rs. Crore)

10.08%
10.76%
11.36%
1499.7
1452.2
1352.7
129.2
156.2
153.7
92.8
109.6
109.9
119.1
132.4
140.9
Total
Basis of Claim
Cost of Debt computed
Interest cost as per
Financials / Average
Debt balance
FRoR
has
been
computed for each year
by computing Equity
considered
for
the
purpose of Gearing has
been
computed
considering
Equity
excluding losses in case
of Accumulated P&L
having Debit balance
and
including
P&L
balance in case of
Accumulated P&L being
in credit.
Average RAB as per
books, relating to Aero
Assets,
has
been
considered except for
1st year of operations
where the closing RAB
has been considered
proportionate to the
number of days in
Operation of the airport
(312 days of 365 days)
FROR % * RAB average
Depreciation accounted
in books has been
considered
for
reimbursement
proportionately at % of
the Aero Assets to total
assets,
80% of the Operating
Expenditure
as
per
Financial
Statements
has been considered as
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Particulars
2008-09
2009-10
2010-11
Total
Basis of Claim
a reimbursement, as
relating
to
Aero
business,
excluding
Forex
losses.
Bad
debts/ waivers have
been claimed back as
part of the shortfall
Income Tax (Rs. Crore)

Aggregate
Revenue
Requirement (Rs. Crore)
Less: Aero Revenue from
Operations
Opening P&L Shortfall
Net Shortfall
Add: OMSA and Concession

Fee Grossed up
0.7
7.0
23.7
341.8
405.3
428.2
(170.6)
(290.9)
(331.4)
114.4
96.8
80% of the Total tax

payment (both charged
off to P&L and carried
as credit in books) has
been considered for
claim, as relating to
Aero business
As per financials
53.3
224.5
435.7
As OMSA Performance
fee and Concession fee
is payable on the
shortfall considered as
Revenue
14.3
7.3
6.2
Total claim
238.8
121.7
103.0
463.5
Compounded
291.1
134.7
103.0
528.8
For Dual Till - Costs, Asset base for computing Return on RAB etc. have been considered as
follows:
RAB As per the certified Asset bifurcation ratio
Depreciation In the ratio of assets
Costs 80% considered as Aero out of the total costs
3.12 WPI and CPI
The WPI figures are derived based on the forecasted Producer Price Index (PPI) values as
provided by analysts projections.
The forecasted Consumer Price Index (CPI) values for the Control Period are considered
on the basis of analysts projections.
The forecasted values for the first Control Period are shown in table below:

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Year
WPI
PPI
CPI
2011-12
8.9%
7.2%
6.8%
2012-13
7.6%
7.1%
6.5%
2013-14
6.2%
5.6%
6.0%
2014-15
6.0%
5.4%
5.7%
2015-16
5.8%
5.2%
5.5%
3.13 Audit of Financial Model

Financial Model has been audited by an independent auditor, as per the requirement and the
final audit report is enclosed herewith as Annexure 3

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4 Financial statements
4.1 Financials - Aggregated
Table 4-1: Profit and Loss Account (INR Crores)
S.N.
1
3
4
5
6
7
Particulars
Revenue
Revenues from Regulated Services
Revenues from other than Regulated Services
Personnel
Concession Fee
Lease Rent
Utilities
Insurance
Marketing, Advt. and others
Waivers and Bad Debts
OMSA Fee
Other income

2011-12
2012-13
2013-14
2014-15
2015-16
808
236
791
230
916
256
1,085
280
1,278
294
(79)
(39)
(42)
(6)
(22)
(4)
(5)
(2)
(11)
(23)
812
(135)
677
(156)
521
(115)
406
406
(92)
(49)
(41)
(6)
(23)
(4)
(5)
(30)
(18)
(27)
725
(142)
583
(148)
435
(87)
348
348
(117)
(49)
(47)
(6)
(31)
(5)
(6)
(12)
(20)
(29)
849
(174)
675
(172)
503
(101)
403
403
(145)
(83)
(55)
(6)
(40)
(5)
(7)
(14)
(23)
(32)
956
(206)
749
(220)
529
(106)
423
423
(174)
(91)
(63)
(12)
(42)
(5)
(7)
(16)
(26)
(36)
1,100
(210)
890
(175)
715
(143)
572
572
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Table 4-2: Balance sheet (INR crores)
S.N
2011-12
2012-13
2013-14
2014-15
2015-16
INR Crores
2020-21
385
385
385
385
385
385
385
385
385
385
385
385
60
465
813
1,216
1,639
5,112
Profit & Loss Account for the Period
406
348
403
423
572
706
Total Profit & Loss Account

C)Loan Funds
465
813
1,216
1,639
2,211
5,818
1,128
1,821
1,650
1,393
1,815
8,501
Unsecured Loan - State Support
334
334
334
334
334
233
D)Working capital borrowings
60
76
87
243
TOTAL SOURCES OF FUNDS

Application of Funds
A) Fixed Assets
2,312
3,353
3,644
3,826
4,832
15,180
Gross Block
2,044
2,240
3,845
3,987
4,068
16,216
less: Accumulated Depreciation
(517)
(659)
(833)
(1,039)
(1,249)
(4,104)
Net Block
1,527
1,581
3,011
2,948
2,818
12,113
542
1,212
441
1,946
Particulars
Source of Funds
A)Shareholders' Funds
Capital
Additional Equity brought in
Total Shareholders' Funds
B)Reserves & Surplus
Profit & Loss Account Brought Forward
Secured Loans (incl. ECB Restatement)
Capital Work in Progress

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Annexure II
Current Assets, Loans and Advances

Inventories
15
16
18
30
32
64
Sundry Debtors
162
185
208
208
199
486
Other Current Assets , Loans and Advances and others
198
198
198
198
198
198
375
399
424
436
429
748
55
57
66
82
80
290
293
452
541
378
86
2,838
Project Creditors
98
14
14
14
14
14
Trade Creditors
31
19
22
28
32
91
148
72
72
72
72
72
98
139
186
241
303
526
Other Liabilities
105
105
105
105
105
105
Current Liabilities and Provisions
481
349
399
459
527
808
Net Current Assets
243
560
632
437
68
3,067
2,312
3,353
3,644
3,826
4,832
15,180
Cenvat Credit
Total Current Assets, Loans and Advances
DSRA Reserves
Cash and Bank Balances
Less : Current Liabilities and Provisions
Security Deposit from Concessionaries

Concession Fee Payable
Misc. Expenditure (not written off or adjusted)

TOTAL APPLICATION OF FUNDS

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Table 4-3: Cash Flow Statement (INR Crores)
S.N.
1
4
5
6
Particulars
Cashflow from operating activities
Net Profit before taxation
Adjustment for :
Adjustment for :
(Increase)/ Decrease in Inventories, Debtors and Other Current Assets
Increase/ (Decrease) in Current Liabilities and Provisions
(Increase)/Decrease in DSRA Reserves
Increase/(Decrease) in Working Capital loans
Net Working capital changes
Cash generated from Operation
Cash flow from investing activities
Purchase of Fixed Assets
Net Cash from/ (used in) Investing Activities
Cashflow from financing activities
Changes in Share Capital
Proceeds from LT Debt incl. Loss on restatement/Fin Lease
Proceeds from State Financial Support
Net Cash from/ (used in) Financing Activities
Net change in cash and cash equivalents
Cash and Cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period

2011-12
2012-13
2013-14
2014-15
2015-16
406
348
403
423
572
135
541
142
490
174
576
206
630
210
782
(139)
181
(55)
(14)
527
(23)
(132)
(2)
(157)
333
(25)
50
(9)
60
76
652
(12)
61
(16)
16
48
678
7
67
2
12
88
870
(511)
(511)
(867)
(867)
(392)
(392)
(584)
(584)
(1,585)
(1,585)
(158)
(158)
(141)
434
293
693
693
159
293
452
(172)
(172)
88
452
541
(257)
(257)
(163)
541
378
423
423
(292)
378
86
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4.2 Calculated Aggregate Revenue Requirements (ARR)

The Aggregate Revenue Requirement (ARR) has been computed in line with the guidelines /
Direction No. 5 / 2011-12 after taking into account the capital expenditure on major
expansion projects viz., West Apron, T1 expansion, 2nd Runway, T2 expansion, T2-Apron,
Forecourt roadways and landside development based on the revised master plan duly
approved by the Board.
As per AERA guidelines, BIAL had submitted the MYTP during July/Sept 2011 in Single till
approach. BIAL had also submitted the MYTP under Dual till approach based the provisions of
the Concession Agreement and various Project Agreements which provides the framework for
tariff determination.
The ARR so calculated for a given control period by BIAL based on determination of the below
mentioned Regulatory Building Block components for Dual till approach:
a.
b.
c.
d.
Fair Rate of Return applied to the Regulatory Asset Base (FRoR x RAB)
Operation and Maintenance Expenditure
Depreciations
Taxation
The ARR calculated in the MYTP under Dual Till submitted is furnished below:
(Rs. Crore)
Till
Dual Till
2011-12
1128.1
2012-13
638.7
2013-14
824.4
2014-15
1036.4
2015-16
1102.4
ARR for the first year of the first control period i.e., 2011-12 has considered the pre-control
period under-recoveries (i.e., for FY: 2008-09 to FY: 2010-11).

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Annexure 1: Cost of Equity report by KPMG

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Annexure 2: Audited Financial Statements 2011-12

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Annexure 3: Financial Model audit report

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11th Annual Report 2011-12

Contents
Board of Directors
03
Directors Report
05
Auditors Report
15
Annexure to Auditors Report
19
Financial Statements
-
Balance Sheet
24
Profit & Loss Account
25
Cash Flow Statement
26
Significant Accounting Policies
29
Notes on Accounts
37
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Board of Directors
Mr. S V Ranganath, IAS - Chairman
Dr. G V Krishna Reddy Vice-Chairman
Mr. G V Sanjay Reddy Managing Director
Mrs. G Indira Krishna Reddy
Mr. Krishna Ram Bhupal
Dr. A Ramakrishna
Mr. L V Nagarajan, IAS
Dr. Rajkumar Khatri, IAS
Mr. Alok Shekhar, IAS
Mr. V Somasundaram
Mr. Klaus Kolof
Mr. Johannes Schmidt
Mr. Pramod Kumar Bhambani
Mr. Daniel Schmucki
Assistant Vice President &

Head Finance & Accounts
and Company Secretary
Mr. S Chandrasekar
Statutory Auditors
M/s. B S R and Company, Bangalore
Internal Auditors
Deloitte Touche Tohmatsu India Private Ltd.,
Registered Office
:

Administration Block,
Bengaluru International Airport
Bangalore 560 300
Tel: +91 80 6678 2620, +91 80 6678 3366
Website
http://www.bengaluruairport.com
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DIRECTORS REPORT
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The Directors have the pleasure in presenting the eleventh Annual Report of Bangalore International
Airport Limited (the Company or your Company) for the financial year ended on 31st March
2012.
1. FINANCIAL RESULTS 2011-12
The details of the key financial results are summarized as follows:

(Rupees in Crores)

Financial Year
2011-12
Income
Expenditure

635.5
Financial Year
2010-11
586.6
Operating Expenses
205.1
176.1
Finance cost
134.9
143.6
Depreciation
134.8
134.7
474.8 454.4

Profit/(Loss) for the year
Less: Provision for taxation
Profit/(Loss) after tax

Add: Profit/(Loss) brought forward

Profit/(Loss) carried forward to Balance Sheet
160.7
132.2
0.0
(0.1)
160.7
132.1
59.5
(72.6)
220.2
59.5
Financial Overview
During the year under review, your Company was able to achieve a turnover of Rs.635.5 crores
(increased by 8% compared to the previous year) and has reported a profit after tax of Rs.160.7 crores
compared to the profit of Rs.132.1 crores reported during the last financial year.
Allotment of Shares: During the year under review, no fresh allotment of shares took place.
2. CHANGES IN SHAREHOLDING IN BIAL:
During the year under review, Siemens Project Ventures GmbH (Siemens) transferred 53,844,000
(Fifty Three million, Eight hundred and Forty Four thousand) equity shares, aggregating to 14% of
the total equity of BIAL in favour of Bangalore Airport & Infrastructure Developers Private Limited
(BAIDPL), a GVK group Company. This has made BAIDPL the single largest Shareholder in the
Company with 43% share in aggregate.
3. OVERVIEW/INDUSTRY OUTLOOK
Traffic
During the year, your Company handled 119,033 Aircraft Movements (ATMs) which is 6.5% higher
than the previous year. The number of passengers who travelled through the Bengaluru International
Airport (the Airport) during the year was 12.71 million, which is higher by 9.3% from the previous
year. All major airlines increased frequencies to existing metro and non-metro airports in the country
along with connecting new domestic destinations. In 2012, low cost carriers witnessed increase in
domestic market share to 49%, the same is expected to grow and drive demand for domestic air travel
from Bangalore.
International ATM traffic showed a good growth of about 7.8% during the year. Bangalore attracted
four new international airlines in the year. Bangkok Airways and Tiger Airways connected Bangalore to
Bangkok and Singapore respectively. International traffic witnessed consistent performance on major
routes such as Middle East and Europe while traffic to North America and Asia have witnessed a steady
growth. The introduction of new services to Asian destinations by domestic airlines and international
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Annexure II
low cost carriers are expected during the next financial year.
Overall cargo traffic witnessed a growth of 1% due to slowdown in the global cargo business. Two new
cargo freighters, Cathay Pacific cargo and Aero Logic Cargo, started their operations to Bangalore.
Cargo tonnage handled by BIAL during the year was at 224,994 Metric Tons.
Regulatory Scenario
The Airport Economic Regulatory Authority (the AERA) had issued various Orders and Guidelines
on tariff determination. Your Company has appealed before the AERA Appellate Tribunal challenging
the various Orders and Guidelines 2011 (Directions 4 and 5) issued by AERA including the Single Till
approach. The said Appeals are pending for adjudication before the AERA Appellate Tribunal.
The Writ Petition filed by Federation of Indian Airlines challenging the ground handling policy of the
Ministry of Civil Aviation came to be dismissed by the Honble High Court of Delhi. Federation of Indian
Airlines has challenged the same before the Honble Supreme Court of India. The Honble Supreme
Court has granted Status Quo.
4. OPERATIONS UPDATE
The key highlights of the operations of your Company are as follows:
Financial Year 2011-12
Air Traffic Movements (Nos)

Number of passengers
Cargo (Metric Tons)
Financial Year 2010-11
119,033
111,787
12,710,531
11,634,035
224,994
222,783
Airport Operations continue to be smooth, efficient and uninterrupted during this financial year. Your
Company has shown consistency in its delivery of quality of operations at the Airport with respect to
defined performance parameters and targets.
Your Company has managed additional traffic demand with ease and continued to improve passengers
experience, safety and efficiency. Total number of passengers handled in the Airport during Financial
Year 2011-12 was 12.71 million. The Airport terminal & apron expansion is in progress to cater to
growing demand anticipated in future.
Your Company successfully conducted an Anti-Hijack mock drill for the year 2011 dealing with
unlawful interference to Civil Aviation, on September 23rd 2011 with the cooperation of Central
Industrial Security Force and other government and private stakeholders. The Aerodrome Committee
Meeting for the period January June 2012 was convened on 15th February 2012 to discuss and decide
date for conducting the next mock drill for the year 2012 which is fixed for 4th September 2012.
Your Company has also constructed a Police Help Centre at BIA which was inaugurated by Mr. Jyothi
Prakash Mirji IPS, Commissioner of Police, Bangalore on 23rd November 2011.
Management of Performance and Service Quality
Setting itself very high standards of performance, your Company monitors and measures the
performance of operations at the airport continuously. Such a quality management program has
yielded rich dividends in terms of high performance in operations.
Some of the highlights of operational performance at the airport were:

Your Company has achieved on time departure of 82.3% of the flights from the airport.
Your Company has received Airport Service Quality (ASQ) rating of 4.24 on a scale of 1 to 5 for
7
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calendar year 2011 and was ranked 53 among 180 participating airports worldwide.

Your Company achieved an overall mean-score of 4.24 against the target mean-score of 4.15
for 2011.
Your Company has initiated several process improvement initiatives to facilitate the smooth
transition of passengers and this is reflected in the performance of key processes during the
year. The average queue waiting time across the various measured processes were well below
the Company targets.
Your Company has invested over 6000 hours of time in measuring the key passenger impacting
processes and has measured over 60,000 passenger waiting times during the year.
The average pre-embarkation security queue waiting time was 6.37 mins for domestic
passengers and 4.04 mins for international passengers.
The average check-in queue waiting time was 4.07 mins for domestic passengers and 6.38 mins
for international passengers.
The average immigration queue waiting time was 5.27 mins for departing passengers and 4.46
mins for arriving passengers.
Your Company has entered into a new contract for refurbishment and upkeep of the Baby Care
Rooms at the Passenger Terminal Building at no cost to the Company.
Safety assurance & promotion components of Safety Management System (SMS) were effectively
implemented by regular detailed audits on all Operators/Concessionaires. DGCA recognizes
the Company as the first airport in India to be fully compliant with SMS implementation.
A joint Fire & Life safety survey audit was conducted on multiple parameters using sampling
methodologies from 12 to 15 Jul 2011 to assess the awareness and preparedness level of all
staff working at the Passenger Terminal Building. It was found that 88-93 % staffs were aware
of fire prevention methods and practice for life safety measures during emergency situations.
Full scale mock emergency exercise Challenger 2011 was successfully conducted on 07 Jun
2011 to test & validate the processes, procedures, systems, human readiness and response to
aircraft emergency/contingencies outside the airport but within its vicinity. The exercise was
of immense value in linking the stakeholders and familiarizing the emergency procedures in an
outside boundary crash scenario.
Certifications, Recognitions and Awards for Bengaluru International Airport

Dragon Air honored the Company for the excellent support rendered to their Bengaluru Team,
which enabled them to win the Best Airport Performance Award -2011 among Dragon Airs
entire network for the second consecutive year.
The Company was honored Computer World Honors Award in July 2011 at Washington.
CISO Chief Information Security Officer (IT Security) was for the first time constituted in India
and your Company received this award in May 2011
Your Company achieved as the second airport worldwide the ISO 25999 Certification for Business
Continuity Management
Your Company has undergone Certification audit for the continuing ISO standards currently
held by the company.
5. PROJECT UPDATE
The expansion of the existing Terminal 1 has been designed to enhance the operational performance in
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order to handle, inter-alia, the increase of passenger traffic from the current 11.2 million passengers
up to 20 million passengers annually.
The enhanced Terminal 1 will be spread over an area of 150,556 square meters. The architectural
concept is based on the idea of a dramatic swooping and curving roof, under which the enhanced
Terminal 1 is located. The roof is the unifying element for new and existing facilities, bringing both
together as one composition. It also forms a dramatic canopy to the main entrance, offering passengers
and public a giant covered area, protected from the vagaries of weather. The undulating wave form
provides the existing Terminal 1 with greater physical presence. The architectural concept is to ensure
that the existing building has a new look.
New Terminal 1 will significantly enhance passenger comfort and experience with the addition of 8
passenger boarding bridges, one contact stand for A380 aircraft, 1618 additional seating, 12 additional
immigration counters and 37 additional check-in counters.
The new expanded Terminal 1 will also showcase Karnatakas culture and the rich heritage through a
carefully curated art programme.
Project Progress
L&T was selected as the EPC contractor following an international competitive tendering process. The
contract was signed on 30 June 2011 and the Notice Proceed was issued on 1 Aug 2011.
The construction is well underway. Most of the new terminal facilities are scheduled to complete and
made operational in a phased manner starting in January 2013.
6. COMMERCIAL UPDATE
The total commercial revenue grew by 25% during the year. The share of non-aviation revenue
increased from 39% to 41% compared to the previous year. The revenue per departing passenger was
further increased by 6% and is at Rs. 191/- per departing passenger [includes Retail, Food & Beverages
(F&B), advertising and landside services].
Domestic and International Security Holding Area (SHA)
There was an increase of 17% in revenue per departing passengers, domestic as well as international.
By refining the menus in the F & B concepts in the Domestic SHA and by augmenting the seating areas,
an increase of 48% in the F & B revenues were noted. 17% increase in the F & B revenues was also seen
in the international SHA. The retail revenues grew by 37% and 27% in the domestic and international
areas. This was possible after all betterment in layout as well as offers and promotions.
Curb and Plaza area:
The revenues generated by retail & F&B in the Curb and Plaza areas increased by 9% and 26%
respectively. RFPs are released in order to modify all existing concepts. The landside services have
seen an increase of 22% during the financial year. Commercial department successfully completed
the Taxi tender process. Meru Cabs Private Limited & Mega Cabs Private Limited were awarded with
concession agreement to operate air-conditioned taxis for a 4 year term from June 2012. The tender
process is expected to result in a 60% increase to existing taxi revenues.. The advertising revenue has
increased by 43%, due to new contracts and will increase more in the financial year 2012-13.
7. HUMAN RESOURCES
The Human Resource (HR) of your Company progressed well during 2011-12 in terms of Headcount and
building the organization capability to take on new horizons for future. Headcount has risen from 710
to 792 as on 31st March, 2012.
Your Company has implemented on-line performance management system in ERP platform with
employee portal during this financial year. To support organizational requirements and career
9
Annexure II
development of employees, implemented key initiatives such as internal job postings (IJP) and annual
promotion cycle.
During this financial year your Company has initiated organization-wide goal setting exercise with
inter and intra linkages with various stake holding departments.
The information required under Section 217(2A) of the Companies Act, 1956 and the Rules made there
under, is provided by way of an Annexure to this Report.
8. DISCLOSURE OF INFORMATION PURSUANT TO SECTION 217(1)(e) OF THE COMPANIES ACT,1956
Energy conservation & Technology absorption
Your Company has taken several energy conservation initiatives during the year like replacement of
Compact Fluorescent Lights and halogen lamps with Light Emitting Diodes type illuminaries, installation
of solar lighting systems in the remote substations throughout the Airport (Zero energy consumption)
and installation of BMS system for lighting control inside as well as outside the terminal building.
As per the latest guidelines of Bureau of Energy Efficiency, your Company has its own energy
management organization in place consisting of certified energy auditor.
Your Company has the credit of receiving the CII National Award for Excellence in Water Management
and Most Innovative (Top award) Environmental Best Practice Award 2012.
Your Company has received the distinction of being the first company in India to be certified as a green
company as per the CII GreenCo rating system.
Your Company has also bagged the credit of being first Terminal Building in the world to be rated LEED
Silver to get certified under Existing Building (EB) category. Your Company has been certified by
KSPCB for Analyzing/testing of water and Waste water parameter.
With a view to energy efficiency and reducing carbon footprint your Company, has announced its
partnership with Karnataka State Biofuel Development Board, Govt. of Karnataka for its operations
at Airport.
Foreign exchange earnings & outgo:
The foreign exchange outgoings during the year related mainly to the procurements of airport services
as part of day-to-day operation. Details of foreign exchange earnings/expenditure have been furnished
under Note no. 25 Note to Accounts.
9. PUBLIC DEPOSITS
Your Company has not accepted any deposits and hence no amount of principal or interest was
outstanding as on the date of Balance Sheet.
10. DIRECTORS
As per section 255 of the Companies Act, 1956 read with Article 108 (1) of the Articles of Association
of your Company, at least two-third of the Directors of your Company are liable to retire by rotation.
Pursuant to section 256 of the Companies Act, 1956 read with Article 108(3) of the Articles of Association
of your Company at-least one-third of such Directors must retire from office at every Annual General
Meeting of the Members of the Company. The retiring Directors are eligible for re-appointment.
Mr. L V Nagarajan, Mr. Klaus Kolof and Mrs. Indira Krishna Reddy retire by rotation at the ensuing
Annual General Meeting and being eligible, offer themselves for re-appointment.
During the year under review, Mr. Satish Chander Chhatwal, representing Airports Authority of India
resigned from the Directorship of BIAL with effect from 30th April 2011 and Mr. V Somasundaram
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Annexure II
was appointed as a Director of your Company with effect from 23rd May 2011 in the casual vacancy
created by resignation of Mr. Satish Chander Chhatwal. Dr.Rajkumar Khatri, IAS, nominee of Karnataka
State Industrial Investment and Development Corporation Limited has been appointed as Director
with effect from 17th June 2011 in the casual vacancy created by resignation of Mr. V Madhu. Dr.
Wolfgang Stefan Bischoff, Director representing Siemens Project Ventures, GmbH resigned from the
Directorship of BIAL with effect from 21st October 2011 and Mr. Johannes Schmidt was appointed as
a Director in the casual vacancy created by resignation of Dr. Bischoff with effect from 21st October
2011.
Consequent to divestiture of 14% equity stakes by Siemens in your Company in favour of BAIDPL,
Mr. Christian Peter Bindl and Mr. O P Narula, representatives of Siemens Project Ventures, GmbH
resigned from the Directorship of BIAL with effect from 20th October 2011 and Mr. Krishna Ram Bhupal
was appointed as an Additional Director on the Board of your Company representing BAIDPL with
effect from 20th October 2011.
The Board places on record its appreciation for the valuable services rendered by the outgoing
Directors, Mr. Satish Chander Chhatwal, Dr. Wolfgang Bischoff, Mr. Christian Peter Bindl and Mr. O P
Narula during their term as Directors of your Company.
11. CORPORATE GOVERNANCE
Your Company strongly believes that the spirit of Corporate Governance goes beyond the statutory
form. Sound Corporate Governance is a key driver of sustainable corporate growth and long-term
value creation for the stakeholders and protection of their interests. Your Company endeavors to
meet the growing aspirations of all stakeholders including shareholders, employees and customers.
Your Company is committed to maintain the highest level of transparency, accountability and equity
in its operations. Your Company always strives to follow the path of good Governance through a broad
framework of various processes.
Whistle Blower Policy
Your Company has established a mechanism for employees to report concerns about unethical
behaviors, actual or suspected fraud or violation of the Companys Code of Conduct. The mechanism
also provides for adequate safeguards against victimization of employees who avail of the mechanism
and also provide for direct access to the Chairman of the Audit Committee. The employees are
informed of this policy through appropriate internal communications. None of the employees have
been denied access to this facility.
12. AUDIT COMMITTEE
The Audit Committee presently has 3 Directors as its members viz., Mrs. Indira Krishna Reddy,
Mr. Pramod K Bhambani and Mr. Alok Shekar. The role, terms of reference, the authority and power of
the Audit Committee are in conformity with the requirements of Section 292A of the Companies Act,
1956.
The Audit Committee meets periodically with the Internal Auditors and the Statutory Auditors to
review the manner in which the Auditors are discharging their responsibilities and to discuss auditing,
internal control and financial reporting issues. To ensure complete independence, the Statutory
Auditors and the Internal Auditors have full and free access to the members of the Audit Committee
to discuss any matter of substance. Three meetings of the Audit Committee were held during the
financial year 2011-12.
13. AUDITORS AND THEIR REPORT
M/s. BSR and Company, Chartered Accountants the Statutory Auditors of your Company, hold office
until the conclusion of the ensuing Annual General Meeting of the Company and have given their
11
Annexure II
consent for re-appointment. The Shareholders will be required to elect the Statutory Auditors for
the year 2012-13 and fix their remuneration. Your Company has received written confirmation from
M/s. BSR and Company, Chartered Accountants to the effect that their appointment, if made, would
be in conformity with the limits prescribed under section 224 (1B) of the Companies act, 1956.
The Board recommends the reappointment of M/s. BSR and Company, Chartered Accountants as the
Statutory Auditors of the company.
The observations of the Statutory Auditors, together with the Notes on Accounts referred to in the
Auditors report, are self-explanatory and do not call for any further explanation from the Directors.
14. DIRECTORS RESPONSIBILITY STATEMENT AS REQUIRED UNDER SECTION 217 (2AA) OF THE
COMPANIES ACT, 1956
Pursuant to the requirements specified under Section 217 (2AA) of the Companies Act, 1956, with
respect to the Directors Responsibilities Statement, it is hereby confirmed that;

i. in the preparation of the Annual Accounts for the financial year ended 31st March, 2012,
the applicable Accounting Standards have been followed along with proper explanations
relating to material departures;
ii. the Directors had selected such accounting policies and applied them consistently and made
judgments and estimates that are reasonable and prudent so as to give a true and fair view
of the state of affairs of the Company as at 31st March, 2012 and of the profit or loss of the
Company for the said period;
iii. that the Directors had taken proper and sufficient care for the maintenance of adequate
accounting records in accordance with the provisions of the Companies Act, 1956 for
safeguarding the assets of the Company and for preventing and detecting fraud and other
irregularities; and
iv. the Directors had prepared the Annual Accounts for the financial year ended 31st March,
2012 on a going concern basis.
15. CORPORATE SOCIAL RESPONSIBILITY (CSR)

Your Company has a strong focus on Fulfilling its Corporate Social Responsibilities. As part of CSR, your
company works on three core issues- Environment, Safety and Community Service. The CSR activities
are primarily led by the CSR team, and supported by the 8 member core committee and over a 100
registered volunteers. Over the years, most of the CSR activities executed have seen strong support
and involvement of volunteers at all levels. In the year 2011, the volunteers clocked more than 280
hours of volunteering as part of various CSR activities.
As part of its commitment to the environment, your Company successfully executed the third Hasiru
Habba, which is aimed at generating awareness regarding relevant environment issues in various
stakeholders, including passengers and concessioners. Where Safety is concerned, your Company
successfully launched the Eye Check-up Camp for all taxi-drivers in association with Essilor and
Sankara Nethralaya, a not-for-profit charitable eye hospital. Over 350 taxi drivers got their eyes
tested and were provided spectacles wherever necessary at a nominal charge. This initiative aimed at
influencing positive Road Safety behavior amongst our stakeholders and was a serious attempt to make
the journey from the airport safer for the passengers. The Fire Prevention and Safety Programme,
conducted with the objective of providing basic fire prevention and safety education to children in
the neighbouring government schools, was taken to 9 schools, covering over 1,000 children. So far,
through this programme BIAL has reached out to over 20 schools and 2,000 children within a span of
2 years.
As an attempt to reach out to the community in the vicinity, regular donation drives were conducted,
12
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which also encouraged volunteer participation. In a bid to encourage the entire airport community to
involve in the spirit of giving, your Company celebrated the Joy of Giving, the proceeds from which
went to 4 NGOs in the airport vicinity. Childrens Day was celebrated with aplomb with the theme of
Centenary Year of Civil Aviation termed Flight of Fantacy wherein 44 children were invited from an
NGO and introduced to various vocations at the airport. Your Company celebrated three years of CSR
initiatives on March 26th 2012. On this occasion, it gave BIAL employees an opportunity to pledge 6
hours of their time to volunteer at various CSR activities in the organization.
In keeping with attempts to liaise with the right partners, your Company conducted a thorough Due
Diligence on 7 NGOs it is regularly associated with to ensure that the proceeds reach those who need
and deserve it the most. Your Companys programme on Fire Prevention and Safety was recognized
and awarded at two forums- The World CSR Day Award Ceremony and Public Relations Council of India
Annual Awards where it competed with over 800 entries. The Public Relations Council of India also
recognized and rewarded your Companys CSR events (Flight of Fantasy) and collateral (Know your
Airport Book).
16. ACKNOWLEDGEMENT
Your Directors take this opportunity to thank the Government of India, particularly, the Ministry
of Civil Aviation, Ministry of Defence, Ministry of Commerce & Industry, Ministry of Finance, and
the Airports Authority of India and the Government of Karnataka, in particular the Infrastructure
Development Department, the Finance Department, KSIIDC, Bangalore Water Supply and Sewage
Board, Bangalore Electricity Supply Company, Karnataka Power Transmission Company Limited,
Bangalore International Airport Area Planning Authority and other bodies associated with the Project,
the Customers, Shareholders, Suppliers, Bankers, Business Partners/Associates, Financial institutions,
Regulatory Agencies for their support and encouragement to the Company.
Your Directors also wish to place on record their appreciation to all the employees of the Company
for their hard work and commitment.Their dedication and competence has ensured that the Company
continues to be a leading player in the Airport Industry.
For and on behalf of the Board of Directors

Bangalore

G.V. Sanjay Reddy
Pramod Kumar Bhambani
25 April 2012
Managing Director
Director
_____________________________________________________________________________________
Safe Harbor Statement:
This document contains forward-looking statements and information - that is, statements related to
future, not past, events. These statements may be identified by words such as expects, looks,
forward to, anticipates, intends, plans, believes, seeks, estimates, will, project
or words of similar meaning. Such statements are based on our current expectations and certain
assumptions and are therefore, subject to certain risks and uncertainties. A variety of factors, many
of which are beyond BIALs control, affect our operations, performance, business strategy and results
and could cause the actual results, performance or achievements of BIAL to be materially different
from any future results, performance or achievements that may be expressed or implied by such
forward-looking statements.
13
Annexure II
14
Annexure II
AUDITORS REPORT
15
Annexure II
AUDITORS REPORT TO THE MEMBERS OF BANGALORE INTERNATIONAL AIRPORT LIMITED

We have audited the attached balance sheet of Bangalore International Airport Limited (the
Company) as at 31 March 2012, the statement of profit and loss and the cash flow statement for
the year ended on that date annexed thereto. These financial statements are the responsibility of
the Companys Management. Our responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with the auditing standards generally accepted in India. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by Management, as
well as evaluating the overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
1. As required by the Companies (Auditors Report) Order, 2003 (the Order), as amended, issued by
the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act,
1956 (the Act), we enclose in the Annexure a statement on the matters specified in paragraphs
4 and 5 of the said Order.
2. Further to our comments in paragraph 1 above, we report that:

(a)
we have obtained all the information and explanations, which to the best of our knowledge
and belief were necessary for the purposes of our audit;
(b)
in our opinion, proper books of account as required by law have been kept by the Company
so far as appears from our examination of those books;
(c)
the balance sheet, statement of profit and loss and the cash flow statement dealt with by
this report are in agreement with the books of account;
(d)
in our opinion, the balance sheet, statement of profit and loss and the cash flow statement
dealt with by this report comply with the accounting standards referred to in sub-section
(3C) of Section 211 of the Act;
(e)
on the basis of written representations received from the directors, as at 31 March 2012,
and taken on record by the Board of Directors, we report that none of the directors are
disqualified as at 31 March 2012 from being appointed as a director in terms of clause (g)
of sub-section (1) of Section 274 of the Act on the said date;
(f)
Without qualifying our opinion, we draw attention to Note 10(d) to the financial statements.
The Company was required to demolish certain assets in order to facilitate its expansion
programme. Since the expansion is being carried out to create an improved infrastructure,
the Company believes that the existing carrying values of the assets demolished, which
are integral to the plan should form part of the expansion cost capitalised. The Company
has, as a matter of abundant caution, also sought an opinion from the Expert Advisory
Committee of the Institute of Chartered Accountants of India (EAC) soliciting their
opinion on the appropriateness of the stated accounting treatment. Pending the opinion
from the EAC, the Company has currently recorded the carrying values of these demolished
assets aggregating Rs 6.38 crore under Capital work in progress. As informed to us by the
Management, the Company would carry out adjustments, if any, based on the opinion
from the EAC;
(g)
Without qualifying our opinion, we draw attention to Note 11 to the financial statements,
regarding recognition and carry forward of Minimum alternate tax (MAT) credit
16
Annexure II
entitlement aggregating Rs 73.52 crore as at 31 March 2012, which, the Management is

confident of utilising the same within the stipulated period available under the provisions
of the Income-tax Act, 1961, notwithstanding the fact, that the Company is entitled
to a tax holiday period as per the provisions of Section 80-IA of the aforesaid Act. The
Company has, as a matter of abundant caution, also sought an opinion from the Expert
Advisory Committee of the Institute of Chartered Accountants of India (EAC) soliciting
their opinion on the appropriateness of the stated accounting treatment. Pending the
opinion from the EAC, the Company has currently retained the MAT credit entitlement
aggregating Rs 73.52 crore under Long-term Loans and Advances. As informed to us by
the Management, the Company would carry out adjustments, if any, based on the opinion
from the EAC;

(h)
Without qualifying our opinion, we draw attention to Note 13 to the financial statements,
regarding outstanding dues from a customer aggregating Rs 55.32 crore, where there
appears to be significant uncertainty relating to the ability of the party to pay the debts
due to the Company, due to financial difficulties which have resulted in scaling down of
customers business. However, the Management is confident of eventual collection of the
debts due from the customer and accordingly believes that the current provision of Rs
2.64 crore created in accordance with the Companys provision policy is sufficient.; and
(i)
in our opinion and to the best of our information and according to the explanations given
to us, the said financial statements give the information required by the Act, in the manner
so required and give a true and fair view in conformity with the accounting principles
generally accepted in India:
(i)
in the case of the balance sheet, of the state of affairs of the Company as at
31 March 2012;
(ii) in the case of the statement of profit and loss, of the profit of the Company for the
year ended on that date; and
(iii) in the case of the cash flow statement, of the cash flows for the year ended on that
date.
for B S R and Company

Chartered Accountants
Zubin Shekary
Partner
Membership no. 48814
Firm registration no. 128900W
Place: Bangalore
Date: 25 April 2012
17
Annexure II
18
Annexure II
ANNEXURE TO AUDITORS REPORT
19
Annexure II
ANNEXURE TO THE AUDITORS REPORT

The Annexure referred to in the Auditors Report to the Members of Bangalore International Airport
Limited (the Company) for the year ended 31 March 2012. We report that:
1
(a) The Company has maintained proper records showing full particulars, including quantitative
details and situation of fixed assets.
(b) The Company has a regular programme of physical verification of its fixed assets by which all
fixed assets are verified in a phased manner over a period of three years. In our opinion, this
periodicity of physical verification is reasonable having regard to the size of the Company
and the nature of its fixed assets. In accordance with the programme, fixed assets have been
verified during the year and no material discrepancies were noticed on such verification.
(c) Fixed assets disposed off during the year were not substantial, and therefore, do not affect
the going concern assumption.
2 (a) The inventories have been physically verified by the Management during the year. In our
opinion, the frequency of verification is reasonable.

(b) The procedures of physical verification of inventories followed by Management are reasonable
and adequate in relation to the size of the Company and the nature of its business.
(c) The Company is maintaining proper records of inventories. The discrepancies identified
on physical verification of inventories between physical stocks and book records were not
material.
The Company has neither granted nor taken any loans, secured or unsecured, to or from
companies, firms or other parties covered in the register maintained under Section 301 of
the Companies Act, 1956.
In our opinion and according to the information and explanations given to us, having regard
to the explanation by the Management that alternative quotes were not obtained for certain
items owing to those being specialized and proprietary in nature, there is an adequate
internal control system commensurate with the size of the Company and the nature of its
business, with regard to purchase of fixed assets and inventories and with regard to the sale
of services. The activities of the Company do not involve sale of goods. In our opinion and
according to the information and explanations given to us, there is no continuing failure to
correct major weaknesses in internal control system.
In our opinion, and according to the information and explanations given to us, the particulars
of contracts or arrangements referred to in Section 301 of the Companies Act, 1956 have
been entered in the register required to be maintained under the section.
The Company has not accepted any deposits from the public.
In our opinion, the Company has an internal audit system commensurate with the size and
nature of its business.
The Central Government of India has not prescribed the maintenance of cost records
under Section 209(1)(d) of the Companies Act, 1956 for any of the services rendered by the
Company.
9 (a) According to the information and explanations given to us and on the basis of our examination
of the records of the Company, amounts deducted/accrued in the books of account in respect
of undisputed statutory dues including provident fund, income-tax, wealth-tax, service tax,
sales-tax, customs duty, cess and other material statutory dues have been regularly deposited
20
Annexure II
during the year by the Company with the appropriate authorities. As explained to us, the
Company did not have any dues on account of employees state insurance, excise duty and
Investor Education and Protection Fund during the year.

(b) According to the information and explanations given to us, no undisputed amounts payable
in respect of provident fund, income-tax, wealth-tax, service tax, sales-tax, customs duty
and other material statutory dues were in arrears as at 31 March 2012 for a period of more
than six months from the date they became payable.
(c) According to the information and explanations given to us, there are no dues of wealth-tax,
sales-tax and customs duty which have not been deposited with the appropriate authorities
on account of any dispute. According to the information and explanations given to us, the
following dues of Income-tax, service tax and Entry tax have not been deposited by the
Company on account of disputes:

Name of the
Nature of dues
Amount
Period to

statute

(in Rs crore) which it

relates
Forum where the

dispute
is pending

Income Tax Act,
Tax collection at
0.11*
2008-09

1961
source

Commissioner of
Income Tax
(Appeals),
Bangalore

Income Tax Act,

1961

Tax deduction at
6.84
2005-06
source (including
interest)
High Court of
Karnataka
Karnataka Special Special Entry Tax

2.13
2006-07
Tax on Entry of
Certain Goods
Act, 2004
High Court of
Karnataka
Karnataka Tax on Entry Tax

0.38 ** 2008-09
Entry of Goods
including penalty
Act, 1979
and interest
Joint commissioner
of Commercial
Taxes (Appeals)

Finance Act, 1994 Service Tax
7.78
2005-09

including interest

and penalty

Finance Act, 1994 Service Tax
1.10
2009-10

including interest

and penalty

10
Customs, Excise
and Service Tax
Appellate Tribunal,
Bangalore
* Out of the above, an amount of Rs 0.05 crore has been paid under protest.
** Out of the above, an amount of Rs 0.34 crore has been paid under protest and a bank guarantee
has been provided for the balance amount by the Company.
The Company does not have any accumulated losses at the end of the financial year and
has not incurred cash losses in the financial year and in the immediately preceding financial
year.
11 In our opinion and according to the information and explanations given to us, the Company has
not defaulted in repayment of dues to its bankers. The Company did not have any outstanding
dues to any financial institution or debentureholders during the year.
12
The Company has not granted any loans and advances on the basis of security by way of
pledge of shares, debentures and other securities.
21
Annexure II
13 In our opinion and according to the information and explanations given to us, the Company
is not a chit fund or a nidhi/ mutual benefit fund/ society.
14
According to the information and explanations given to us, the Company is not dealing or
trading in shares, securities, debentures and other investments.
15
According to the information and explanations given to us, the Company has not given any
guarantee for loans taken by others from banks or financial institutions.
16
In our opinion and according to the information and explanations given to us, the term loans
taken by the Company have been applied for the purpose for which they were raised.
17
According to the information and explanations given to us and on an overall examination of

the balance sheet of the Company, we are of the opinion that the funds raised on short term
basis have not been used for long term investment.
18
The Company has not made any preferential allotment of shares to companies/ firms/ parties
covered in the register maintained under Section 301 of the Companies Act, 1956.
19
The Company did not have any outstanding debentures during the year.
20
The Company has not raised any money by public issues during the year.
21
According to the information and explanations given to us, no fraud on or by the Company has
been noticed or reported during the course of our audit.

Firm registration no. 128900W
Zubin Shekary
Partner
Membership no. 48814
Place: Bangalore
Date: 25 April 2012
22
Annexure II
FINANCIAL STATEMENTS
23
Annexure II

(in rupee crore)
Balance Sheet As at
Note
31 March 2012
31 March 2011
EQUITY AND LIABILITIES

SHAREHOLDERS FUNDS
Share capital
384.60
384.60
Reserves and surplus
220.06
56.03
604.66
440.63

NON-CURRENT LIABILITIES
Long-term borrowings
1,273.58
1,435.59
Other long-term liabilities
225.66
192.32
Long-term provisions
6

2.92
1,502.16
2.13
1,630.04
CURRENT LIABILITIES
Trade payables
28.17
24.94
Other current liabilities
334.75
260.84
Short-term provisions

ASSETS
8.90
6.75
371.82
292.53
2,478.64
2,363.20
NON-CURRENT ASSETS
10
Fixed assets

Tangible assets
1,449.74
1,564.57

Intangible assets
Capital work-in-progress
432.66
92.14
1,910.80
1,687.83
Long-term loans and advances
28.40
11
31.12
185.20
92.86
2,096.00
1,780.69
13.82
CURRENT ASSETS
Inventories
12
15.29
Trade receivables
13
120.39
79.72
Cash and bank balances
14
202.77
434.47
Short-term loans and advances
15
11.17
20.71
Other current assets
16
33.02
33.79
382.64
582.51
2,478.64
2,363.20

SIGNIFICANT ACCOUNTING POLICIES
NOTES ON ACCOUNTS
1
2 to 36
As per our report attached

for Bangalore International Airport Limited

Firms Registration No: 128900W

Zubin Shekary G.V. Sanjay Reddy
Partner Managing Director
Director
Membership No. 048814

Place: Bangalore Alok Shekhar
Bodapati Bhaskar
Date: 25 April 2012
Director
Director - Finance

S. Chandrasekar

Head - Finance & Accounts and Company Secretary
24
Annexure II

(in rupees crore, except per share data)

Statement of Profit and Loss for the
Note

Year ended
31 March 2012
Year ended
31 March 2011
Revenue
Revenue from operations
17
Other income
18
Total revenue
605.68
538.20
29.84
48.39
635.52
586.59
Expenses
Employee benefit expenses
19
72.86
65.64
Finance costs
20
134.88
143.59
Depreciation and amortisation expense
10
134.76
134.68
Other expenses
21
132.26
110.45
Total expenses
474.76
454.36
Profit before tax
160.76
132.23
36.00
29.22
Tax expenses

Current tax (Minimum alternate tax)
Less: Minimum alternate tax credit entitlement
Income tax for earlier year
Total tax expenses
(36.00)
(29.22)
0.13
0.13
Profit for the year
160.76
132.10
4.18
3.43
384,600,000
384,600,000
Earnings per equity share

Equity share of par value Rs 10 each
Basic and diluted
34
Number of shares used in computing earnings per share

Basic and diluted
NOTES ON ACCOUNTS
1
2 to 36

Firms Registration No. 128900W

Director

Bodapati Bhaskar
Date: 25 April 2012
Director
Director - Finance

S. Chandrasekar

25
Annexure II

Cash Flow Statement for the

Note

(in rupees crore)
Year ended
31 March 2012
Year ended
31 March 2011
160.76
132.23
134.68
CASH FLOWS FROM OPERATING ACTIVITIES

Profit before tax
Adjustments to reconcile profit before tax to cash provided by operating activities

Depreciation and amortisation expense
134.76
Loss/(Profit) on sale of fixed assets (net)
(0.01)
0.13
Unrealised exchange loss / (gain)
26.06
(11.19)
Provision for doubtful debts
1.24
Provision for doubtful debt written back
Interest income
Finance lease charges
0.05
0.11
Finance expenses
134.83
135.58
428.60
360.15
(29.09)
(2.95)
(28.44)
Changes in assets and liabilities:

Inventories
(1.47)
(1.74)
Trade receivables
(41.90)
(30.87)
Loans and advances and other assets
5.88
13.21
Liabilities and provisions
37.84
17.24
428.95
Cash generated from operations
357.99
Income tax paid (net of refund)
(34.09)
(29.20)
Net Cash generated from operating activities
394.86
328.79
CASH FLOWS FROM INVESTING ACTIVITIES

Payment towards capital expenditure
(343.28)
(66.11)
Interest received
33.58
21.10
Proceeds from sale of fixed assets

Redemption/ maturity of bank deposits (having original maturity
0.05
257.46
0.03
(48.10)
of more than three months)

Net Cash (used in) investing activities
(52.19)
(93.08)
CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of loan taken from banks
(183.63)
(91.98)
Repayment under finance lease
(0.05)
(1.62)
Finance lease charges
(0.05)
(0.11)
Finance expenses
(133.18)
(135.37)
Net Cash (used in) financing activities

(316.91)
(229.08)
26
Annexure II

(in rupee crore)
Cash Flow Statement for the
Note

Net increase in cash and cash equivalents
14
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year 14
Year ended
31 March 2012
Year ended
31 March 2011
25.76
6.63
17.96
11.33
43.72
17.96


Director

Bodapati Bhaskar
Date: 25 April 2012
Director
Director - Finance

S. Chandrasekar

27
Annexure II
28
Annexure II
29
Annexure II
30
Annexure II
Significant accounting policies for the year ended 31 March 2012
1.1 Company Overview

The Company has been incorporated on 5 January 2001 for designing, financing, construction,
operation and maintenance of an international airport at Devanahalli, Bangalore. Accordingly,
a joint venture amongst Siemens Project Ventures GmbH, Germany (hereinafter Siemens),
Flughafen Zurich AG, Switzerland (hereinafter Zurich Airport), L&T Infrastructure Development
Projects Limited (hereinafter L&TIDPL), Karnataka State Industrial Investment and Development
Corporation Limited (hereinafter KSIIDC) and Airports Authority of India (hereinafter AAI)
was entered into for the execution of this project.
Bengaluru International Airport (hereinafter BIA) has commenced commercial operations on
23 May 2008, the Airport Opening Date (hereinafter AOD).
During the year 2009-10, Bangalore Airport & Infrastructure Developers Private Limited
(hereinafter BAIDPL) which is a stepdown subsidiary of GVK Power & Infrastructure Limited
(hereinafter GVK Power) had acquired 17% of the outstanding equity shares from L&TIDPL
and 12% of the outstanding equity shares from Zurich Airport. Further during the year 2011-12,
BAIDPL has acquired 14% of the outstanding equity shares from Siemens. Thus making BAIDPL
the single largest shareholder in the Company with 43% stake in aggregate.
1.2 Basis of preparation of financial statements

The financial statements have been prepared and presented under the historical cost convention
on the accrual basis of accounting except for certain financial instruments which are measured
at fair values and comply with the Accounting Standards (AS) prescribed by Companies
(Accounting Standards) Rules, 2006, as amended, other pronouncements of the Institute of
Chartered Accountants of India (ICAI) and the relevant provisions of the Companies Act, 1956,
(hereinafter the Act) to the extent applicable. The financial statements are prepared in crore
of Indian rupees.
The Management evaluates all recently issued or revised Accounting Standards on an ongoing basis. Pursuant to ICAI announcement on application of AS 30 - Financial Instruments:
Recognition and Measurement, AS 31 - Financial Instruments: Presentation and AS 32
- Financial Instruments: Disclosures relating to financial instruments, the Company has
adopted the principles of AS 30, to the extent the adoption does not conflict with existing
mandatory accounting standards and other authoritative pronouncements, Company Law and
other regulatory requirements.
1.3 Use of estimates

The preparation of financial statements in conformity with the generally accepted accounting
principles in India requires Management to make estimates and assumptions that affect the
reported amounts of income and expenses of the year, assets and liabilities and disclosures
relating to contingent liabilities as of the date of the financial statements. Actual results could
differ from those estimates. Any revision to accounting estimates is recognised prospectively in
current and future years.
1.4 Revenue recognition

Revenue from airport operations are recognised on accrual basis, net of service tax, applicable
discounts and collection charges, when services are rendered and it is probable that an economic
benefit will be received, which can be quantified reliably.
Aeronautical Revenue includes revenue from all regulated charges levied at the BIA, i.e.,
landing fees, parking and housing fees, passenger service fee (facilitation component) and user
development fees. Non Aeronautical Revenue means all revenue streams other than aeronautical
revenue streams.
31
Annexure II
Interest is recognised using the time proportion method based on rates implicit in the transaction.
Award fees and tender fees are recognised on an accrual basis in accordance with the terms of
the relevant arrangement. Utility charges recovered from users of such utilities are adjusted
against the relevant expenses.
1.5 Fixed assets and depreciation

Fixed assets are stated at their original cost of acquisition and subsequent improvements
thereto including taxes, duties, freight and other incidental expenses related to acquisition and
installation of the assets concerned.

Depreciation is provided on a Straight Line Method (SLM). The rates of depreciation prescribed
in Schedule XIV to the Act are considered as the minimum rates. If Managements estimate of
the useful life of a fixed asset at the time of acquisition of the asset or of the remaining useful
life on a subsequent review is shorter than envisaged in the aforesaid schedule, depreciation is
provided at a higher rate based on Managements estimate of the useful/remaining useful life.
Pursuant to this policy, the rates of depreciation determined by the Management are as set out
below:
Class of Asset
Building
3.33%-5%
3.33%-5%
Plant and machinery
4.75%-16.21%
Office equipment
10.34%-25%
Computers
16.21%-25%
6.33%-10%
Vehicles
9.5%-20%
Assets individually costing upto rupees five thousand are fully depreciated in the year of
purchase. Depreciation on additions and disposals during the year is provided on proportionate
basis.

Leasehold Improvements are amortised over the primary period of lease.
1.6 Intangible assets and amortisation

Intangible assets are recognised only if it is probable that future economic benefits that are
attributable to the asset will flow to the enterprise and the cost of the asset can be measured
reliably.

Computer software licenses are capitalised on the basis of costs incurred to acquire and bring
to use the specific software. Operating software is capitalised and amortised along with the
related fixed asset. Other software is amortised, on a straight line method, over a period of
three to five years based on Managements assessment of useful life.
The Company had incurred certain legal and other expenses during the construction period
towards various agreements, viz. Concession Agreement, Communication, Navigation and
Surveillance and Air Traffic Management (CNS/ ATM) Agreement, Operations and Management
Services Agreement, State Support Agreement and Land Lease Agreement which are capitalised
as Intangibles Others and are amortized over a period of seven or thirty years.
The amortisation period and method used for intangible assets are reviewed at each financial
year end.
1.7 Borrowing costs

Borrowing costs that are directly attributable to the acquisition or construction of a qualifying
asset are capitalised as part of the cost of that asset till such time the asset is ready for its
intended use. A qualifying asset is an asset that necessarily takes a substantial period of time to
get ready for its intended use. Other borrowing costs are recognised as an expense in the period
in which they are incurred.
32
Annexure II
1.8 Lease accounting

Leases under which the Company assumes substantially all the risks and rewards of ownership
are classified as finance leases. Such assets acquired are capitalised at fair value of the asset
or present value of the minimum lease payments at the inception of the lease, whichever is
lower.
Operating lease expenses/income is recognised in the profit and loss account on a straight line
basis over the lease term.
1.9 Foreign currency transactions

The Company is exposed to foreign currency transactions including foreign currency expenses
and payables. With a view to minimize the volatility arising from fluctuations in currency rates,
the Company enters into foreign exchange forward contracts and other derivative instruments.
Additionally, the Company enters into interest rate derivatives to minimise its interest costs.
Foreign exchange transactions are recorded using the exchange rates prevailing on the dates
of the respective transactions. Exchange differences arising on foreign exchange transactions
settled during the year are recognised in the profit and loss account for the year.
Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date
are translated at the closing exchange rates on that date; the resultant exchange differences
are recognized in the profit and loss account. Non-monetary items which are carried in terms of
historical cost denominated in a foreign currency are reported using the exchange rate at the
date of the transaction.
For forward exchange contracts and other derivatives that are not covered by Accounting
Standard (AS) 11, The Effects of Changes in Foreign Exchange Rates (hereinafter referred
to as AS 11) and that relate to a firm commitment or highly probable forecast transactions,
the Company has adopted the principles of AS 30, Financial Instruments: Recognition and
Measurement (hereinafter referred to as AS 30) with effect from 1 April 2009. In accordance
with the principles of AS 30, such derivative financial instruments, which qualify for cash flow
hedge accounting and where Company has met all the conditions of cash flow hedge accounting,
are fair valued at balance sheet date and the resultant exchange loss/(gain) is debited/credited
to the Hedge Reserve. This loss/ (gain) would be recorded in profit and loss account when the
underlying transactions occur.
The derivative instruments which are termed as financial assets/ liability in accordance with
the principle of AS 30 are accounted at fair value through profit and loss account and any
subsequent change in measurement is also routed through the profit and loss account.
1.10 Inventory

Inventory consists of spares for machineries, which are charged to the profit and loss account
as and when they are consumed. The inventories are valued using the weighted average cost
method.
1.11 Retirement and other benefits

Defined-contribution plans
The Company has defined contribution plans (where Company pays pre-defined amounts and
does not have any legal or informal obligation to pay additional sums) for post employment
benefits namely Provident Fund, and the Companys contributions thereto are charged to profit
and loss account every year. The Companys contributions to State plan, namely, Employee
Pension Scheme, 1995, is charged to profit and loss account every year.
Defined-benefit plans
The Company has defined benefit plan (viz., Gratuity) for employees, the liability for which is
determined on the basis of actuarial valuation at the balance sheet date under the Projected
Unit Credit Method.
33
Annexure II
Other long term employee benefits
The obligation for long term employee benefits like compensated absences is recognised at the
present value of the obligation based on actuarial valuation under the Projected Unit Credit
method at each balance sheet date.
Gains or losses arising out of actuarial valuation are recognised immediately in the profit and
loss account.
1.12 Concession fee

The Concession fee is computed as a percentage of gross revenue pursuant to the terms and
conditions of the Concession Agreement for designing, financing, construction, operation and
maintenance of an international airport at Devanahalli, Bangalore and is recognised in the profit
and loss account.
1.13 Taxes on income
The current income tax charge is determined in accordance with the relevant provisions of the
Income-tax Act, 1961 applicable to the Company.
Deferred tax charge or credit are recognised for the future tax consequences attributable to
timing difference that result between the profit offered for income taxes and the profit as per
the financial statements. Deferred tax in respect of timing difference which originate during
the tax holiday period but reverse after the tax holiday period is recognised in the year in
which the timing difference originate. For this purpose, the timing differences which originate
first are considered to reverse first. The deferred tax charge or credit and the corresponding
deferred tax liabilities or assets are recognised using the tax rates that have been enacted or
substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the
extent there is reasonable certainty that the assets can be realised in future; however, when
there is a brought forward loss or unabsorbed depreciation under taxation laws, deferred tax
assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax
assets are reviewed as at each balance sheet date and written down or written up to reflect the
amount that is reasonably/virtually certain to be realised.
In accordance with the provisions of Section 115JAA of the Income-tax Act, 1961, the Company
is allowed to avail credit equal to the excess of Minimum Alternate Tax (MAT) over normal
income tax for the assessment year for which MAT is paid. MAT credit so determined can be
carried forward for set-off for ten succeeding assessment years from the year in which such
credit becomes allowable. MAT credit can be set-off only in the year in which the Company
is liable to pay tax as per the normal provisions of the Income-tax Act, 1961 and such tax is
in excess of MAT for that year. Accordingly, MAT credit entitlement is recognised only to the
extent there is convincing evidence that the Company will pay normal tax during the specified
period.
1.14 Earnings per share

The basic and diluted earnings per share is computed by dividing the net profit/loss attributable
to equity shareholders for the year by the weighted average number of equity shares outstanding
during the year. The Company did not have any potentially dilutive equity shares outstanding
during the year.
1.15 Provisions and contingent liabilities

Provisions are recognised when the Company has a present obligation as a result of past events,
for which it is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation and a reliable estimate of the amount can be made. Provisions
are reviewed regularly and are adjusted where necessary to reflect the current best estimates of
the obligation. A disclosure for a contingent liability is made when there is a possible obligation
34
Annexure II
or a present obligation that may, but probably will not, require an outflow of resources. When
there is a possible obligation or a present obligation in respect of which the likelihood of
outflow of resources is remote, no provision or disclosure is made.
1.16 Impairment of assets

At each balance sheet date, the Company assesses whether there is any indication that an
asset may be impaired. If any such indication exists, the Company estimates the recoverable
amount. If the carrying amount of the asset exceeds its recoverable amount, an impairment
loss is recognised in the profit and loss account to the extent the carrying amount exceeds the
recoverable amount. The reduction is treated as an impairment loss and is recognised in the
profit and loss account. If at the balance sheet date, there is an indication that a previously
assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset
is reflected at the recoverable amount, subject to a maximum of depreciable historical cost.
An impairment loss is reversed only to the extent that the carrying amount of asset does not
exceed the net book value that would have been determined; if no impairment loss had been
recognised.
1.17 Cash flow statement

Cash flows are reported using the indirect method, whereby net profit before tax is adjusted for
the effects of transactions of a non-cash nature and any deferrals or accruals of past or future
cash receipts or payments. The cash flows from operating, investing and financing activities of
the Company are segregated.
35
Annexure II
36
Annexure II
NOTES ON ACCOUNTS
37
Annexure II
Notes on accounts for the year ended 31 March 2012

2 Share capital

(in rupees crore, except as otherwise stated)
As at 31 March 2012
Particulars
As at 31 March 2011
Equity shares
Authorised:
700.00
700.00
700,000,000 (Previous year: 700,000,000) equity shares of Rs 10 each
Issued, subscribed and fully paid up:
384,600,000 (Previous year: 384,600,000) equity shares of Rs 10 each
fully paid up
384.60
384.60

384.60
384.60
The Company has only one class of equity shares having par value of Rs 10 per share. Each holder
of equity shares is entitled to one vote per share. The Company can declare and pay dividends.
The dividend proposed by the Board of Directors is subject to the approval of the shareholders in
the ensuing Annual General Meeting. No dividends have been declared by the Company till date.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining
assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the
number of equity shares held by the shareholders.
The details of shareholder holding more than 5% shares as at 31 March 2012 and 31 March 2011 is set below:
As at 31 March 2012
As at 31 March 2011
No. of shares
% held No. of shares % held
Name of the share holder

Bangalore Airport & Infrastructure Developers Private Limited

165,378,000
Siemens Project Ventures GmbH, Germany
99,996,000
Karnataka State Industrial Investment and Development Corporation Limited (KSIIDC) 49,997,997
Airports Authority of India
49,998,000
19,230,000
Flughafen Zurich AG, Switzerland
43
26
13
13
5
111,534,000
153,840,000
49,997,997
49,998,000
19,230,000
29
40
13
13
5
The reconciliation of the number of shares outstanding as at 31 March 2012 and 31 March 2011 is set out below:
Particulars
As at 31 March 2012
Number of shares at the beginning

Movement during the year
Number of shares at the end
As at 31 March 2011
384,600,000

384,600,000
3 Reserves and surplus

Particulars
As at 31 March 2012
Hedge Reserve - Opening Balance [Refer note 33]
Additions during the year
Hedge Reserve - Closing Balance
384,600,000
384,600,000
(in rupees crore)
As at 31 March 2011
(3.50)
(6.35)
3.27
2.85
(0.23) (3.50)
Surplus in Statement of Profit and Loss - Opening Balance

59.53
(72.57)
160.76
132.10
Add: Net profit after tax transferred from Statement of Profit and Loss
Surplus in Statement of Profit and Loss - Closing Balance
220.29
59.53

220.06
56.03
4 Long-term borrowings

(in rupees crore)
Particulars
As at 31 March 2012
As at 31 March 2011
Secured Loan
From banks:

Rupees term loan *

Foreign currency term loan **
Finance lease obligations

Unsecured Loan
From other parties:

State financial support (Base amount) ***

State financial support (Contingent amount) ***
769.47
170.61

940.08
923.37
178.64
0.08
1,102.09
272.25
61.25
272.25
61.25
333.50
1,273.58
333.50
1,435.59
38
Annexure II

* In March 2005, the Company had entered a loan agreement with the ICICI Bank with a clause which
specified the right with the rupee lender to assign, novate or transfer the loan. Based on the same,
the loan has been assigned by ICICI Bank to the various banks on various dates. The Company had
availed Indian currency term loan of Rs 1,154.21 crore. The rupee term loan is secured by way of a
first ranking mortgage and charge by deposit of all title deeds (present and future) with the Security
Trustee in respect of all of the Companys immovable properties located in the State of Karnataka;
on moveable assets (both, tangible and intangible), all revenue and receivables, project documents,
clearances, insurance contracts, and all other assets of the Company (both, present and future) and
hypothecated to the Security Trustee (acting for the benefit of the lenders). The principal amount of
the loan is repayable in thirty equal quarterly installments which commenced from 31 October 2010.
The interest rate on the above loan ranges from 9 percent to 13 percent payable at the end of each
month. The Company has repaid 6 instalments till 31 March 2012.
** The Company had availed a foreign currency term loan of USD 5 crore from ICICI Bank Limited under
a facility agreement. The foreign currency term loan is secured by way of a first ranking mortgage and
charge with the Security Trustee in respect of all of the Companys movable and immovable properties
and assets (both, present and future); borrowers right under each project documents; interest in
all licenses, permits, approvals, assignments, concessions, easements and consents; all revenue and
receivables; insurance contracts; letter of credit, guarantee or performance bonds issued in favour
of the Company and hypothecated to the Security Trustee (acting for the benefit of the lenders),
pari passu with the rupee term loan. The principal amounts are repayable in thirty equal quarterly
installments commenced from 31 October 2010. The interest rate as per agreement is 6 months USD
LIBOR rate plus 150 basis points. The interest is paid on half yearly installments on 31 January and 31
July every year respectively. The Company has repaid 6 installments till 31 March 2012.
*** The Company had entered into a State Support Agreement (hereinafter SSA) [for the development,
construction, operation and maintenance of BIA] with the Government of Karnataka (GoK) on 20
January 2005 (as amended on 20 June 2006) whereby GoK, subject to other terms, would make
available to the Company over the project period, Rs 272.25 crore (Base amount) and Rs 77.75 crore
(Contingent amount), which is to be used exclusively towards financing of the base project cost
and project contingency respectively. The amounts, being interest free, are repayable in twenty
equal half yearly instalments commencing from 30 April 2018.
The Management would identify/ recommend and the Board of Directors consider and approve such
expenditure as can be categorized/ financed under project contingency. The SSA stipulates the
mechanism for obtaining funding from GoK for such project contingency amounts.
(in rupees crore)
5 Other long-term liabilities
Particulars
As at 31 March 2012 As at 31 March 2011
Trade payables
6.66
1.88
137.11
133.97
Others
Security deposits from service provider, right holders, etc.
Concession fee payable (Refer note below)
81.89
225.66
56.47
192.32
The Company has entered into a Concession Agreement (hereinafter CA) with the Ministry of Civil
Aviation, Government of India on 5 July 2004 (as amended on 20 November 2006, to include scope
of re-design) whereby the Government of India has granted to the Company exclusive right and
privilege to carry out the development, design, financing, construction, commissioning, maintenance,
operation and management of BIA [excluding the right to carry out the reserved activities as per CA or
to provide Communication and Navigation Surveillance/ Air Traffic Management (CNS/ ATM) services,
which are required to be provided by AAI] for an initial period of 30 years (and renewable for a further
period of 30 years subject to stipulated conditions) from the date of commencement of commercial
operations of air traffic and has provided for the payment of a concession fee by the Company.
39
Annexure II
The concession fee for the first ten financial years shall be payable in twenty equal half-yearly
instalments and first such instalment being due and payable on 30 June and second of such instalment
being due and payable on 31 December (Reference Date) on the eleventh financial year after the
AOD. For the rest of the term, the instalment shall be payable on the Reference Date falling thereafter.
6 Long-term provisions
Particulars
(in rupees crore)
As at 31 March 2012
As at 31 March 2011
2.92
2.13
2.92
2.13
Provision for employee benefits

Gratuity [Refer note 29(a)]

7 Trade payables
Particulars
(in rupees crore)
As at 31 March 2012
As at 31 March 2011
0.37
0.16
27.80
24.78
28.17
24.94
Trade payables
Due to micro and small enterprises [Refer note 35]
Others

8 Other current liabilities

Particulars
Book overdraft
(in rupees crore)
As at 31 March 2012
As at 31 March 2011
1.23
2.96
153.90
153.90
Current maturities of long-term borrowings

From banks:

Rupee term loans
Foreign currency term loan
34.07
29.74
Current maturities of finance lease obligations
0.08
0.05
Interest accrued but not due on long term borrowings
2.37
0.72
11.23
0.17
Security deposits from service provider, right holders, etc.

Income received in advance
0.72
0.09
Deferred revenue
0.11
0.54
Accrued salaries and benefits
9.69
7.35
Other payables

Purchase of fixed assets
Withholding and other taxes payable
Mark-to-market loss on forward and options contracts
Other liabilities
115.71
52.11
5.12
3.59
1.04
0.52
8.58
334.75
260.84
9 Short-term provisions
Particulars
(in rupees crore)
As at 31 March 2012
As at 31 March 2011
Provision for employee benefits

Gratuity [Refer note 29(a)]
0.09
0.02
Compensated absences
4.62
3.69
Provision for tax (net of advance tax)
4.19
3.04
8.90
6.75
40
1,977.96
1,965.02
13.52
29.60
43.12
3.19
1,934.84
560.48
537.88
662.99
2.62
77.00
67.06
23.62
As at
1 April
2011
26.44
16.13
1.15

1.15
-
25.29
6.03
8.53
2.78
0.33
4.53
2.41
0.68
11.09
3.19
-
-
-
2.81
11.09
1.70
-
2.38
0.01
0.02
4.17
-
Additions/
Deletions/
adjustments
adjustments
during the year during the year
Original Cost
1,993.31
1,977.96
14.67
29.60
44.27
0.38
1,949.04
564.81
546.41
663.39
2.94
81.51
65.30
24.30
As at
31 March
2012
382.27
247.67
7.70
4.30
12.00
1.48
370.27
52.88
63.47
195.54
0.82
35.83
12.36
7.89
134.76
134.68
2.37
1.50
3.87
0.06
130.89
18.77
22.36
69.44
0.32
12.97
4.19
2.78
1.86
0.08
-
-
1.31
1.86
0.17
-
0.82

(1.29)
0.85
-
As at
Deletions/
1 April
For the year adjustments
2011
during the year
Depreciation/Ammortisation
515.17
382.27
10.07
5.80
15.87
0.23
499.30
71.48
85.83
264.16
1.14
50.09
15.70
10.67
As at
31 March
2012
1,478.14
1,595.69
4.60
23.80
28.40
0.15
1,449.74
493.33
460.58
399.23
1.80
31.42
49.60
13.63
As at
31 March
2012
1,595.69
-
5.82
25.30
31.12
1.71
1,564.57
507.60
474.41
467.45
1.80
41.17
54.70
15.73
As at
31 March
2011
Net block value
(in rupee crores, except as otherwise stated)
41
41
Notes:
a Engineering Structures represents runway, taxiways, apron and roads (including trumpet flyover).
b The above fixed assets include Rs 50.89 crore (Previous year: Rs 50.89 crore) funded by State Financial Support (Contingent amount).
c During the year, Computers amounting to Rs 2.81 crore, related accumulated depreciation amounting to Rs. 1.31 crore has been transferred from assets acquired on
finance lease to owned assets on completion of lease period and payment of lease obligations. During the previous year, Software amounting to Rs 2.94 crore, related
accumulated depreciation amounting to Rs.1.53 had been transferred from assets acquired on finance lease to owned assets on completion of lease period and payment
of lease obligations.
d During the year ended 31 March 2012, the Company has demolished a portion of its fixed assets, comprising of carrying values of Building aggregating Rs 1.52 crore,
Furniture and fixtures aggregating Rs 3.32 crore and Plant and equipment aggregating Rs 1.54 crore as a part of its airport expansion plan. The Management has not
derecognized the carrying values of these assets on demolition and has instead transferred the carrying values of such assets to Capital work-in-progress as it believes
that these costs are an integral part of the new asset being constructed and hence eligible for capitalisation. The Company has, as a matter of abundant caution, also
sought an opinion from the Institute of Chartered Accountants of India (EAC) soliciting their opinion on the appropriateness of the stated accounting treatment.
Pending the opinion from the EAC, the Company has currently recorded the carrying values of these demolished assets aggregating Rs 6.38 crore under Capital work-inprogress. The Company would carry out adjustments, if any, based on the opinion from the EAC.
Total
Previous year
Software
Others (Refer note 1.6)

Computers

Intangibles Assets:
Leased
Buildings
Plant and equipment
Office equipment
Computers
Vehicles
Owned
Tangible Assets:
Particulars

10. Fixed assets
Annexure II
Annexure II

11 Long-term loans and advances
(Unsecured, considered good unless otherwise stated)
(in rupees crore)
As at 31 March 2012
As at 31 March 2011
59.06
5.17
Particulars
Capital advances
Deposits with Government authorities
Minimum alternate tax credit entitlement *
Advance tax (net of provision)
5.24
5.24
73.52
37.52
0.31
1.07
Amount recoverable from Passenger Service Fee (Security Component)

Account* [Refer note 22]

47.07
43.86
185.20
92.86
* The Company has recognised and carried forward Minimum alternate tax (MAT) credit entitlement
aggregating Rs 73.52 crore (Previous year: Rs 37.52 crore) as at 31 March 2012. This is based on the
profitable projections of the Company for aeronautical, non aeronautical and real estate businesses;
which are supported by the Concession agreement, which gives the Company the right to operate the
airport for a period of atleast 30 years from the airport opening date (i.e. 23 May 2008). Accordingly, the
Management believes that there will be sufficient future taxable profits to utilise the aforementioned
MAT credit entitlement within the stipulated period available under the provisions of the Income-tax
Act, 1961 of India, notwithstanding the fact, that the Company is entitled to a tax holiday period as
per the provisions of Section 80-IA of the aforesaid Act. The Company has, as a matter of abundant
caution, also sought an opinion from the Expert Advisory Committee of the Institute of Chartered
Accountants of India (EAC) soliciting their opinion on the appropriateness of the stated accounting
treatment. The Company is awaiting the opinion from the EAC, and has currently retained the MAT
credit entitlement aggregating Rs 73.52 crore (Previous year: Rs 37.52 crore) under Long-term loans
and advances. The Company would carry out adjustments, if any, based on the opinion from the
EAC.
12 Inventories
Particulars
(in rupees crore)
As at 31 March 2012
As at 31 March 2011
Stores and spares
15.29
13.82
15.29
13.82
13 Trade receivables *
(in rupees crore)
Particulars
As at 31 March 2012
As at 31 March 2011
Over six months
0.19
2.60
Others
3.13
2.39
3.32
4.99
Secured
Considered good

Unsecured
Considered good

Over six months
26.38
17.57
Others
90.69
57.16
Considered doubtful

Over six months
Others
2.75
-
119.82
Less: Provision for doubtful debts

1.52

76.25
(2.75)
(1.52)
120.39
79.72
* The trade receivables as at 31 March 2012 contain outstanding dues from a customer aggregating
42
Annexure II

Rs 55.32 crore. There appears to be significant uncertainty relating to the ability of the party to pay
the debts due to the Company due to financial difficulties which have resulted in scaling down of
customers business. However, considering the national importance of the continued existence of the
customer and based on the regular receipt of debts due during the year till 9 February 2012 which
resumed again effective 17 April 2012, the Management is confident of eventual collection of the
debts due from the customer in due course. Accordingly, the Management believes that the current
provision for the customer aggregating Rs 2.64 crore created in accordance with the Companys
provision policy is sufficient.
14 Cash and bank balances
Particulars
(in rupees crore)
As at 31 March 2012
As at 31 March 2011
0.01
0.16
0.01
2.53
11.17
32.38
43.72
13.53
1.89
17.96
Cash and cash equivalents

Cash on hand
Cheques on hand
Balances with banks:
Current accounts
Deposit accounts

Other bank balances
Deposit accounts with more than 12 months maturity
Deposit accounts less than 12 months maturity

159.05
159.05
202.77
33.50
383.01
416.51
434.47
The deposits maintained by the Company with banks comprise of time deposits, which can be
withdrawn by the Company at any point without prior notice or penalty on the principal.
15 Short-term loans and advances

Particulars
As at 31 March 2012
(in rupees crore)

As at 31 March 2011
Others
Prepaid expenses
Mark-to-market gain on forward and options contracts
Others
Deposits
7.95
0.85
1.79
0.58
Amount recoverable from Passenger Service Fee (Security Component)

Account* [Refer note 22]

11.17
16 Other current assets

Particulars
Interest accrued but not due on fixed deposits
7.49
1.42
1.32
0.48
10.00
20.71
(in rupees crore)
As at 31 March 2012
As at 31 March 2011
9.88
14.37
Unbilled revenue
23.14
19.42
33.02
33.79
17 Revenue from operations

Particulars
(in rupees crore)
Year ended 31 March 2012 Year ended 31 March 2011
Sale of services
Aeronautical revenues
367.69
331.40
Non-aeronautical revenues
237.99
206.80
605.68
538.20
43
Annexure II

18 Other income
(in rupees crore)
Particulars
Interest - banks
29.09
28.44
Interest - others
0.01
Exchange gain (net)
16.87
Profit on sale of fixed assets (net)
0.01
Tender fees
0.25
0.08
Provision for doubtful debt written back
Miscellaneous income

19 Employee benefit expenses
2.95
0.48
0.05
29.84
48.39
Particulars
(in rupees crore)

66.20
57.98
Contribution to provident and other funds
3.19
3.23
Staff welfare
2.12
2.45
Staff recruitment and training
1.35
1.98
72.86
65.64
Salaries and wages
20 Finance costs
Particulars
(in rupees crore)
Interest - banks
Rupees term loan*
106.83
116.83
17.92
17.72
Exchange difference to the extent considered as an adjustment to borrowing costs 8.95
7.90
Other borrowing costs
1.18
1.14
134.88
143.59
Foreign currency term loan*
* Net of recovery from Passenger Service Fee (Security Component) Account Rs 3.95 crore (Previous year: Rs 5.28 crore) [Refer note 22]
21 Other expenses
Particulars
(in rupees crore)
Rent

Land lease *
6.35
6.35
Others
0.41
0.29
Rates and taxes
0.81
0.14
Insurance
2.04
2.46
23.23
22.38
Repairs to buildings
15.07
11.97
Repairs to machinery and others
20.61
17.77
5.32
3.78
25.42
23.15
5.37
2.67
Power and Fuel

[Net of recovery Rs 15.09 crore
(Previous year: Rs 13.69 crore)]
Consumption of stores and spares [Refer note 27]

Concession fee
Legal and professional
44
Annexure II

Technical consultancy
6.08
2.48
Operations and management services fee
7.84
8.15
Advertisement
1.98
1.09
Travelling and conveyance
7.03
5.87
Communication [Net of recovery Rs 0.01 crore (Previous year: Rs 0.02 crore)]
0.67
0.69
Printing and stationery
0.29
0.36
Exchange loss (net)
1.47
Loss on sale of fixed assets (net)
0.13
Provision for doubtful debts
1.24
Miscellaneous
1.03
0.72
132.26
110.45
* Land lease agreement

The Company has entered into a Land Lease Agreement (LLA) with KSIIDC on 20 January 2005 whereby,
for the purposes of BIA project, KSIIDC has leased to the Company approximately 3,884 acres of land
situated within Devanahalli Taluk & Bangalore North Taluk. A Land Lease Deed (LLD), which supercedes
the LLA (containing the same clauses as the LLA) has been signed between the aforesaid parties and
registered with the local authority on 30 April 2005. The term of the LLD is concurrent with the term
of the CA.
he land, valued at Rs 175 crore (referred to as site cost), carries a nominal lease rent of one rupee
T
per annum up to the AOD. The lease rent after the AOD is fixed at the rate of 3% per annum of the site
cost for a period of seven years and 6% for the eighth year. Thereafter, the lease rent is escalated by
3% every year (over the preceding years lease rent) for the remainder of the lease period.
Out of the additional land of approximately 133 acres that KSIIDC had to acquire and lease to the
Company as per the LLD, KSIIDC has handed over land aggregating to approximately 124 acres as
at the previous year end. The Company has entered into an additional Land Lease Deed (LLD) with
KSIIDC on 31 December 2011. This additional land valued at Rs. 36.78 crore carries a nominal lease
rent of one rupee per annum up to the AOD. The lease rent after the AOD is fixed at the rate of 3%
per annum of the site cost for a period of seven years and 6% for the eighth year. Thereafter, the
lease rent is escalated by 3% every year (over the preceding years lease rent) for the remainder of
the lease period.
The Company has entered into arrangements for sub-lease of land to concessionaires for purposes of
airport and non-airport activities.
22
P
assenger Service Fee (PSF) collected from the departing passengers has two components, viz.
Facilitation component (FC) and Security component (SC). As per orders issued by Ministry of Civil
Aviation (MoCA) from time to time, PSF (SC) collections are held by the Company in fiduciary capacity
for the Government of India and are deposited in escrow bank account maintained for meeting security
related expenses.
he following is the Memorandum Account relating to PSF (SC) for which the books are maintained
T
separately. The balances/transactions do not form part of the Companys books of account.
45
Annexure II
(in rupees crore)
Income and Expenditure Account for the
Income
PSF (SC) (net of service tax)
81.43
Other income
0.53
74.29
81.96
Expenditure
0.31
74.60
64.03
57.67
17.93
16.93
Excess of income over expenditure transferred

to PSF (SC) Fund
(in rupees crore)
Balance Sheet As at 31 March 2012 As at 31 March 2011

Assets
Fixed assets (net of accumulated depreciation)
42.36
51.23
Current assets and advances
13.61
6.98
Sundry debtors
23.73
15.23
Cash and Bank balances

Cash on hand
Current accounts
Deposit accounts
0.63
1.35
11.69
12.32
6.62
7.97
92.02
81.41
Liabilities
Book overdraft
0.13
0.12
Payable to the Company
47.07
53.86
Current liabilities and provisions
5.80
6.34
PSF (SC) fund
39.02
21.09
92.02
81.41
The following capital and revenue expenditure have been transferred/ debited to PSF (SC) Account by
the Company and included in the above balances:

Particulars

(in rupees crore)
Year ended
31 March 2012
Security related assets
Year ended
31 March 2011
0.55
Interest on bank loans relating to the security assets
3.95
5.28
Other security related expenditure
0.57
0.97
The Company had received observations from the Comptroller and Auditor General of India (CAG)
during the audit for the year 2010-2011, stating that the Perimeter wall should not form a part of
the PSF(SC) books based on Ministry of Civil Aviation (MoCA) SOP and clarification dated 5 July
2010. The Company has replied to the CAG stating that the general clarification by MoCA in July
2010, stated that the 16 April 2010 order shall be applicable prospectively and should not be applied
retrospectively and accordingly no adjustment is required to be carried out. The CAG has also sent
their comments to the MoCA in the month of March 2012 with a copy of the same to the Company.
Pending further communication from the MoCA, the Company has retained the security related capital
assets (including perimeter wall) in the PSF (SC) books.
46
Annexure II

23 Taxation
(a) Transfer pricing

The Finance Act, 2001 has introduced, with effect from assessment year 2002-03 (effective 1 April
2001), detailed Transfer Pricing regulations for computing taxable income and expenditure from
international transactions between associated enterprises on an arms length basis. These
regulations, inter alia, also require the maintenance of prescribed documents and information
including furnishing a report from an accountant within the due date of filing the Return of
Income.
For the fiscal year ended 31 March 2011, the Company had undertaken a study to comply with
the regulations for which the prescribed certificate of the Accountant has been obtained and
that did not envisage any additional tax liability. For the fiscal year ended 31 March 2012, the
Company is in the process of undertaking a study to comply with the said regulations.
(b) The deferred tax asset/ liability as at the balance sheet date resulting from timing differences
between book profit and tax profit are bifurcated between differences which relate to tax
holiday period and other timing differences. In the opinion of the Management, the timing
differences which pertain to the tax holiday period are expected to get reversed in the future
years within the tax holiday period and accordingly, no deferred tax has been created for the
same. The Management is of the view that the other timing differences are not likely to be
material.
24 Contingent liabilities and commitments (To the extent not provided for)

Contingent liabilities:
Particulars
Claims against the Company not acknowledged as debts
As at 31 March 2012
(in rupees crore)

As at 31 March 2011
0.98
0.98
(a) The Company has issued undertaking to Customs authorities aggregating to Rs Nil (Previous year:
Rs 0.78 crore) with respect to concessional rate of duty adopted for import of certain eligible
equipment for use in BIA.
(b) The Company has filed an application to get itself impleaded as one of the aggrieved party
against an appeal filed by the State of Karnataka, challenging the order of the Karnataka High
Court, issued in April, 2007, quashing the levy of Special Entry Tax of Rs 2.13 crore (Previous
year: Rs 2.13 crore).
(c) The Income Tax Department has filed an appeal in the Karnataka High Court against the
Income Tax Appellate Tribunal (ITAT) order regarding the Tax Deducted at Source (TDS) on the
reimbursement of Development Costs to overseas promoters in 2005-2006. The Company had
earlier paid the TDS amount of Rs. 5.94 crore (Previous year: Rs 5.94 crore) under protest
before getting the relief from ITAT. This was refunded to the company along with interest of Rs.
0.91 crore (Previous year: Rs 0.91 crore) as a result of favourable ITAT order. The Management
is confident of defending the Tribunal order in the High Court and made appropriate legal
representation in this regard.
(d) The Company has received two demand orders from Commissioner of Service tax for the periods
2005-2009 and 2009-10 for payment of service tax of Rs.2.36 crore as a recipient of service
towards reimbursement of salary costs to Zurich Airport (Previous year: Rs 2.36 crore as per the
show cause notices). The interest and penalty as per the above demand orders amounts to Rs
1.23 crore and Rs 2.93 crore respectively. Further, a show cause notice has been issued for period
2010-2011 for a sum of Rs.0.29 crore on the same account. These payments relate to salaries
of expatriates who were seconded to Company. The Company has preferred an appeal against
demand orders before the Tribunal (CESTAT) and challenged the show cause notice which
47
Annexure II
is not confirmed by formal demand as on the balance sheet date. The Company has challenged
the demand based on the judicial precedence on the matter and is confident of non-applicability
of service tax since the payment relates to salary costs to expatriate employees of the Company
which cannot be treated as services received by the Company. Zurich Airport is only a remitter of
the foreign currency remuneration as is evidenced by Expatriate Remuneration Reimbursement
Agreement between the Company and Zurich Airport. The Company has accounted these
payments as salaries and discharged appropriate TDS as the economic employer of the said
expatriates.
Commitments:

Particulars
As at 31 March 2012
Estimated amount of unexecuted
capital contracts (net of advances)
Other commitments *
* Pertains to open forward exchange contracts aggregating Rs 5.97 crore (Previous year: Rs 26.04
crore) and lease commitments aggregating Rs 0.18 crore (Previous year: Rs 0.31 crore).
(in rupees crore)
As at 31 March 2011
564.64
97.52
6.15
26.35
25 Expenditure in foreign currency

(in rupees crore)

Particulars
Year ended
Year ended

31 March 2012
31 March 2011

Salaries and wages
2.56
3.43
Legal and professional
0.13
Technical consultancy
1.57
2.90
Operations and management services fee
0.50
0.41
Repairs
1.70
1.26
Interest banks
4.16
4.40
Travelling and conveyance
0.30
0.45
Staff recruitment and training
0.05
0.43
Others
0.38
0.01
26 Imports (Valued on the Cost, Insurance and Freight basis)

(in rupees crore)

Particulars

Capital goods (including Capital work-in-progress)
0.83
0.43
Stores and spares
1.16
1.25
27 Consumption of stores and spares
(in rupees crore)

Particulars

Indigenous

Imported

Year ended 31 March 2012

Amount %
4.39
83%
0.93
17%
5.32 100%

Amount
%
3.03
0.75
3.78
80%
20%
100%
48
Annexure II

28 Auditors Remuneration (included in legal and professional expenses)

(in rupees crore)

Particulars

Year ended
31 March 2012
Year ended
31 March 2011

Statutory audit (including limited reviews)

Others*

0.25
0.15
0.40
0.25
0.10
0.35
0.01
0.01
*including certification fees

Reimbursement of out-of-pocket expenses
29 The disclosures as envisaged in AS 15 on Employee Benefits are given below:

a)

Defined Benefit Plan

The Company provides for gratuity, a defined benefit plan (the gratuity plan) to its employees.
The gratuity plan provides a lump sum payment to vested employees at retirement or termination
of employment based on the respective employees last drawn salary and years of employment
with the Company.
Reconciliation of opening and closing balances of the present value of the defined obligation:

Particulars
As at 31 March 2012
(in rupees crore)

As at 31 March 2011
Obligations at year beginning
2.15
1.32
Current service cost
0.81
0.50
Interest cost
0.26
0.15
Actuarial (gain)/ loss on obligations
Past service cost
Benefits paid during the year
Obligations at year end
Classified as:
(0.25)
0.14
0.04
0.04
3.01
2.15
Long-term provisions
2.92
2.13
Short-term provisions
0.09
0.02
Total
3.01
2.15
Defined benefit obligation liability as at balance sheet date is not funded by the Company
Expense recognised during the year:

Particulars
(in rupees crore)

Current service cost
0.81
0.50
Interest cost
0.26
0.15
Actuarial (gain)/loss due to change in assumptions
Past service cost
(0.25)
0.14
0.04
0.04
0.86
0.83
49
Annexure II
Assumptions

Particulars
Discount rate per annum
Salary escalation rate
Attrition rate
As at 31 March 2012
As at 31 March 2011
8.70%
8.35%
7%
7%
Age 21-44:2%
Age 21-44:2%
Age 45-59:1%
Age 45-59:1%
0.10
0.10
Ceiling limit of Gratuity
Amounts for the current and the previous four years are as follows:

(in rupees crore)
Particulars
Defined benefit obligations
Plan assets
Surplus/ (defecit)
Experience adjustment on plan liabilities
Experience adjustment on plan assets
b)

Defined Contribution Plan

The Company has contributed Rs 3.74 crore (gross of amount transferred to Capital work-inprogress) towards provident fund during the year (Previous year: Rs 3.23 crore)
As at 31 March 2012 31 March 2011 31 March 2010 31 March 2009 31 March 2008
3.01

2.15

1.32

0.81

(3.01)
(2.15)
(1.32)
(0.81)
(0.09)
0.12
(0.02)
(0.01)
0.25
(0.25)
-
30 Segment Reporting

The Company is in the business of operations of the Airport at Bangalore. Consequently, disclosure
under AS 17 Segment reporting has not been made, as, in the opinion of the Management, the
Company does not have separate reportable business or geographical segments.
31 Related party

List of related parties:
Name of the party Description of relationship
Siemens Project Ventures GmbH, Germany
Enterprises which exercise significant influence over the Company
Bangalore Airport & Infrastructure

Developers Private Limited
Enterprises which exercise significant influence over the Company
Mr. G V Sanjay Reddy (w.e.f. 9 April, 2010) Key Management Personnel
Mr. Marcel Hungerbuehler

(w.e.f. 1 February 2009 upto 8 April 2010) Manager/ Managing Director of Company
Orbit Tours and Travels Private Limited Enterprises in which directors have significant influence
GVK Projects & Technical Services Limited Enterprises in which directors have significant influence
GVK Power & Infrastructure Limited Enterprises in which directors have significant influence
The details of amounts due to or due from as at 31 March 2012 and 31 March 2011 are as follows:
(in rupees crore)
Name of the party
Orbit Tours and Travels Private Limited
Trade payables
0.18
0.01
GVK Projects & Technical Services Limited.
Trade payables
3.43
The details of related party transactions entered into by the Company for the year ended 31 March 2012
and 31 March 2011 are as follows:
Nature
As at 31 March 2012
As at 31 March 2011
50
Annexure II

(in rupees crore)
Name of the party

Natureof transaction

Year ended
31 March 2012
Year ended
31 March 2011
G.V. Sanjay Reddy
Remuneration
3.73
3.40
Marcel Hungerbuehler
Remuneration
0.04
Orbit Tours and Travels Private Limited *
Purchase of air tickets
0.78
0.54
12.00
0.53
0.65

GVK Projects & Technical Services Limited Travel cost & Technical

Consultancy fee

GVK Power & Infrastructure Limited.
Reimbursement of travel cost
*Transactions falling under the purview of Section 297 of the Companies Act, 1956, for which
necessary approval has been received from the Ministry of Corporate Affairs.
32 Leases

Finance lease
The Company has acquired computer systems and software on lease for a period of three to five
years, which has been classified as a finance lease as envisaged in Accounting Standard (AS) 19
Leases:
Particulars
Total Minimum lease payments outstanding:
Within one year of the balance sheet date
Due in a period between one year and five years
(in rupees crore)
As at 31 March 2012
As at 31 March 2011
0.08
0.06
0.08
0.08
0.14
(0.01)
0.08
0.13
(in rupees crore)
(Less): Interest not due
Present value of minimum lease payments
Lease obligations payable
Particulars
Within one year of the balance sheet date
Due in a period between one year and five years
As at 31 March 2012
As at 31 March 2011
0.08
0.05
0.08

0.08 0.13

Operating lease

(in rupees crore)

Particulars
Rent*
*The Company has entered into leasing arrangements for office and residential premises,which
are generally cancellable in nature. Such leases are generally for a period ranging from eleven
to one hundred eight months with options for renewal against increased rent, and premature
termination of agreement with notice periods ranging between one to six months.
The amount of lease rentals towards long-term non-cancellable operating leases for office
premises is Rs 0.15 crore (Previous year: Rs 0.13 crore).
The maximum obligations on long-term non-cancellable operating leases for office premises are
as follows:
0.42
0.43
51
Annexure II


Particulars
(in rupees crore)
As at 31 March 2012
As at 31 March 2011
Not later than one year
0.13
0.13
Later than one year but not later than five years
0.05
0.18
0.18 0.31
Sub-lease of land to concessionaires:
The Company has entered into agreements for sub-lease of approximately 3.18 acres, with
three concessionaires/ airline operators to use the land for commercial operations. The
agreements provide for transfer of land back to the Company along with the buildings constructed
by the concessionaires/ airline operators, at the end of the sub-lease term which ranges from
seven to fifteen years. The company has recognised revenue of Rs 2.86 crore (Previous year: Rs
2.64 crore) as part of Non-aeronautical revenue (Also refer note 17).
33 Derivatives

Forward contracts and unhedged foreign currency exposure
As at 31 March 2012, the Company has outstanding forward contracts amounting to USD 0.12
crore (Previous year: USD 0.54 crore), EURO Nil (Previous year: EURO 0.02 crore) and CHF Nil
(Previous year: CHF 0.02 crore). These derivative instruments have been entered to hedge
highly probable forecasted payables.
The Company has unhedged foreign currency exposure of Rs 1.41 crore (Previous year: Rs 0.30
crore) for sundry creditors as at balance sheet date.
In accordance with the principles of AS 30, those derivative instruments which qualify for
cash flow hedge accounting have been fair valued as at balance sheet date and the resultant
exchange loss as at the year-end aggregating Rs 0.23 crore (Previous year: Rs 3.50 crore) has
been accounted in Hedge Reserve.
Currency and interest rate swaps
In accordance with the principles of AS 30, those derivative instruments which are termed as
financial assets/ liability, accounting have been fair valued as at balance sheet date at Rs Nil
(Previous year: Rs 0.98 crore) and the resultant exchange gain amounting to Rs 0.98 crore has
been credited to the Statement of profit and loss.
34 Earnings per share

(in rupees crore, except as otherwise stated)
Particulars
Nominal value of equity shares (Rs)
Weighted average number of equity shares outstanding

Basic and Diluted
Profit after tax for the year considered for the calculation
of basic and diluted earnings per share
Earnings per share Basic and diluted (Rs)
35
The Ministry of Micro, Small and Medium Enterprises has issued an Office Memorandum dated
26 August 2008 which recommends that the Micro and Small enterprises should mention in their
correspondences with its customer the Entrepreneurs Memorandum Number as allocated after
filing of the Memorandum. Accordingly, the disclosure in respect of the amounts payable of such
enterprises as at 31 March 2012 has been made in the financial statement based on information
received and available with the Company. The dues to such enterprises which have provided
goods and services to the Company and which qualify under the definition of Micro and Small
enterprises, as defined under Micro, Small and Medium Enterprises Development Act, 2006 is
stated as under:
10
10
384,600,000
384,600,000
160.76
132.10
4.18
3.43
52
Annexure II

(in rupees crore)

Particulars
31 March 2012
(i)

The principal amount and the interest due thereon

remaining unpaid to any supplier as at the end of
each accounting year
(ii)

(iii)

31 March 2011
0.37
0.16
The amount of interest paid by the buyer in terms of

Section 16 of the Micro, Small and Medium
Enterprises Development Act, 2006, (the Act) along
with the amount of the payment made to the supplier
beyond the appointed day during each accounting year
The amount of interest due and payable for the period

of delay in making payment (which have been paid
but beyond the appointed day during the year) but
without adding the interest specified under the said Act
(iv) The amount of interest accrued and remaining unpaid

on 31 March 2012 in respect of principal amount settled

during the year
(v)

The amount of further interest remaining due and

payable even in the succeeding years, until such
date when the interest dues as above are actually paid
to the small enterprise, for the purpose of disallowance
as a deductible expenditure under section 23 of the Act -
The above information has been determined to the extent such parties have been identified by
the Company, which has been relied upon by the auditors.
36
The Company has prepared these financial statements as per the format prescribed by Revised
Schedule VI to the Companies Act, 1956 (the schedule) issued by Ministry of Corporate Affairs.
Previous periods figures have been regrouped to conform to the classification required by the
Revised Schedule VI.


Director

Bodapati Bhaskar
Date: 25 April 2012
Director

S. Chandrasekar
Director - Finance

53
Annexure II
Annexure II
Annexure II

Detailed Submissions regarding Order
No.13/2010-11, Order No.14/2010-11 and
Direction No.5/2010-11
April 08, 2013
1
Annexure II
Contents
INTRODUCTION.................................................................................................................................... 3
STATE CONCESSIONS (GOI AND GOK) ................................................................................................. 7
APPROPRIATE REGULATORY TILL......................................................................................................... 8
TILL - A POLICY DECISION ................................................................................................................... 25
AIRPORTS - WHETHER A MONOPOLY ................................................................................................ 26
FAIR RATE OF RETURN ....................................................................................................................... 27
LAND VALUE ADJUSTMENT ............................................................................................................... 29
SERVICES OTHER THAN REGULATED SERVICES ................................................................................. 31
SERVICE QUALITY ............................................................................................................................... 33
INCENTIVE BASED OR PRICE CAP REGULATION................................................................................. 35
INTRUSIVE / HEAVY HANDED REGULATION .................................................................................. 37
21.
Cost of Debt: ...................................................................................................................... 37
22.
Refinancing of debt:........................................................................................................... 38
23.
Working Capital Loans: ...................................................................................................... 39
BENEFIT OF CONCESSIONS ................................................................................................................ 39

24.
Interest Free or Concessional Loan Agreements: .............................................................. 39
25.
Work in Progress Assets: ................................................................................................... 40
OTHER ISSUES .................................................................................................................................... 41

26.
Traffic Forecasting: ............................................................................................................ 41
27.
Over-recovery and Under-recovery:.................................................................................. 42
28.
Scope of RAB or RAB Boundary ......................................................................................... 43
29.
Initial RAB........................................................................................................................... 44
30.
Asset Value Adjustment..................................................................................................... 45
31.
Operations and Maintenance Expenditure ....................................................................... 46
32.
Bad debts ........................................................................................................................... 47
33.
Passenger Service Fee........................................................................................................ 48
34.
Targeted Efficiency Improvement ..................................................................................... 48
CONCLUSION ..................................................................................................................................... 51
2
Annexure II
INTRODUCTION
1.
Bangalore International Airport Limited (BIAL) welcomes this opportunity to

further submit its views and concerns to the Airports Economic Regulatory
Authority of India in relation to the tariff determination exercise that has been
initiated by the Authority, with respect to aeronautical tariffs charged by major
airports.
2.
The following orders and/or consultation papers have been issued by the Authority
in respect of the tariff determination exercise:
(i)
White Paper dated December 22, 2009 setting out the broad canvas, within
which, tariff determination exercise would be conducted;
(ii)
Consultation Paper No.3/2009-10 dated February 26, 2010 setting out the
proposed regulatory philosophy of the Authority;
(iii)
Order No.13/2010-11 dated January 12, 2011 setting out the Regulatory
Philosophy and Approach in Economic Regulation of Airport Operators;
(iv)
Order No.14/2010-11 dated February 28, 2011 further setting out the
Regulatory Philosophy and Approach in Economic Regulation of Airport
Operators; and
(v)
Direction No.5/2010-11 dated February 28, 2011 setting out detailed

guidelines for the tariff determination exercise.
3.
BIAL had submitted a detailed response dated March 19, 2010 to Consultation
Paper No.3/2009-10. BIAL had also filed Appeal No.2/2011 challenging Order
No.13/2010-11; and Appeal No.7/2011 challenging Order No.14/2010-11 and
Direction No.5/2010-11.
4.
Appeal Nos.7 to 11 of 2011 were listed for hearing on February 15, 2013 before the
Honble Appellate Tribunal. During the course of hearing of Appeal No.7 to 11 of
2011, a submission was made on behalf of the Authority that, the Authority by
Order No.13/2010-11, Order No. 14/2010-11 and Direction No.5/2010-11 has only
3
Annexure II
indicated its mind prima facie and that it would be open to the contesting parties to
canvass their views regarding the principles to be applied in the tariff determination
exercise. In line with this submission, Appeal Nos. 7 to 11 of 2011 were disposed of
by a common order dated February 15, 2013 providing BIAL and other stakeholders
an opportunity to raise all pleas and contentions before the Authority. We at BIAL
welcome the submission made on behalf of the Authority since this provides a
window of opportunity to BIAL to convey its concerns, apprehensions and
difficulties with respect to Order No.13/2010-11, Order No.14/2010-11 and
Direction No.5/2010-11. As stated above, BIAL has already submitted a response
dated March 19, 2010 to Consultation Paper No.3/2009-10. BIAL has also, through
the appeals filed in Appeal No.2/2011 and Appeal No.7/2011 conveyed its principal
concerns. To avoid repetition, BIAL requests that its concerns set out in its response
dated March 19, 2010 and Appeal Nos.2 and 7 of 2011 be considered as a part of
this document. Although most of BIALs concerns have been highlighted in the
above referred documents, at the cost of repetition, BIAL wishes to set out below its
principal observations, concerns and submissions for the kind consideration of the
Authority.
5.
In order to place BIALs observations and submissions in an appropriate context,

we are briefly recapitulating the legal framework in which, BIAL was provided
multiple concessions to build, operate and transfer a Greenfield Airport at
Bangalore:
(i)
The Airports Infrastructure Policy, 1997 recognized:
and stressed the need for private investment and management

capacities;
the need to provide a market orientation to the existing structure in

order to encourage greater efficiency and enterprise in the operation
of airports, through introduction of private capital and management
skills;
that revenue from non-aeronautical services is an important

component of airport development especially in order to make
airports not only viable but also capable of generating surpluses for
further expansion and development;
4
Annexure II
that except for user development fees, there will be total freedom for
airport operators in the matter of raising revenue through nonaeronautical revenue and there will not be any government control
over the same;
revenue from non-aeronautical sources as an internal resource for

financing of airport infrastructure;
that considering the quantum of investment required and considering

the fact that public funds are scarce, private sector involvement is a
necessity;
that private sector participation would inter alia bring in efficiency in

management of airports; and
that the role of the central and state governments would, among other
things, include approval of aeronautical charges. A similar provision
with respect to non-aeronautical charges was however absent.
Thus, the policy provided a revolutionary thrust towards induction of

private capital and private management of airports. It is our view that
the thrust on privatization essentially translates to a reduction in
control or regulation of the airport business.
Privatization
indisputably indicates a paradigm shift away from the license raj,

both in letter and spirit, and recognizes the importance of private
enterprise and entrepreneurship. In this backdrop, it is our view that,
in order for private capital and management skills to be employed
optimally, regulation can be minimal to give effect to the policy of
the State and to ensure provision of appropriate services by the
airport operator. Apart to such oversight, the overarching approach
must be towards recognizing maximum freedom to the airport
operator, in carrying on its activities both aeronautical and nonaeronautical.
(ii)
The Airports Authority of India Act, 1994: The 2003 amendments to the
Airports Authority of India Act, 1994 strengthened investors confidence
and provided a further legal framework for privatization of airports. It is also
pertinent that the statement of objects and reasons for the 2003 amendments
5
Annexure II
specifically refers to the requirement to improve the standard of services and

facilities at the airports to bring them at par with international standards, and
for the infusion of private sector investment for this purpose. The statement
of objects and reasons further specifically states that significant private
sector investments in such a project require an effective legal framework
within which the investors would feel safe and secure about operational and
managerial independence.
(iii)
In line with the Airports Infrastructure Policy, 1997 and the amendments to
the Airports Authority of India Act, 1994 and to attract investment in a
sunrise sector, the Central and the State Government offered multiple
concessions and initiated a global competitive bidding process for
development of an international airport at Bangalore. It is in this backdrop
that BIAL was selected to build, operate and transfer the Bengaluru
International Airport at Bangalore.
(iv)
A Concession Agreement dated July 05, 2004 (Concession Agreement)

was executed between the Ministry of Civil Aviation / Central Government
and BIAL. Thereafter, the State Support Agreement dated January 20, 2005
(State Support Agreement) was executed between the State of Karnataka
and BIAL; and the Land Lease Deed (Land Lease Deed) dated April 30,
2005 was executed between KSIIDC and BIAL.
6.
Bangalore International Airport was the first private Greenfield airport which was
developed in the new legal framework ushered in by the Airports Infrastructure
Policy, 1997 and the amendments effected by the Airports Authority of India
(Amendment) Act, 2003. BIAL faced myriad challenges and risks, both legal and
otherwise, since it was a prime mover. Amidst multiple uncertainties, commitments
were made by the shareholders of BIAL to develop a world class airport in
Bangalore. It is only fair that the promises made and the framework, in which
investments and commitments were made, be respected and adhered to.
7.
Order Nos.13 and 14 and Direction No.5 (collectively referred as tariff orders), in
their current form, have the effect of severely eroding benefits that had been given
and/or promised to BIAL. The tariff orders undermine the assurances on the basis
of which, investments were made into the Bengaluru International Airport (BIA).
6
Annexure II
In fact, certain observations in the tariff orders may have the effect of rewriting the
basis on which, investments were made into BIA. Additionally, certain regulatory
mechanisms proposed in the tariff orders are not in tandem with extant international
practices and standards. Some such mechanisms may also not be in line with the
regulatory framework contemplated under the Airports Economic Regulatory
Authority of India, 2008 (Act). It is BIALs endeavour to point out such portions
of the tariff orders and seek appropriate modifications thereto.
STATE CONCESSIONS (GOI AND GOK)

8.
The Ministry of Civil Aviation/ Central Government provided a concession to BIAL

to develop a Greenfield airport in Bangalore in exercise of its executive power. This
executive power has been exercised by the Central Government under Entry 29, List
I of the VII Schedule of the Constitution. There is no provision whatsoever in the
AERA Act which undermines the Concession Agreement. On the contrary, Section
13(1)(a)(vi) expressly provides for a consideration of State concessions. Also, the
AERA Act does not deal with rights and liabilities of the airport operator and only
provides for a mechanism of tariff determination. In that sense, the AERA Act is a
procedural legislation and not a substantive legislation. A procedural legislation
cannot take away vested rights of the parties subject to such legislation.
9.
Additionally, in the course of the proceedings before the Honble Appellate

Tribunal in Appeal No.7, an affidavit dated July 18, 2011 was filed on behalf of the
Ministry of Civil Aviation/Central Government.
In the affidavit, the Central
Government has opined that the Concession Agreement, containing the philosophy
for economic regulation of aeronautical tariffs of the airports, has been approved at
the highest level at the Government and has been providing the guiding principles to
the Government in determination of aeronautical tariffs. It can be safely concluded
from the above that the Central Government is in favour of a full and effective
implementation of the concessions provided in the concession agreements executed
between airport operators and the State for the purposes of determination of tariffs
for aeronautical services. In fact, the statement on behalf of the Central
Government, in the affidavit, denotes that the terms and conditions of the
Concession Agreement are indicative of policy. As stated above, under Section 42
7
Annexure II
of the AERA Act, the Authority is bound by the policy directives of the Central
Government. In summation, the AERA Act as well as the policy directives of the
Central Government prescribe that the State concessions to the airport operator be
given full effect to.
APPROPRIATE REGULATORY TILL

10.
In Order No.13, the Authority has indicated that it will adopt Single Till regulatory
regime for major airports in India. Order No.14 and Direction No.5 prescribe
adoption of Single Till. The Authority has come to this conclusion on the basis of
reasons, which in our humble view, do not conform to the correct factual and/or
legal position. The Authoritys principal reasons for adoption of Single Till and
our responses thereto are below:
(i)
Position under the AERA Act: The Authority relies on certain observations
made in the 133rd Parliamentary Standing Committee Report.
It is our
humble view that the Authoritys reliance on the Standing Committee

Report is misplaced in law. A Parliamentary Committee Report on a bill
cannot be a tool for interpretation of a subsequently enacted statute. The
reliance on such report is not legally apposite. At any event, the extracts
from the report, which form a part of Order No.13 at paragraph 5.136,
indicate discussions with respect to tariff determination or regulation of
tariffs for non-aeronautical services as against inclusion of revenue from
non-aeronautical services, either completely, or in part, or not at all for
determination of tariffs of aeronautical services.
The Parliamentary
Committee did not deliberate on or recommend any modifications to the bill

with respect to inclusion of revenue received from non-aeronautical services
for determination of tariffs from aeronautical services. In this light, the
Authority cannot rely on the report to decipher the true meaning of Section
13(1)(a)(v) of the AERA Act.
In our view, the Authority need to have, in the first instance, considered the
very words employed in Section 13(1)(a)(v) to cull out the true import of
Section 13(1)(a)(v). Section 13(1)(a)(v) provides for consideration of
8
Annexure II
revenue received from services other than aeronautical services.
The
provision does not indicate that all revenue must be included. Additionally,
the proviso to Section 13(1)(a) indicates that any or all of the considerations
specified in Section 13(1)(a) (i) to (vii) can be considered for determining
different tariff structures for different airports. These two features visibly
indicate that the AERA Act does not mandate a single till approach. Instead,
the AERA Act provides the leeway to the Authority to apply appropriate
mode of regulation, keeping in mind the factors prescribed in Section
13(1)(a)(i) to (vi). In the case of BIAL, in view of Section 13(1)(a)(vi), in
accordance with the Concession Agreement, BIAL should not be governed
under a single till regulation .
The Authority, in the final tariff determination orders issued in respect of

Mumbai airport and Delhi airport, has applied the shared till mechanism for
determination of tariffs. Had single till been mandated by the AERA Act, a
shared till mechanism could not have been applied in the case of Mumbai
and Delhi airports. If that be so, the Authoritys conclusion at clause 5.136
of Order No.13 that legislature did not contemplate regulation under a
hybrid till. runs contrary to its subsequent orders.
The conclusion of the Authority that dual and hybrid till are not
contemplated under the AERA Act runs contrary to the provisions of the
AERA Act as well as the subsequent orders passed by the Authority.
(ii)
ICAO recommends Single Till: This conclusion does not reflect the true or
correct position adopted by ICAO. ICAO has not recommended any form of
economic oversight over another. This is also the stated position of ICAO,
which is apparent from some of the extracts of ICAO documents, which are
reproduced below.
Convention on International Civil Aviation
The basic policy established by ICAO in the area of the charges for Airport
and Air Navigation Services is expressed in Article 15 of the Convention on
9
Annexure II
International Civil Aviation (Doc. 7300), usually referred to as the Chicago

Convention, as follows:
Airport and similar charges

Every airport in a contracting State which is open to public use by its
national aircraft shall likewise, subject to the provisions of Article 68, be
open under uniform conditions to the aircraft of all the other contracting
States. The like uniform conditions shall apply to the use, by aircraft of every
Contracting State, of all air navigation facilities, including radio and
meteorological services, which may be provided for public use for the safety
and expedition of air navigation.
Any charges that may be imposed or permitted to be imposed by a
Contracting State for the use of such airports and air navigation facilities by
the aircraft of any other Contracting State shall not be higher.
a) As to aircraft not engaged in scheduled international air services,
than those that would be paid by its national aircraft of the same
class engaged in similar operations, and
b) As to aircraft engaged in scheduled international air services, than
those that would be paid by its national aircraft engaged in similar
international air services.
All such charges shall be published and communicated to the International
Civil Aviation Organization, provided that, upon representation by an
interested contracting State, the charges imposed for the use of airports and
other facilities shall be subject to review by the Council, which shall report
and make recommendations thereon for the consideration of the State or
States concerned. No fees, dues or other charges shall be imposed by any
contracting State in respect solely of the right of transit over or entry into or
exit from its territory of any aircraft of a contracting State or persons or
property thereon.
In summary, Article 15 sets out the following three basic principles:
10
Annexure II
Uniform conditions shall apply to the use of airports and air

navigation services in a Contracting State by aircraft of all other
Contracting States;
The charges imposed by a Contracting State for the use of such

airports or air navigation services shall not be higher for aircraft of
other Contracting States than those paid by its national aircraft
engaged in similar international operations; and
No charge shall be imposed by any Contracting State solely for the

right of transit over or entry into or exit from its territory of any
aircraft of a Contracting State or persons or property thereon.
ICAOs Policies on Charges for Airports

Additional and more detailed policy guidance is provided in ICAO's
Policies on Charges for Airports and Air Navigation Services (Doc
9082). These are revised periodically by the Council following major
international conferences on airport and air navigation services economics
although most of the basic philosophy and principles have remained
unchanged over the years. An introduction section of Doc 9082 addresses
some issues which are common to airports and air navigation services: scope
and proliferation of charges, organizational and managerial issues and other
factors affecting the economic situation of airports and air navigation
services.
ICAO's Policies on Charges differ in status from the Chicago Convention in

that an ICAO Contracting State is not legally bound to adhere thereto, unlike
the Articles of the Chicago Convention. However, since the principles in
the ICAOs Policies, including on charges, are based on recommendations
by major international conferences, States are morally committed to
follow them and to ensure that their cost recovery practices conform
thereto.
The principles contained in Section II - ICAOs Policies on Airport ChargesDoc 9082/6 cover such subjects as the cost basis for airport charges, airport
charging systems, pre-funding of projects; currency issues, landing charges,
11
Annexure II
parking and hangar charges, passenger service charges, security charges,

noise-related charges, consultation with users, development of revenues
from concessions, rental of premises and "free zones", and fuel concession
fees.
Among the basic principles included in ICAOs Policies on Charges
concerning the cost basis for airport charges are:
- that where an airport is provided for international use, the users ultimately
bear their full and fair share of the cost of providing the airport
(paragraph 21);
- that the cost to be shared be the full cost of providing the airport and
its essential ancillary services, including appropriate amounts for
cost of capital and depreciation of assets, as well as the cost of
maintenance and operation and management and administration
expenses,
but
allowing
for
all
aeronautical
revenues
plus
contributions from non-aeronautical revenues accruing from the

operation of the airport to its operators (paragraph 22 i));
Airports may produce sufficient revenues to exceed all direct and indirect
operating costs (including general administration, etc.) and so provide for a
reasonable return on assets at a sufficient level to secure financing on
favourable terms in capital markets for the purpose of investing in new or
expanded airport infrastructure and, where relevant, to remunerate
adequately holders of airport equity. (paragraph 22 vii);
ICAOs Policies on Charges also actively encourage the full development of
revenues from non- aeronautical activities in general (paragraph 34).
Other principles and recommendations of particular relevance in the

context of the cost basis for airport charges and charging systems are:
12
Annexure II
- airports should maintain accounts that provide a satisfactory basis for

determining and allocating the costs to be recovered, and should provide
adequate financial information to the users (paragraph 21);
- that the proportion of costs allocable to the various categories of

airport users should be determined on an equitable basis, so that no
users shall be burdened with costs not properly allocable to them
according to sound accounting principles (paragraph 22 v);
- that airports may produce sufficient revenues to exceed all direct and
indirect operating costs and so provide for a reasonable return on
assets at a sufficient level to secure financing on favourable terms in
capital markets for the purpose of investing in new or expanded
airport infrastructure and, where relevant, to remunerate adequately
holders of airport equity (paragraph 22 vii);
- that charges should not be imposed in such a way as to discourage

the use of facilities and services necessary for safety (paragraph 23 ii)
and
- The council considers that as a general principle it is desirable, where an

airport is provided for international use, that user shall ultimately bear their
full and fair share of the cost of providing the airport (paragraph 29).
Further,
1) ICAO lays emphasis on four key charging principles of non-discrimination,
cost-relatedness, transparency and consultation with the users.
2) ICAO does not propagate that airports have to adopt Single Till, though it
suggests that contribution from non-aeronautical revenues accruing from the
operation of the airport to its operators may be considered.
Mention of contribution from non-aeronautical revenues does in no way
suggest Single Till, as it does not stipulate all contributions. Mention of
13
Annexure II
contribution from non-aeronautical revenues itself indicates that separate

accounts are being maintained for aeronautical and non-aeronautical revenue
and expenses. In case of Single Till there is no need to maintain separate
expense account. Any inference about ICAO mandating Single Till is
flawed.
It is important to point out that the previous editions of ICAO Doc 9082
provided for inclusion of all revenues from non-aeronautical services.
Whereas, in the 6th edition, the language was modified to provide for
inclusion of contributions from non-aeronautical revenues. This amendment
reflects that ICAO does not recommend single till any longer.
The Authority has relied on a quotation by Prof. Dr. David Gillen in support
of its conclusion that ICAO recommends single till. BIAL has had the
opportunity of consulting David Gillen and had filed Dr. Gillens expert
affidavit dated January 12, 2012 in Appeal No.7/2011 in which he has
opined as under:56.
ICAOs policy regarding airport charges and air navigation
services are set out in ICAO document 9082/7.1 There is no statement
whatsoever regarding single or dual till price cap regulation and which it
prefers. There is a clear statement by ICAO that it considers that as a
general principle it is desirable, where an airport is provided for
international use, that the users shall ultimately bear their full and fair
share of the cost of providing the airport. Specifically, at paragraph 22i
under Airport Charges:
The cost to be shared is the full cost of providing the airport and its
essential ancillary services, including appropriate amounts for cost of
capital and depreciation of assets, as well as the costs of maintenance,
operation, management and administration, but allowing for all
aeronautical revenues plus contributions from non-aeronautical
revenues accruing from the operation of the airport to its operators.
57.
ICAOs latest document regarding charging policies (ICAOs
Policies on Charges for Airport and Air Navigation Services, Document
9082, 8th Edition 2009) is completely silent on single versus dual till. In
fact the word till does not appear in the document, nor do the expressions
1
See ICAO Document 9082/7, ICAOs Policies on Charges for Airports and Air Navigation Services. 7 th
edition 2004.
14
Annexure II
single till or dual till. It is clear that ICAO has not taken an explicit
position on single versus dual till.
58.
This is instructive in interpreting the possible ICAO position
on single versus dual till. First, note that the position of ICAO is that all
costs, and no more or less, should be paid by users of airport services.
Second, it states that allowing for contributions from non-aeronautical
revenues accruing from airport operations. It does not say all nonaeronautical revenues should be passed on which is what single till
regulation would do. Further, its statement that all costs be paid, has an
implication of no subsidies, and is basically saying, do not charge less
than costs, just as do not charge more than costs.
59.
This position is supported by Odoni (2007) who notes that
ICAOs position on charging for airport services should be cost based,
that users should pay the full costs including repairs and management
and interest and depreciation and no more and that airports may produce
revenues greater than costs.2 ICAO is silent on what should happen to
these revenues.
60.
IATA not unsurprisingly since they represent only the
interests of airlines has claimed that only single till should be used in
price cap regulation and that ICAO supports this position. In an IATA
submission regarding the need for economic regulation of Hong Kong
International Airport in 2004, IATA simply listed paragraph 22i (listed
above in paragraph 14) claiming this was proof of the ICAO position.3 I
disagree for reasons stated above.
61.
In a presentation to the Strategic Airport Management
Program, April 13-17, 2007,4 an ICAO representative provides detailed
explanations of airport pricing and specifically what constitutes single
and dual till. There is no statement of the position ICAO takes on single
versus dual till. In this same presentation the argument is made that half
or more of airport services are subject to competition; this would
constitute the bulk of revenue from non-aeronautical services. Given
these services are in competitive markets it is the airport that generates
these revenues not the airlines. It is the airport that invests resources to
increase the spending of passengers not the airlines.
62.
Gillen and Niemeier (2008)5 state The single till principle
was recommended by ICAO and has been widely used in Europe, but this
long tradition is slowly breaking up. I also note that Airports Economic
2
See, Amadeo Odoni (2007), Airport Systems, Fall, Massachusetts Institute of Technology.
See, The Need for Economic Regulation of the Hong Kong International Airport, IATA Submission to the
Economic Development and Labour Bureau of the Hong Kong SAR, 14 January 2004, LC Paper
No.CB(1)773/04-05(05).
4
See, Eileen Poh (2007), Airport Economics, presentation to the Strategic Airport Management Program,
April 9-13, 2007 Singapore.
5
See, David Gillen and Hans Niemeier, European Union: Evolution of Privatization, Regulation and Slot
Reform, in Winston and Gines de Ruse (eds) Aviation Infrastructure Performance: A Study in Comparative
Political Economy, Brookings Institution, Washington DC March 2008.
3
15
Annexure II
Authority of India in Order No.13/2010-22 quotes other papers I have

written which contain this same quote. Some have taken this as a
recommendation for support that ICAO has taken a position of single
versus dual till. In ICAO Document 9082, which describes the basis for
setting aeronautical charges, the first Edition was published in 1973. In
this and four (4) subsequent editions, upto 1997, the phrase used in
consideration of what revenues to include in setting aeronautical charges
is but allowing for all revenues both aeronautical and nonaeronautical which would imply a single till, although ICAO never
uses the term. However in the 6th Edition published in 2001, the phrase
changes to be The cost to be shared is the full cost of providing the
airport and its essential ancillary services, including appropriate
amounts for cost of capital and depreciation of assets, as well as the
costs of maintenance, operation, management and administration, but
allowing for all aeronautical revenues plus contributions from nonaeronautical revenues accruing from the operation of the airport to its
operators. The change in phrase is telling because it explicitly does not
say all non-aeronautical revenue but says instead contributions from
non-aeronautical revenues. My opinion is that ICAO recognized the
growing importance of non-aeronautical revenues and they also
recognized that the airport had shifted from being a public utility to
being a modern business. It was simply unreasonable to shift all of the
non-aeronautical revenue to subsidize aeronautical services. Prior to
2001, non-aeronautical revenue was a relatively small portion of total
revenues, but with a number of airports this was no longer true. The Air
Transport Research Society (ATRS), in their 2011 report based on 2009
data show non-aeronautical revenue ranging from; Europe 5% to 52%
with a mean of 22%; Asia Pacific 5% to 58% with a mean of 27%; North
America 7% to 46% with a mean of 21% all as a percentage of total
revenue.6
64.
It is therefore my opinion that the conclusion reached by
AERAI in Order 13 at paragraph 5.32 is incorrect. It quotes me from two
papers at paragraph 5.27 and 5.28. The quote, as argued above, was
based on the then existing statement in ICAO Document 9802 regarding
the inclusion of all revenues. I was under a mistaken assumption and
have since read carefully the texts of the relevant documents and
researched the ICAO position further. Furthermore, the AERAI at
paragraph 5.23 takes an overly broad interpretation to imply ICAO in
Document 9082 had meant that all non-aeronautical revenue to be
included in setting aeronautical charges. In fact, ICAO is explicit in its
paragraph 7, which the AERAI quotes in 5.23, and AERAI chooses to
ignore the fact ICAO says it may be appropriate for airports to retain
non-aeronautical revenues.
Moreover, in paragraph 10 of the affidavit dated July 18, 2011 filed by the
Ministry of Civil Aviation/Central Government in Appeal No.7, the Central
6
See, ATRS Airport Benchmarking Report 2011
16
Annexure II
Government has opined that neither Doc 9082 nor Doc 9562 specifies the
extent to which the non-aeronautical revenues should be taken into
account..
The above makes it amply clear that ICAO does not recommend single till.
The Authoritys principal premise for proposing a single till form of
regulation is unfounded. BIAL therefore requests the Authority to reconsider
its conclusion that ICAO recommends single till and consequently, further
reconsider regulation under a single till mechanism.
(iii)
POSITION AS PER CONCESSION AGREEMENT
Set out below are certain salient features of the Concession Agreement:
The commitment of the Ministry of Civil Aviation in clause 5.4.3

indicates the importance the Ministry attaches to the Concession
Agreement and to the rights of BIAL under the Concession Agreement.
The Concession Agreement contemplates regulation of tariff for

specified services. Such services are set out in Schedule 6 under the title
Regulated Charges and are restricted to landing, housing and parking,
passenger service fee and user development fee (domestic and
international). BIAL is free to determine its own charges without any
restriction in respect of all other services as per Article 10.3.
The Concession Agreement makes a distinction between airport

activities and non-airport activities. Under the head of airport activities
outlined in Schedule 3 of the Concession Agreement, BIAL is required
to provide only infrastructure for non-aeronautical services such as post
offices, conference centres, public telephones, restaurants and other
refreshment facilities, within the terminal building. The actual provision
of non-aeronautical services enumerated above is not regarded as an
airport activity. To illustrate, managing or operating a restaurant is not
an airport activity under the Concession Agreement, while providing a
building to house such a restaurant is considered an airport activity.
17
Annexure II
Non-airport activities under the Concession Agreement include airport

shuttle transport services, business parks, hotels, commercial buildings
etc.
The Concession Agreement carves out a specified set of services that are
within the scope of regulation which are termed as Regulated Charges /
Services. All other services should be consequently not regulated by the
Authority. Under the single till mechanism proposed by the Authority,
although tariffs for non-aeronautical services are not fixed by the Authority,
the profits that the airport operator may earn from such services are fixed.
This is nothing but an indirect fixation of tariffs for non-aeronautical
services. Thus, the non-fixation of tariffs for non-aeronautical services is
only illusory and does not translate into any real or on the ground
entrepreneurial freedom to the airport operator. As submitted in the response
dated March 19, 2010, Appeal No.2 and Appeal No.7, the proposed single
till regulation effectively determines tariffs even for non-aeronautical
services, which is clearly impermissible under the AERA Act and was never
contemplated under the Concession Agreement, the legal and factual
framework within which significant investments were made by BIAL and its
shareholders to establish the Bengaluru International Airport.
In the proposed regulations, the Authority has further not considered the
concessions offered to BIAL in the form of the State Support Agreement and
the Land Lease Deed. In the detailed project report which was shared with
the bidders at several points of time during the course of the bidding, it was
understood and conveyed that aeronautical and non-aeronautical services
would be treated as distinct sources of revenue. In securing financial closure
of the project, the consortium which emerged as the successful bidder for the
Bengaluru International Airport created a financial model which operated on
the understanding that aeronautical and non-aeronautical sources of revenues
would be treated distinctly. The State of Karnataka acknowledged the
financial models specifically and used it for the purpose of calculation of the
viability gap in the form of state support. Thus, the State of Karnataka
invested into BIAL as a 13% shareholder and also provided viability gap
18
Annexure II
funding of Rs. 350 crore on the basis of the understanding that aeronautical
and non-aeronautical revenues would be treated distinctly.
BIAL was granted state support to the tune of Rs.350 crore as per clause 3 of
the State Support Agreement to render the airport project viable. The State
Support Agreement further acknowledges that the State of Karnataka agreed
to provide financial support to improve the viability of the project and
enhance bankability of the initial phase and agreed to procure KSIIDC i.e.,
Karnataka State Industrial Investment and Development Corporation
Limited to execute the Land Lease Deed. Under the State Support
Agreement, BIAL is entitled to commercially develop real estate projects,
construction of hotels, restaurants, business centres, etc. for generation of
revenue. The Land Lease Deed was executed in furtherance of the State
Support Agreement and even under the Land Lease Deed; BIALs rights to
undertake non-airport activities such as construction of business parks,
hotels, etc are recognized.
Under the State Support Agreement as well as the Concession Agreement,
upon termination or expiry, BIAL has an option to continue to exercise
leasehold rights with respect to either the CA Excluded Area or SSA
Excluded Area, as the case may be. However, rest of the leased area is
deemed to have been surrendered. The fact BIAL has an option to exercise
leasehold rights with respect to certain portions of the leased land even
without the right to operate the airport makes it apparent that leased land was
provided to BIAL for the twin purposes of development of the airport and
commercial utilization. As stated above, one of the objectives of providing
leased land to BIAL for commercial utilization was to incentivize airport
development and expansion.
The Authoritys proposals in Direction No.5 not to consider the state
concessions would greatly impair the financial prospects of BIAL apart from
clearly setting at naught the intent of the State while entering into such
agreements. The Concession Agreement, State Support Agreement and the
Land Lease Deed form the bedrock of the relationship between the State and
19
Annexure II
BIAL for the purpose of operating and maintaining the airport and therefore,
no guidelines should be issued by the Authority, which have the effect of
truncating the letter and spirit of the Concession Agreement, the State
Support Agreement and the Land Lease Deed.
Subsequent to the issuance of the tariff orders, the Authority appears to have
revised its position in relation to the meaning of the term concession. The
Operation, Management and Development Agreements have been executed
between the Airports Authority of India and Mumbai and Delhi Airports. It
is an admitted position that the OMDA are the repository of state
concessions. BIAL understands that, pursuant to communications received
by the Authority from the Central Government, the Authority has considered
and given effect to OMDA for final tariff determination in respect of Delhi
and Mumbai airports. In this view of the matter, the Authority should
consider and give full effect not only to the Concession Agreement but also
the State Support Agreement and the Land Lease Deed.
From a legal stand point, if the concessions are not considered, the
provisions of Section 13(1)(a)(vi) will be rendered otiose. Whereas, if
Section 13(1)(a)(vi) and (vii) are considered and given full effect to, the
entire gamut of factors prescribed in Section 13(1)(a) would have been
considered. In this light, BIAL urges the Authority to reconsider the
proposed regulations with respect to applicability of the Concession
Agreement, the State Support Agreement and the Land Lease deed.
The Authority, in its final tariff determination orders in the case of Mumbai
and Delhi airports, has considered and given effect to the Operation,
Management and Development Agreement entered into by the Ministry of
Civil Aviation with Mumbai International Airport Limited and the Delhi
International Airport Limited. However, in the case of BIAL, in clause 3.2
of Order No.13, the Authority has proposed that the Concession Agreement
may require appropriate modifications and in Direction No.5, the rights of
BIAL under the Concession Agreement have not been considered. BIAL
respectfully submits that the Authority does not have any power or
20
Annexure II
jurisdiction to modify or alter the Concession Agreement executed between

the Union of India and BIAL. BIAL has been singled out for prejudicial,
differential and discriminatory treatment. BIAL submits that the Authority
should give full effect to the Concession Agreement, State Support
Agreement and the Land Lease Deed and not regulate services which are
beyond the ambit of regulation as per clause 10.3 of Concession Agreement
(such services are hereafter referred to as services other than regulated
services).
Concession Agreement clauses

The clauses of the Concession Agreement were central to securing financing for
the project. The concession clauses clearly indicate a separation of aeronautical
and non-aeronautical charges. While indicating that the Independent Regulatory
Authority will follow ICAO policies in regulating aeronautical charges, the
agreement also sought to employ some explicit provisions which provided
commitments to the investors of the project.
i.
Article 5.4.3 of concession agreements reads as follows:

in recognition of the investment to be made by the shareholders, from time
to time, of BIAL and the Lenders and subject to material compliance by such
shareholders and the Lenders with all Applicable Law, GoI will not take
any steps or action in contradiction of this Agreement which results in or
would result in such shareholders or the Lenders being deprived or
substantially deprived of their investment or economic interest in the Project
except in accordance with the Applicable Law. (Emphasis added)
The above provision clearly showcases the intent of the government to

protect the interest of the investing community. Lenders to BIAL committed
their investments to the project at the financial closure stage, based on the
financial model which was developed with an assumption of separation of
aeronautical and non-aeronautical sources of income. As shown below, the
Central and State governments were party to these agreements as key
stakeholders in the project.
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Annexure II
If the fundamental bid assumptions are changed in any way, the risk
perception of the project will increase, resulting in an increased cost of
capital. Further, the reduced cash flows may not allow the airport operator to
cover the principal repayments, thereby reducing their debt service coverage.
This can impact future expansion of airport.
ii.
Article 10.3 of the Concession Agreement reads as follows:

BIAL and/or Service Provider Right Holders shall be free without any
restriction to determine the charges to be imposed in respect of the facilities
and services provided at the Airport or on the Site, other than the facilities
and services in respect of which Regulated Charges are levied. (Emphasis
added)
The above statement signals the intent of the government for a fundamental
separation of the aeronautical and non-aeronautical streams of revenue.
In a single till system, the overall allowed regulated return for the airport is
calculated, and the level of non-aeronautical revenues is subtracted, leaving
the remaining deficit to be bridged from aeronautical revenues. Since the
overall returns are capped, any increase in non-aeronautical revenues will
necessarily decrease the aeronautical tariffs tantamount to defeating the
governments avowed policy of fundamental separation of the aeronautical
and non-aeronautical streams of revenue.
Any changes to the regulated charges section by the regulatory authority will
trigger a change in law, and BIAL is entitled to compensation pursuant to
Article 15.5. In fact, one of the remedies under Article 15.8 available for
BIAL is to increase the charge to be levied on the users of the Airport to
mitigate the adverse effect of the change in law.
It is pertinent to state that Mr. K. Roy Paul, the then Secretary, Ministry of
Civil Aviation and former Chairman of Air India Limited, in a paper titled
Airport Modernization in India has stated as under7:

a. The concept of dual till agreed to by GOI in the case of BIAL project
ensures that the airport investor has greater flexibility to expand nonaeronautical/ commercial operations, which improves airport services and
reduces pressure for increasing airport charges.
7
http://www.pecc.org/resources/doc_view/1002-airport-modernisation-in-india
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Annexure II
b. The process of selection of the investor through a global competitive

bidding process is completely transparent.
This lends credence to BIALs submission that Concession Agreement
contemplates regulation under dual till approach.
Further, Mr. Gajendra Haldea, Advisor to Deputy Chairman, Planning
Commission, in his letter dated October 6, 2010 bearing reference number
D.O. No. N-14033/3/2005-Infra, has opined that shared / hybrid till presents
the best alternative for airports in India.
Also, financial closure of BIAL was achieved and VGF was calculated on
the basis that BIALs tariffs shall be determined under dual till regulation.
Not only BIAL, but State of Karnataka, MoCA and lenders have relied on
dual till basis and therefore, dual till regulation should be applied in the case
of BIAL. The same is detailed below.
Project Information Memorandum (Detailed Project Report)
The project information memorandum that was shared with the bidders, at
several points indicated that aeronautical and non-aeronautical services should
be treated as distinct sources of revenue.
i.
Part-II -Clause-1.2 para-1 on page 046, states that modern airports around
the world have a substantial quantum of revenue from activities which are
not directly linked to aeronautical services. This quantum varies from 5070% at major airports in the world. The present proportion for nonaeronautical revenues at BIAL is close to 40%8, much below the
international level. It is clear that unless non-aeronautical revenues are
allowed to develop independently, there is no incentive for the airport
operator to increase the proportion as the upside would be subsumed by a
reduction in the aeronautical tariffs.
ii.
Part-II -Clause-1.2 para-2 on page 046 states that non-aeronautical activities

are expected to significantly augment the revenues from the aeronautical
services
Considering cargo and fuel farm as non-aeronautical services, as per the Concession Agreement
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iii.
Part-II -Clause-1.4 sub clause-19 on page 048 highlights the fact that the
airport shall have a distinct and significant commercial orientation to
capitalize on the development potential of Bangalore and the region
iv.
Part II - Para 3.2 on, Page 052 clearly states that it is proposed that nonaeronautical operations shall form a distinct and significant component of
the airport investment. It further states that land shall be optimally and
innovatively used to maximize commercial and business revenue.
v.
In Clause-3.3 para-2 on page 078, the government recognizes that private

participation in commercial projects requires the projects to be commercially
viable.
Financial Closure, State Support Agreement and Project Financials
In securing financial closure of the project, the project investors created a

financial model which operated under the understanding that aeronautical
and non-aeronautical sources of revenues are treated distinctly.
Central and State government entities were stakeholders to the financial

closure as shareholders in the project, and have taken cognizance of this
model.
Further, as per the amended State Support Agreement, the Government of

Karnataka acknowledged the financial model specifically, and used it for the
purpose of calculation of the viability gap in the form of state support.
Therefore, any changes in the fundamental tariff assumptions would question
the entire basis under which the state support was calculated.
The entire business plan that was prepared for the project, and shared with
the government at various points in time, including for the purpose of
securing tariff approvals and finalizing User Development Fees was based on
this financial model, and therefore under the assumption of separation of
aeronautical and non-aeronautical revenue sources.
Several service provider Right Holder Agreements were executed and the
Service Provider Rights were granted to our concessionaires based on this
concept, as the revenue share under these SPRH Agreements was again
derived from the same model. The terms of these agreements range from 5
to 20 years. All these would stand to be affected if the model is assumed to
be single till.
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Annexure II
TILL - A POLICY DECISION

11.
Section 42 of the AERA Act requires the Authority to comply with the policy
directions that may be issued by the Central Government. Recognizing the policy
implications of determination of an appropriate till mechanism, we understand that
the Ministry of Civil Aviation / Central Government commissioned M/s. Bridgelink
Advisors to provide a detailed report on Consultation Paper No.3/2009.
M/s Bridgelink Advisors submitted their initial report dated July 19, 2010 and
recommended the following:
(i)
Greenfield airports such as Bangalore International Airport, Hyderabad

International Airport and Cochin International Airport should be regulated
by under a hybrid or shared till mechanism.
(ii)
Revenues from Cargo and Ground handling services should be treated as

non-aeronautical revenue for the purposes of tariff determination.
12.
In response to the recommendation of M/s. Bridgelink Advisors, the Authority

issued a letter dated September 06, 2010 opining that a single till mechanism is the
most appropriate approach for determination of tariffs. In the said letter, the
Authority had requested the Ministry of Civil Aviation / Central Government to
favour the Authority with its views on this issue. Recognizing that the issue of till
was of paramount importance, and a policy matter, the Authority sought the views
of the Ministry of Civil Aviation. The letter dated September 06, 2010 was
accompanied by a detailed note containing the Authoritys response to the
recommendations of M/s. Bridgelink Advisors. In response to the comments of the
Authority, M/s. Bridgelink Advisors issued a final report once again recommending
hybrid till / shared revenue till framework across airports in India to support
incentivization. Thereafter, the Ministry of Civil Aviation also indicated vide its
letter dated October 12, 2010 that the Ministry of Civil Aviation is seized of the
larger issue of deciding the regulatory till / framework and the views of the Ministry
would be conveyed to Authority on finalization of the issue. These communications
indicate with complete certainty that the issue of regulatory till was regarded as a
policy issue both by the Authority as well as the Ministry of Civil Aviation/Central
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Annexure II
Government.
As stated later in these submissions, the Concession Agreement
indicates the policy of the Central Government and therefore, needs to be given
effect to, in letter and spirit.
FINANCIAL COVENANTS
13.
Financing agreements including the business plan and details submitted in response
to the request for proposal and the tender document were arrived at / calculated on
the basis of a dual till approach. As is evident from the Concession Agreement,
achieving financial close was a condition precedent for the primary provisions of
the Concession Agreement to come into effect. Financial close required execution
of financing agreements between BIAL and its lenders and such financing
agreements were entered into on the basis of dual till approach.
14.
Clause 10.2.4 of the Concession Agreement prescribes that regulated charges that
may be approved by an independent regulatory authority shall comply with the
principles referred to in Article 10.2.1 until the earlier of (i) the date that the
outstanding debt in respect of the initial phase has been repaid; and (ii) fifteen years
from financial close. The Concession Agreement thus provides further protection to
BIALs investments and commitments inter alia keeping in mind the financing
agreements that were executed by BIAL. Any alternation of the basis of financing
will not only have a direct impact on BIAL, but may also affect BIALs line of
credit adversely. BIAL therefore requests that the basis of the financing agreements
be not altered post facto and tariffs be determined in accordance with the dual till
approach.
AIRPORTS - WHETHER A MONOPOLY

15.
It is the Authoritys major premise that the airports in India are monopolistic entities
and should therefore be regulated. However, the Authority has not arrived at this
conclusion on the basis of evidence of misuse of alleged monopoly by the airport
operators. The Authority need to have considered and adopted a light handed
regulatory approach and need to have embarked on intrusive regulation only upon
evidence of an exploitation of monopoly, if at all. BIAL believes that, on account of
competition offered by airports in the vicinity coupled with alternative means of
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Annexure II
transport and competition in other segments of the airport business by other service
providers, BIAL can hardly be considered as a monopoly. Moreover, BIAL will be
required to keep in mind market conditions in order to cater to a continuously
fluctuating demand and further in order to continue its growth trajectory. In this era
of information, any inkling of exploitation of a supposed monopoly would surely act
against BIALs best interests. This is possibly true of all other major airports as
well. In this context, BIAL once again requests the Authority to revisit its major
premise and reconsider regulation by light handed approach. It is BIALs view that
the threat of intrusive regulation would be a sufficient deterrent for any airport
operator to misuse its supposed monopoly. BIAL also refers to the views of Prof.
David Gillen in this regard. Copy of Prof Gillens expert affidavit dated January 12,
2012 which was filed in Appeal No.7/2011 has been enclosed along with these
submissions.
FAIR RATE OF RETURN

16.
Although Indian airports operate under regulatory conditions similar to the

other capital intensive and long gestation infrastructure assets such as power
generation, power distribution, roads and ports, the risk profile of airports is
not comparable with the other infrastructure assets due to the following:a. Airports have a fair mix of aeronautical, non-aeronautical and real estate
related revenues.
b. Cyclical in nature the degree of severity or volatility in cash flows is higher
in the case of airports and hence the risk and return profiles are not
comparable.
c. The Indian airport operators are exposed to certain additional unique risks on
account of nascent stage of the regulatory framework, capital constraints,
financial risks, traffic risk, operators are relatively new, political uncertainties
etc
Considering the unique risks in the airport sector compared to other sectors,
we would request the Authority to consider the following factors, otherwise,
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Annexure II
the airport sector will be perceived as less attractive for investment, which
will not be in the long term interest of the sector.
i.
Market risk premium: Equity Risk Premium (Rm-Rf) which is the difference
between the expected rate of return on the market portfolio and the risk-free
rate, the market rate of return or Rm may be calculated based on 10 year
annualized return on 90 days moving average of market return using BSE
Sensex as the market return indicator.
ii.
While computing the asset beta, consideration of betas of all listed airports in
developing and emerging country markets.
iii.
While selecting listed international airports from countries within developing

and emerging markets, their semblance to Indian airports on the following
factors may be considered: Economic profile
Operating environment
Opportunities and constraints
Regulatory environment and
Financial position
iv.
The base rate RoE recommended by Regulators/Committees of other sectors

like Central Electricity Regulatory Commission, State Electricity Regulatory
commission, Tariff Authority of Major Ports (TAMP) and NHAI are in the
range of 15.5% to 18% depending upon different parameters including the
risks associated. Hence, airport sector which is prone to higher risks than all
these sectors shall have a much higher RoE compared to these sectors.
v.
For the purpose of computing debt to equity ratios, security deposits may be
treated as quasi-equity and hence may be included under the head equity and
Interest free loans and cost of debt may be treated as debt.
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Annexure II
LAND VALUE ADJUSTMENT

17. Land Value Adjustment:
Authoritys Approach: The Authority has proposed to effect land value adjustments
for those assets which are excluded from the scope of RAB. The Authority has
proposed, in Clauses 7.7 and 7.8 of Order No.13 and Clause 5.2.4 of Direction No.5
to make an adjustment in respect of any land associated with an asset excluded from
the scope of RAB by reducing from the RAB the value of such land being the
higher of (i) prevailing market value of such land, or (ii) book value of such land.
The Authority has also proposed to commission experts to independently determine
and review the market value in respect of such land.
Observations: BIAL was provided land under the Land Lease Deed by the State of
Karnataka inter alia as a part of its policy to:
encourage private sector participation in the development of airports;

and
encourage and provide industrial development, tourism, cargo,

movement and general economic and social development of the state
of Karnataka.
The State of Karnataka has taken multiple steps for promotion of industries in the
state of Karnataka. The Karnataka Industrial Areas Development Board was set up
under the Karnataka Industrial Areas Board Development Act, 1966 in order to
encourage and promote industrialization of the state. Similarly, the Karnataka State
Industrial and Infrastructure Development Corporation (KSIIDC), earlier known as
Karnataka State Industrial Investment and Development Corporation, was
established in the year 1964, as a wholly owned undertaking of the State of
Karnataka inter alia to encourage industrial growth in the state of Karnataka. The
State of Karnataka, as a part of its overall objective of encouraging infrastructure
and industrial development, also provided Rs.350 crore to BIAL to improve the
viability of the Greenfield airport project and enhance the bankability of the initial
phase, as detailed in the State Support Agreement. Thus, the State of Karnataka, as a
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Annexure II
matter of policy and in order to encourage development of airport infrastructure,

provided viability gap funding as well as leased land to BIAL.
As per the Authoritys proposals, land value adjustment is proposed in respect of
those assets which are excluded from the scope of RAB. On first principles, even
under a single till mechanism (which is not applicable in the case of BIAL), once
assets are excluded from the scope of RAB, no regulation, in any form, is
contemplated in respect of such assets. Therefore, the Authoritys proposals are not
in accordance with the single till principle itself.
Additionally, the proposal with respect to land value adjustment would completely
set at naught the Land Lease Deed as well as the State Support Agreement. Clause
4.2 of the Land Lease Deed provides that BIAL may utilize the leased land inter
alia for (i) improving the commercial viability of the project; and/or (ii) such that
the utilization facilitates substantive further investment in or around the airport.
Land value adjustment as proposed by the Authority is the very antithesis of these
objectives. If market value of the land is deducted, BIAL would get little or no
benefit from the lease of the land and resultantly, will not be able to utilize any
income from utilization of such land to make the airport project more viable.
Further, ICAO doc 9562 recognizes the concept of an airport city, i.e. a city built
around an airport, which is reminiscent of cities that were built around sea ports and
river ports in the past centuries. This objective of development of areas surrounding
the airport is sought to be achieved under clause 4.2(v) of the Land Lease Deed.
Land value adjustment would be a full and complete disincentive for the airport
operator to utilize the land for facilitating further investment around the airport as
BIAL would be forced to buy land, which is already leased to it.
Without prejudice to the above, if market value of lands is reduced from the scope
of RAB, effectively, the airport operator is forced to buy such land at prevailing
market prices. This is an incongruous situation because such lands have been leased
by the state of Karnataka to BIAL for a fixed term of 30 years. BIAL cannot be
forced to pay market value of land, which it will never come to own and in respect
of which, it will only have leasehold rights.
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Annexure II
The proposed land value adjustments would also have the effect of negating the
benefits provided to BIAL under the State Support Agreement and the Land Lease
Deed. The effect of land value adjustment would be to recast the Land Lease Deed
in its entirety. The proposed regulations are beyond the ambit and powers of the
Authority.
The proposed regulations in respect of land value adjustments were neither

discussed as a part of the White Paper nor as a part of the Consultation Paper.
Therefore, neither BIAL nor any of the airport operators had any opportunity to
submit their views regarding the proposed regulations in respect of land value
adjustments. BIAL therefore requests that these objections be considered and the
proposals in respect of land value adjustments dropped.
From a legal standpoint, the Authority simply has no power or jurisdiction to make
land value adjustments or in any manner deal with assets that are beyond the scope
of RAB. The proposed regulations are wholly beyond the jurisdiction of the
Authority and are de hors the functions prescribed under the AERA Act.
Submissions:
It si humbly submitted the Authority should revisit the manner in which single till
mechanism is proposed to be implemented. The Authority need not make any land
value adjustments or in any manner deal with assets that are beyond the scope of
RAB. All proposals in this regard need to be cancelled.
SERVICES OTHER THAN REGULATED SERVICES

18.
Services other than Regulated Services / Revenues from Services other than
Aeronautical Services
Authoritys Approach: The Authority has proposed to apply the single till regulation
mechanism to regulate all major airports. BIALs comments with respect to the
singlet till mechanism have been set out in the preceding paragraphs. As stated
above, it is BIAL's submission that the single till mechanism is statutorily ruled out
and is further inapplicable to BIAL. In this section, BIAL is submitting its
comments in relation to the manner in which the single till mechanism is sought to
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Annexure II
be implemented by the authority. As a part of the tariff determination process, in

relation to services other than regulated services, the Authority has, among other
things, proposed to:
require the airport operator to forecast expenditure;
undertake scrutiny of bottom-up projections of revenue made by the airport
operator;
undertake benchmarking of revenue levels;
commission experts to ascertain whether opportunities for such revenues are
underexploited;
follow a bottom-up approach for review of operations and maintenance
expenditure;
hold stakeholder consultations;
require the airport operator to project revenues; and
not provide for error correction for variation in revenue.
Clauses 8.9, 11.1 to 11.7, 13.1, 17.5 .10 of Order No.13 and clause 4.2.5, entire
clause 5 and clause 6.21.3 contain the proposed modes of regulation of services
other than regulated services.
Observations: The Authoritys proposed regulations amount to a completely
intrusive regulation of services other than regulated services. The proposed
regulations pose a fundamental question of jurisdiction of the Authority. Under
Section 13 of the AERA Act, the Authority's functions extend only to determination
of tariffs for aeronautical services. In the exercise of this function, the Authority
cannot extend its jurisdiction to regulate, in any manner, the provision of services
other than regulated services. Even under a single till mechanism (which is
inapplicable to BIAL), the Authority need not undertake any regulatory activities in
relation to services other than regulated services. The proposed regulations will
make inroads into operational freedom of the airport operator apart to acting as a
disincentive for the development of revenues from services other than regulated
services. There is no jurisdiction in law for the Authority to call upon the airport
operator to forecast expenditure in relation to services other than regulated services.
Additionally, it is extremely difficult for the airport operator to forecast with any
certainty either the revenues or expenditure for non-aeronautical services.
Predictability in respect of aeronautical services itself is extremely low and depends
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Annexure II
on multiple variables. In such circumstances, to expect the airport operator to

forecast revenues from non-aeronautical services is an equally difficult task. The
Authoritys proposals to undertake scrutiny of bottom-up projections of revenue
made by the airport operator; benchmarking of revenue levels; commissioning
experts to ascertain whether opportunities for such revenues are underexploited are
likewise, beyond the ambit of functions of the Authority and the Authority wholly
lacks jurisdiction to do so. Such an exercise, apart to being impermissible, would be
a complete disincentive to the airport operator to exploit revenues from services
other than regulated services. Effectively, by way of the proposed regulations, the
Authority has proposed to completely regulate services other than regulated
services. Also, by effect of the proposed regulations under the single till regime, any
revenues that may be garnered by the airport operator are ploughed back to
subsidize regulated services and therefore, the concept of airport operators freedom
is only illusory and only notional.
In reality, under the proposed regulations,
regulated services and services other than regulated services, are similarly treated,
but for determination of tariffs. This is certainly not contemplated under the AERA
Act and is opposed to the very objective of privatization, i.e. introduction of private
capital and/or private management capacities.
Submissions: The proposed regulations are completely antithetical to the provisions
of the AERA Act and any form of regulation of services other than regulated
services inter alia as provided in clauses 8.9, 11.1 to 11.7, 13.1, 17.5.10 of Order
No.13 and clause 4.2.5 and entire clause 5 of Direction No.5, need to be revisited
and dropped. There can no regulation of any nature with respect to services other
than regulated services, even under a single till regime. Without prejudice to the
above, the Authority need to provide for error correction with respect to revenues
from services other than regulated services.
SERVICE QUALITY
19.
Service Quality Parameters

Authoritys Approach: In clause 12 of Order No.13 and clauses 6.11.3, 6.14,
Appendices II, III and IV, the Authority has proposed to apply objective and
subjective service quality parameters to the airport operator. The Authority has laid
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Annexure II
down service quality parameters and proposes to impose a penalty / rebate if the
airport operators fail to keep up to the prescribed quality parameters. Appendix 2 to
Direction No.5 contains objective service quality parameters such as maximum
queuing time for Check-In, availability of baggage trolleys, parking bays, etc.
Appendix 3 to Direction No.5 sets out the subjective service quality parameter,
which is the rating on the ACI ASQ survey. Appendix 3 further sets out the criteria
which are considered in arriving at the ACI ASQ survey which includes waiting
time in check-in queue / line, availability of baggage carts / trolley, availability of
parking facilities, value for money of parking facilities etc.
Observations: As per the AERA Act, only those service standards, which are set by
the Central Government, can be implemented by the Authority. As per the Act,
only those service quality standards that are set by the Central Government can be
taken into account for determination of tariffs. Therefore, the Authority should not
have proceeded to set service quality parameters, either objective or subjective. The
Authoritys proposals include penalizing the airport operator for non-compliance
with service quality parameters, which hinges on regulating service quality and
which is contrary to the mandates of Section 13 of the Act.
Additionally, a number of service quality prescriptions are dependent on the quality
of service provided by third parties, over which the airport operator has little or no
control.
To illustrate, the first objective service quality parameter pertains to
waiting time for security check.
Security checking is undertaken by Central
Industrial Security Force. The objective of the CISF personnel is to ensure safety of
airport users / premises by thoroughly frisking passengers during the check in
process. This frisking is also conducted to ensure that there is no transportation of
contraband or other impermissible articles. Therefore, the primary objective of the
CISF personnel is not to ensure a quick turnaround time per passenger but to detect
and prevent illegalities / unlawful activities. Thus, waiting time for security check
is not a relevant factor for CISF personnel. In such circumstances, to impose on
BIAL / airport operator conditions with respect to security check is unfair.
Likewise, in the case of immigration check in waiting time, the primary objective of
immigration department personnel is to screen passengers for appropriateness /
legality of documents and baggage. And BIAL / airport operator has little or no
control over officials who are in charge of immigration counters.
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Annexure II
Additionally, there is a duplication of service quality standards in Appendix 2 and

Appendix 3, such as, service quality standards with respect to waiting time in checkin queue / line, availability of baggage carts / trolley. Effectively, the airport
operator is proposed to be penalized twice. To illustrate, if the airport operator is not
able to meet the proposed service quality standard in relation to waiting time for
checkin, the airport operator will suffer a penalty / rebate of 0.25% under
Appendix 2 and the same will also be factored in for calculation of ASCI ASQ
penalty / rebate of 2.5%.
Also, if the airport operator incurs additional expenses that have not been forecast,
the Authority has proposed that it shall not reimburse such additional expenses. In
maintaining service quality, it is but likely that, due to changed circumstances, the
extent and nature of expenses that may be incurred will change. Therefore, it would
be unfair to treat expenses towards maintaining service quality as controllable and
not provide for reimbursement of the same.
It is also observed that, whilst the Authority has proposed to separately determine
tariffs for providers of cargo, ground handling and fuel farm services, quality
parameters are imposed on the airport operator alone.
Submissions: It is submitted that the Authority need to reconsider its approach with
respect to laying down service quality parameters, either subjective or objective.
The Authorityneed not prescribe such parameters and may await standards that may
be set by the Central Government. Without prejudice, the Authority need to treat
expenses incurred for complying with subjective and objective service quality
parameters as uncontrollable and provide error correction / truing up.
INCENTIVE BASED OR PRICE CAP REGULATION

20.
Incentive based or Price Cap Regulation:

Authoritys Approach: Per clause 17.5.1 of Order No.13, the Authority has
proposed to adopt Price Cap Regulation, also termed as incentive based regulation.
Per clause 12.9 of Order No.13, the Authority proposes to incentivize upkeep of
objective service quality standards by reducing the rebate / penalty from 0.5% to
0.25% of aeronautical revenue, per month, subject to overall cap of 1.5%. Per
clause 5.2.5 of Direction No.5, the Authority proposes to include incentive
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Annexure II
adjustments for forecasting RAB. Likewise, per clause 5.2.6(b) of Direction No.5
which deals with rolling forward of RAB, the Authority has proposed to make
incentive adjustments. Certain factual scenarios, in which, the Authority may
consider incentivizing the airport operator are set out in clause 5.2.5 of Direction
No.5.
Observations: Neither Order No. 13 nor Direction No. 5 set out with any clarity the
circumstances in which the Authority will provide incentive adjustments. In Order
No.13, the Authority proposes to incentivize the airport operator by reducing the
minimum rate of penalty / rebate to 0.25% from 0.5% per month for non
compliance with objective service quality parameters. A reduction in the monthly
rate of penalty can hardly qualify as an incentive. In contrast, the Authority has
proposed detailed regulations for levying rebate/penalty for under performance with
respect to subjective and objective service quality parameters. In Order No.13, the
Authority has extensively dealt with service quality rebate / penalty in clauses 8.1.3,
12.9, 12.15, 12.16 and 17.5.9.c. Service quality rebate has been defined in clause
6.14 of Direction No. 5. Service quality rebate is proposed to be imposed in the
event the airport operator does not achieve service quality standards specified by the
Authority. The quality standards and the measurement mechanism are detailed in
Appendices 2, 3 and 4 to Direction No.5. The approach adopted by the Authority
with respect to incentives and rebates is starkly different and very unfair to the
airport operator.
While there is complete lack of clarity with regard to
incentivization, detailed guidelines have been prescribed for levying penalty. It is

surprising that the Authority has extensively dealt with rebates/ penalties for under
performance with respect to service quality parameters. However, neither Order
No.13 nor Direction No.5 indicate with any certainty, the incentivization
mechanism. This is clearly unfair to the airport operators. Moreover incentive based
regulation appears to be the fulcrum of Order No.13 and the ostensible reason for
the Authority rejecting cost plus regulation / rate of return regulation. The lack of
clarity about incentive adjustments pose serious concerns with regard to the entire
scheme of regulation proposed via Order No.13 and Direction No.5. In pith and
substance, the proposed scheme of regulation, does not qualify as incentive based
regulation. Moreover, if the Authority were to propose detailed guidelines for
incentivization, similar to the proposed regulations with respect to service quality
rebates, the airport operators would be inundated with tedious compliance
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Annexure II
considerations and the airport operators freedom of enterprise and entrepreneurship

would be severely restricted. This is of utmost concern to BIAL inter alia because
BIAL undertook development of a Greenfield Airport on the strength of express
promises for securing to BIAL complete freedom to regulate its affairs, but for
certain services termed as regulated charges/ services, under the Concession
Agreement. BIAL humbly submits that an intrusive regulation consisting of
multiple rebates and incentives would result in severe distortion of market dynamics
and would be the very antithesis of privatization and/or induction of private
management capacities which is the stated objective of the Airport Infrastructure
Policy of 1997, the 2003 amendments to the Airports Authority of India Act and
AERA Act.
Submissions: BIAL once again humbly requests the Authority to reconsider the
entire gamut of the proposed regulations and regulate by the light handed approach.
Neither the incentive mechanisms nor price caps should be made applicable for
services other than regulated services.
INTRUSIVE / HEAVY HANDED REGULATION
21.
Cost of Debt:
Authoritys approach: The Authority has proposed an intensive scrutiny approach in
clause 6.4 of Order No.13 read with clause 5.14 of Direction No.5 with respect to
variation in the cost of debt over a control period. The Authority proposes to
consider the forecast cost of existing and future debt within a control period, subject
to the Authority being assured of reasonableness of such cost based on review,
including of its sources, procedures and methods used for raising such debts. Per
clause 5.1.6 of Direction No.5, the Authority would also consider the nature of
financial instruments being used or proposed to be used to mobilize debt for
determining a cost of debt.
Observations: As per extant international practices and standards with respect to
utility regulators, intrusive regulation is employed, only when it is absolutely
essential and unavoidable. BIAL understands that the Authority also proposes to
determine tariffs with least amount of regulatory intervention in the day-to-day
business of, and management of the airport by, the airport operator. The approach
adopted with respect to variation and forecast in the cost of debt is intrusive and
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requires to be revisited. A review of the sources, procedures and methods used for
raising debt by the Authority is excessively intrusive and vastly restricts
entrepreneurial freedom. If a transparent process is adopted by the airport operator
in line with prevalent market practices, there can be no requirement for further
regulatory oversight. Any further regulatory oversight will constrain entrepreneurial
ability and leveraging of market situation by the airport operator.
Submissions: In determining cost of debt, the Authority need not further require the
airport operator to provide justifications if such loans are obtained in a transparent
manner. To illustrate, if quotes for loans are called for from more than one bank
and thereafter, a competitive quote is considered, BIAL prefers that such loans be
accepted as such and without enquiry. Since there is scope for error correction or
truing up of accounts, a less intrusive approach would be in consonance with the
overall regulatory objective of achieving efficiency without needlessly exposing
airport users to risk. For services other than regulated services, there should be no
regulation whatsoever including with respect to cost of debt. Further, in determining
cost of debt, any fixing of ceilings on cost of debt need to be avoided.
22.
Refinancing of debt:
Authoritys Approach: The Authority expects airport operators to make every effort
to refinance / restructure debt in clause 6.5 of Order No.13. The costs and benefits
associated with refinancing would be passed on to the users.
Observations: The business reality is that refinancing / restructuring of debts is not
taken recourse to frequently. Refinancing/ restructuring of debt is also many a times
linked with obtaining further debt. To illustrate, certain existing debts may have to
be moved to a new lender who is willing to offer further debt on competitive terms.
These are decisions that are taken by the airport operator keeping in mind the airport
business as a whole and impositions of restrictions in that regard will impede on the
operational freedom of the airport operator.
Submissions: These are purely commercial decisions and BIAL prefers that these
decisions be left to the wisdom of the airport operator. Since restructuring of debt is
linked to myriad other factors, there cannot be no expectations in this regard. For
services other than regulated services, there should be no regulation whatsoever
including with respect to refinancing of loans.
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23.
Working Capital Loans:

Authoritys Approach: In clauses 6.7 and 7.11 of Order No.13, clauses 5.1.4(d) read
with 5.4.3 of Direction No.5, the Authority has proposed that the airport operator
should submit to the Authority the proposed levels of working capital requirements
and should demonstrate that the working capital loans are not excessive. The
Authority has also proposed that it shall review and assess the levels of projected
working capital requirements and shall consider cost of working capital loans as
appropriate.
Observations: Working capital loans/short term loans are availed to meet immediate
financing requirements. As a general rule, borrowers do not avail working capital
loans unless the same is absolutely necessary in view of the high rate of interest.
Even lenders do not easily grant working capital loans without detailed scrutiny.
Standard application forms used by banks / financial institutions for grant of
working capital loans indicate the wide array of factors that banks / financial
institutions consider while granting working capital loans. Banks / financial
institutions undertake a scrutiny of the business necessity prior to granting working
capital loans. Thus, the conditions and processes generally adopted for sanctioning
of working capital loans demonstrate self-regulation.
Submissions: The Authority need not enquire into the appropriateness of working
capital loans availed. Such enquiry would impede entrepreneurial freedom and
enterprise, apart to being not necessary, because of a self-regulated market. So long
as working capital loans have been obtained by the airport operator in a competitive
manner, inter alia by calling for quotations from multiple banks / financial
institutions, the Authority need not review or seek justifications with respect to
working capital loans. For services other than regulated services, there should be no
regulation whatsoever including with respect to obtaining short term / working
capital loans.
BENEFIT OF CONCESSIONS
24.
Interest Free or Concessional Loan Agreements:

Authoritys Approach: Per clause 6.7 of Order No.13 and clause 5.1.5 of Direction
No.5, the Authority has proposed to consider interest free or concessional loan
arrangements at the actual cost of debt.
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Observations: Interest free or concessional loans are provided to the airport operator
as a fillip to its business operations and to enhance viability and profitability of the
airport operator. By considering interest free or concessional loans at actual cost,
such benefit is completely negated. To illustrate, if the airport operator obtains loans
at market rates, the market rates would get reflected in the cost of debt and
consequently, in the fair rate of return. Likewise, if interest free or concessional
loans are obtained, since they will be considered at actual, no benefit will accrue to
the airport operator at the time of calculation of fair rate of return. The proposed
arrangements will provide no incentive whatsoever for obtaining interest free or
concessional loans and in the scheme of things proposed, interest free or
concessional loans will become a misnomer. The proposed regulations are unfair to
the airport operator because they deprive the airport operator of a benefit which was
specifically conferred on it. For instance, if in a particular control period, the entire
financing requirements of the airport operator are met with by interest free loans,
the cost of debt will be zero, which in turn, will make the FRoR zero / nil leaving
the airport operator with no returns. This is certainly not contemplated under the
AERA Act.
Submissions: The Authority should consider and provide returns at market rates for
interest free or concessional loans. For services other than regulated services, there
should be no regulation whatsoever including with respect to interest free or
concessional loans.
25.
Work in Progress Assets:

Authoritys Approach: The Authority has proposed to deduct accumulated capital
receipts of the nature of contributions from stakeholders including total
contributions pertaining to work in progress assets including by way of development
fees, capital grants and subsidies.
Observations: As stated in the context of concessional loans, the purpose of a
subsidy or grant by a stakeholder such as the government is completely lost, if
benefits therefrom do not accrue to the airport operator.
Submissions: The airport operator must be entitled to benefits and returns on all
assets, irrespective of the nature of sources of capital for creation of such assets. The
proposed regulations need not be applicable to services other than regulated
services.
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OTHER ISSUES
26.
Traffic Forecasting:
Authoritys Approach: Per clause 10.3 of Order No.13 and clause 6.15.2 of
Direction No.5, any variation of traffic forecast, outside of the bands, will be shared
equally between airport operators and users.
Observations: Airport operators have little or no control over the volume of traffic.
As it can be understood by examining historical traffic behavior, traffic normally/
functionally behaves in correlation to general economic scenario in the country and
abroad and the general economic situation in the country in a subsequent year is
almost impossible to predict. The September-2008 collapse of Lehmann Brothers
and the consequent economic downturn was not predicted by leading economists /
financial institutions or even governments world over. Further, there are a large
number of uncertainties which are simply beyond prediction, such as, failure of a
particular carrier resulting into zero ATMs from that carrier. In this context, it may
be relevant for us to consider studies of a world renowned economist / thinker
Mr. Nassim Nicholas Taleb and his works on insufficiency of knowledge and
consequent inability to predict. In the absence of effective tools for prediction being
available with the airport operator, it would be a herculean task and a near
impossibility for the airport operator to accurately forecast the traffic volumes.
More often than not, unprecedented situations could have the effect of pushing the
traffic volumes beyond prescribed bands. In such circumstances, all that the airport
operator can do is to provide its services efficiently and the AERA Act prescribes a
mechanism for implementation of set service quality parameters. Besides, the
proposed regulations will force the airport operator to focus on issues like
forecasting, which ought not to be the primary concern of the airport operator. As a
result, the airport operators focus on providing good quality airport services may be
diverted. The costs of regulatory compliance will also sky rocket since prediction
would require the airport operator to engage with specialized professionals in that
field. It is our humble opinion that, a regulation requiring myriad compliances will
increase the cost of regulation and will also restrict entrepreneurial freedom.
Submissions: The Authority is submitted to reconsider its proposals not to provide
error correction for forecasting errors beyond the bands that may be prescribed by
the Authority and should provide for complete error correction. . For services other
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than regulated services, there should be no regulation whatsoever including with

respect to forecasting error correction.
27.
Over-recovery and Under-recovery:

Authoritys Approach: Per clause 6.10.2(c) of Direction No.5, the Authority has
proposed to provide adjustments for under-recovery only on account of the terms
detailed in clause 6.10.2(c). It has been clarified that under-recovery for any factors
like change in traffic mix, etc. shall not be compensated. On the contrary, as per
clause 6.20.2, the Authority has proposed that over-recovery, if any, irrespective of
the reasons for such over-recovery shall be clawed back. Further, per clause 6.21.3
the Authority has proposed that it shall normally not provide error correction for
variation in operation and maintenance expenditure (other than other mandated
operating costs and statutory operating costs); variation in fair rate of return and
variation in revenues received from services other than regulated services. Per
counter affidavit dated June 22, 2011, filed on behalf of the Authority in Appeal
No.7, the reason for such a proposal seems to be that error correction for underrecovery should be allowed only when under-recovery has occurred for reasons
totally beyond the control of the airport operator.
Observations: As stated with respect to error correction about traffic forecasts, it is
very difficult to predict with any amount of certainty let alone accuracy. In such
circumstances, the airport operator cannot be found fault with or punished for
under-recovery. To illustrate, the case of traffic mix is a scenario where there is an
error in prediction with respect to the precise volumes of arriving and departing
passengers. It can hardly be said that a prediction error with respect to traffic mix is
within the control of the airport operator. To further illustrate, no provision has
been made for under-recovery in force majeure situations. Also a differential
treatment for over-recovery and under-recovery i.e., complete claw back in case of
over-recovery and limited error correction in case of under-recovery is unfair and
imposes an undue burden on the airport operator. This burden is heightened on
account of the fact that the differential treatment is merely on account of an error in
prediction. The observations in the case of forecasting error correction would also
apply to the proposed regulations regarding under-recovery and over-recovery.
Submissions: The Authority need to consider providing complete under-recovery to
bring it on par with proposed regulations regarding over-recovery.
Without
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prejudice to BIALs submission that there should be no regulation of services other

than regulated services, error correction with respect to under-recovery must also be
provided for services other than regulated services, whenever such services are
proposed to be regulated by the Authority.
28.
Scope of RAB or RAB Boundary

Authoritys Approach: The Authority, in clauses 7.1 to 7.4 of Order No. 13 and
clause 5.2 of Direction No. 5 has proposed principles with respect to exclusion and
inclusion of assets in the RAB. The Authority has proposed that all fixed assets of
the airport operator would constitute RAB assets subject to principles of inclusion
and exclusion. The principles of inclusion and exclusion have been outlined in
Order No. 13 and Direction No. 5.
Observations: In clause 7.2 of Order No. 13, the Authority has set out that all
airport assets will come under the scope of single till. Surprisingly, in clause 7.3,
the Authority has extended the scope of assets to all the fixed assets of the airport
operator. Consistent with what is stated above in this regard, the Authority ought
not to include any assets or in any manner regulate assets pertaining to services
other than regulated services. The AERA Act also does not permit regulation
beyond the precincts of the airport.
The proposed regulations with respect to
principles of exclusion or inclusion depending on whether an asset derives material

commercial advantage from the airport on account of its location etc. are inapposite.
Under the AERA Act, it is the function of the Authority to determine tariffs for
aeronautical services and for that purpose, consider the factors prescribed in Section
13(1)(a). In setting out principles of exclusion and inclusion and in defining the
scope of RAB to include all non-aeronautical assets, the Authority has exceeded its
mandate and jurisdiction.
Submissions: In BIALs humble view, consideration of all assets of the airport
operator as the starting point needs to be revisited. The Authority can only consider
those assets that are essential for providing the regulated services and should not
consider any other assets that are required for providing services other than
regulated services BIAL reiterates that all assets with fixed locations inside terminal
buildings should not be included in the scope of RAB and only those assets essential
for performance of regulated services should be included. In this light, principles
relating to exclusion and inclusion of assets needs to be relooked into.
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29.
Initial RAB
Authoritys Approach: The Authority proposes to not just consider the original cost
of fixed assets as indicated in the last audited accounts, but further proposes to
assess the cost by considering (i) evidence of competitive procurement for
investments of more than 5% of the opening RAB of the first tariff year; (ii)
evidence that investment was made in accordance with the approved plan; and (iii)
evidence that investment, if any, over and above the approved investments, was
necessary for providing better services or on account of requests from users or
stakeholders.
The Authority has proposed to deduct accumulated capital receipts of the nature of
contributions from stakeholders including total contributions pertaining to the fixed
assets which are included in the scope of the RAB, including by way of
development fees, capital grants and subsidies.
Observations: The airport operators, in exercise of their entrepreneurial freedom and
enterprise, made multiple investments for development and/or modernization of
major airports. In case of BIA, exercise of entrepreneurial skills was especially
important and crucial because BIA was a Greenfield airport. Investments have been
made by BIAL in line with the master plan provided in the Concession Agreement.
Investments were approved by the Airports Authority of India and the State
Government as both the State parties are represented on the board of BIAL. In this
scenario, the Authority should not assess or evaluate the process or necessity of
creation of assets. Once accounts have been audited, such audited accounts indicate
the actual expenditure incurred for facilities that are available for all those who use
airports and therefore, it is only fair that all such assets and the expenses incurred
for their creation are included as a part of the RAB. There were no restrictions at
the time of making of investments and such restrictions cannot be now imposed post
facto.
As stated in the context of concessional loans, the purpose of a subsidy or grant by a
stakeholder such as the government is completely lost, if benefits therefrom do not
accrue to the airport operator.
Submissions: The proposal of the Authority for evaluating cost of fixed assets needs
to be dropped. The costs indicated in the last audited accounts can be considered for
the purpose of arriving at the initial cost of fixed assets and there need not be an
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enquiry conducted by the Authority in that regard. A subsidy or a contribution is

provided as a sop and this should not be negated by not providing for returns on
such contributions/grants/subsidies. The proposal for deducting subsidies/
contributions/ grants or any contributions from stakeholders for arriving at the
original cost of fixed assets can be dropped. The airport operator must be entitled to
benefits and returns on all assets, irrespective of the nature of sources of capital for
creation of such assets.
Without prejudice to the above, in the calculation of
weighted average cost of capital, per clause 5.1.1 read with clause 5.1.5 of Direction
No.5, interest free or concessional loan arrangements will be considered at the
actual cost of such arrangements. However, even at the time of calculation of initial
RAB, accumulated capital receipts of the nature of contributions from stakeholders
are proposed to be reduced / subtracted from initial RAB. Thus, concessional loans
or contributions from stakeholders are factored in twice, resulting in an unfair
reduction of the returns to the airport operators. Additionally, without prejudice to
the above, the proposed regulations in relation to arriving at original cost of fixed
assets should not be applied in respect of services other than regulated services and
book value of such assets should be considered.
30.
Asset Value Adjustment

Authoritys Approach: For assets to be excluded from the scope of RAB, the
Authority, in clause 5.2.4 of Direction No.5, has proposed to consider the value of
the asset as the higher of: (i) depreciated replacement cost value; (ii) book value;
and (iii) transfer value of the asset.
Observations: Book value of assets represents a true and correct valuation inter alia
because book value has been considered and approved by the auditors. Replacement
cost value will not accurately represent the value of the asset since replacement
value necessarily requires consideration of subsequent market phenomenon. For
calculation of RAB, the Authority has proposed to consider book value of assets. It
is only fair that book value of assets be considered for exclusion of assets from the
scope of RAB.
The Authority has further proposed to consider the value at which an asset was
excluded for the purposes of subsequent inclusion. This approach may not be
appropriate since it may result in unfairness to either the airport operator or the
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users and also because, it may not reflect the true value of the asset at the time of
inclusion.
Submissions: The Authority should revisit its proposal and consider only the book
value of assets proposed to be excluded from the scope of RAB. An asset which is
excluded from the scope of RAB, at the time of its subsequent inclusion, should be
assigned a true value / fair market value and the value assigned to it at the time of
exclusion should not be considered.
31.
Operations and Maintenance Expenditure

Authoritys Approach: In clauses 11.1 to 11.17 of Order No.13 and clause 5.4 of
Direction No.5, the Authority has proposed detailed guidelines with respect to
operations and maintenance expenditure. The Authority proposes to undertake a
prudency check with respect to underlying factors impacting variance over the last
few years; and assess efficiency improvement. The Authority has also largely
restricted the scope of uncontrollable costs. The Authority has proposed that,
uncontrollable costs be restricted to, other mandated operating costs and statutory
operating costs. The Authority requires all other uncontrollable costs to be reflected
by the airport operator with supporting evidence and forecasts as a part of the
building blocks approach.
Observations: BIAL would like to bring to fore certain business realities with
respect to operations and maintenance expenditure. Firstly, there are a large number
of uncertainties with respect to day-to-day expenditure, which cannot be forecast by
the airport operator. To illustrate, change in expenses due to fuel price hike,
exchange rate fluctuations, are not only beyond the control of the airport operator,
but also cannot be estimated/predicted in advance. Let alone the airport operator,
even Governments world over cannot predict the rate of inflation accurately. In such
a situation, to expect the airport operator to predict and forecast such
macroeconomic changes and/or the impact of such macroeconomic changes on the
operations and maintenance expenditure of the airport operator is not only unfair
and onerous but a near impossibility.
Additionally, by not providing for exchange rate fluctuations, the enterprise and
entrepreneurial ability of the airport operator in raising overseas debts is largely
restricted. It is common knowledge that overseas borrowings tend to be at more
competitive rates of interest, but are accompanied by risks relating to exchange rate
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fluctuations. The airport operators freedom to make a reasoned commercial

decision in this regard is greatly restricted because the Authority provides little or
no compensation for exchange rate fluctuations. This approach is also unfair to the
airport operator because, if no loss is incurred by the airport operator on account of
exchange rate fluctuations, and the airport operator ends up with a profit, such
profits will be ploughed back and thus, the airport operator receives no particular
benefit or incentive for its efforts. Whereas, if the airport operator incurs a loss, the
airport operator will be forced to bear the burden of such a loss. This is not only an
unfair regime, but also restricts and impinges upon the airport operators freedom of
enterprise.
Expenses incurred towards operations and maintenance expenditure are clearly
accounted for and audited. It is the audited accounts which are submitted to the
Authority. Moreover, in the case of BIAL, state parties, i.e. Airports Authority of
India and State of Karnataka have appointed nominee directors and the expenses
incurred are therefore, approved by state parties. An entrepreneur requires flexibility
and freedom of enterprise in order to conduct its business effectively. Having to
post facto justify every such expense to the Authority would largely restrict this
freedom of enterprise.
Such continuous and intense regulatory scrutiny would
completely compromise entrepreneurial freedom and increase the cost of regulation

manifold.
Submissions: The Authority to consider reimbursing the audited operations and
maintenance expenditure in full.
The Authority can call for explanations /
justifications only when expenses prima facie appear to be overly excessive. In

summation, the Authority can consider requiring justifications, prudency check and
review of efficiency enhancement measures only as an exception and not as a rule.
The Authority can set a benchmark, preferably in line with the interest rates offered
by any nationalized bank in India. The airport operator need to be allowed to keep
the benefits or suffer losses, as the case may be, in case of any deviation from the
bench mark. This approach would be fair to the users as well as the airport operator.
32.
Bad debts
Authoritys Approach: In clause 11.7 and 17.5.8.f of Order No.13 and clause 5.4.3
of Direction No.5, the Authority has proposed that any allowance for working
capital should be net of allocation for bad debts.
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Observations: Bad debts are a business reality. No business can function without
facing bad debts. The Authority has not proposed any mechanism for
reimbursement of bad debts to the airport operator. Effectively, the airport operator
will be forced to pay out of the ARR towards bad debts. This is extremely unfair on
the airport operator because certain bad debts are completely beyond the control of
the airport operator. To illustrate, there are significant outstandings from Kingfisher
Airlines Limited and Air India Limited. Under the proposed regulations, for no
fault of BIAL, BIAL would be forced to bear the burden of this bad debt.
Submissions: The Authority should make provisions to reimburse bad debts to the
airport operator. If and when a bad debt is recovered, the provision for bad debts can
be reversed. The provisions in relation to bad debts should not be applicable to
services other than regulated services.
33.

Authoritys Approach: In clause 16.2 of Order No.13 and clause 5.2 of Direction
No.5, the Authority has proposed that the facilitation component in relation to
security expenditure will be considered for remuneration through other tariff
components as a part of the overall yield per passenger.
The Authority has
proposed that initial capital expenditure on security related assets shall be included
as a part of the RAB. The Authority has further proposed that any incremental
capital expenditure on security related assets shall be met out of the passenger
service fee. The Authority has proposed to issue separate guidelines for
determination of passenger service fee.
Observations: Costs and expenses in relation to security related expenditure is likely
to be audited by the Comptroller and Auditor General.
Submissions: Expenses that may be disallowed by the CAG should be included
either as a part of the RAB or as operations and maintenance expenditure. BIAL
looks forward to the PSF guidelines containing necessary protections to safeguard
the interests and investments of the airport operators.
34.
Targeted Efficiency Improvement

Authoritys Approach: in clause 6.5 of Direction No.5, the Authority has proposed
to consider X factor or targeted efficiency improvement. The Authority has
proposed to simulate a competitive environment in a non-competitive situation by
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allowing airport operator to raise tariff(s) to offset cost increases, but by a rate lower
than inflation, in order to encourage greater efficiency. The Authority has also noted
that the assessment of efficiency improvement can be complex and requires a
variety of considerations such as key performance indicators relating to trends in
cost per passenger, efficiency factors applicable to other entities in the country,
impact of various levels of efficiency factor on revenues, operation and maintenance
expenditures and returns and historical profitability and performance.
Observations: The Authority has not set out the manner in which it would arrive at
the X factor, while recognizing that the Authority is required to take into account a
wide array of factors. The approach of simulating a competitive environment by
Authority appears to be outside of the jurisdiction as provided under the Act. The
function of the Authority as provided under section 13 of the AERA Act is
restricted to determination of tariff, on the basis of expenditure incurred by the
airport operator. Realistically, simulation of a competitive environment is fraught
with uncertainties, which is something the Authority recognizes by listing the
multitude of factors that the Authority may have to consider in determination of the
X factor. In such circumstances, the possibility of the cost of regulation being more
than the efficiency that regulation may bring in, cannot be ruled out. Further, it is
beyond doubt that such attempts will largely restrict entrepreneurial freedom and
enterprise and will be the very antithesis of the philosophy with which private
airports were introduced in the country.
The Authority has not provided for
situations where the airport operator is unable to comply with the X factor because
of factors which are beyond the control of the airport operator. This is especially
important because a multitude of factors are involved in efficiency improvement.
The Authority has not appreciated the business reality that, inevitably, either supply
is greater than demand or vice versa. It is rarely that both are in perfect tandem. The
business of airport development can hardly be equated and understood in
mathematical terms, bereft of practicalities involved. Attempts by the Authority to
simulate market environment may lead to distortions which will affect not only the
airport operator but the users at large.
Also, the Authority proceeds on the
assumption that there is insufficient competition, which assumption itself is

questionable. A long line of experts including Prof. David Gillen, whose affidavit
filed in Appeal No.7 is enclosed along with this submissions, opine that airports
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cannot be considered to be monopolies because airports face competition in

different aspects of their business from other service providers.
Submissions: The proposals of the Authority to consider X factor must be revisited.
Audited accounts must be considered to provide appropriate returns and BIAL
prefers that simulation of competitive environments need to be avoided. The
Authority should not apply the X factor in respect of services other than regulated
services.
35.
Mandated Operating Cost Correction

Authoritys Approach: In clause 6.16.1 of Direction No.5, while the Authority has
proposed to allow error correction for mandated operating costs, the Authority has
proposed that mandated capital expenditure incurred by the airport operator shall
not be considered for correction within the control period.
Observations and Submissions: BIAL prefers that all mandated expenditure either
capital or otherwise be considered by authority in the calculation of RAB or
reimbursed, as the case may be, within the control period.
36.
Taxation
Authoritys Approach: In clause 6.17 of Direction No.5, the Authority has proposed
not to consider increase in tax on corporate income or change in statutory operating
cost relating to input products or services procured by the airport operator.
Observations: Non-consideration of change in taxes on corporate income or taxes in
relation to input products or services is unfair. The airport operator cannot be forced
to bear the brunt of additional taxes. There appears to be rationale missing in
allowing for recovery of certain taxes, while not allowing for recovery in respect of
other forms of taxation. Unlike what is stated in the affidavit of the Authority filed
in Appeal No.7, there is no scope for the airport operator to reduce such losses. To
illustrate, there is no means by which the airport operator can reduce exposure to an
increase in fuel prices or account for it even before its occurrence.
Submissions: The Authority is requested to consider error correction with respect to
any direct or indirect increase in taxes either on the airport operator or through
increase in taxes for inputs and services, within the same control period.
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CONSULTATION
37.
Consultation Protocol:
Authoritys Approach: Per clauses 8.1 to 8.22 of Order No.13 and Appendix 1 of
Direction No.5, the Authority has proposed a detailed Consultation Protocol
including by way of constituting an Airport Users Consultative Committee
(AUCC). The Authority proposes to apply the Consultation Protocol as detailed in
Appendix 1 of Direction No.5 in respect of aeronautical services as well as services
other than aeronautical services.
Observations: Under the AERA Act Authority has to determine tariffs for
aeronautical services. The Authority is also required to consider and give effect to
the concessions granted by the state, which in the case of BIAL, is the Concession
Agreement, State Support Agreement and the Land Lease Deed. As stated above, by
effect of the Concession Agreement, the services of cargo, ground handling and
supply of fuel are excluded from the ambit of regulation. In summation, under the
AERA Act, the Authority can determine tariff only for aeronautical services,
excluding cargo, ground handling and supply of fuel. The Authority may not
consider determination of tariffs for any other services that may be provided by the
airport operator. The function of regulating the consultation process appears to be
concomitant to the power of determining tariffs and may not be an independent
function. In the absence of jurisdiction to determine tariffs for services other than
regulated services, it appears to be that the Authority has no power or jurisdiction to
mandate consultation for such services.
Additionally, the constituents of AUCC include persons who do not fall within the
definition of stakeholder under the Act.
Submissions: The consultation process/ Consultation Protocol with respect to
services other than regulated services can be excluded. BIAL prefers that the
constituents of AUCC be restricted to those who fall within the definition of
stakeholder. Specifically, the Authority can exclude cargo, ground handling and
fuel supply services from the Consultation Protocol.
CONCLUSION
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38.
BIAL requests the Authority to provide an opportunity of personal hearing, prior to

finalization of the tariff determination mechanism and prior to issuance of a
consultation paper for the same
39.
BIAL also reserves the right to submit further submissions as may be required
For Bangalore International Airport Limited
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-1-
AIRPORT MODERNISATION IN INDIA

By
K Roy Paul
Secretary, Ministry of Civil Aviation, India
and
Chairman, Air-India Limited
With phenomenal growth in air traffic, the importance of air transport

in the whole economy has increased considerably. Its role in
transportation of people, cargo and creation of jobs needs no
emphasis. Airports have become the key nods in the production and
commercial systems and engines of local economic development.
With more and more business taking place around these airports, a
new urban form is fast emerging. Civil Aviation
prosperity and creates
contributes to
opportunities for employment, business,
commerce, trade and tourism industry.

Aviation infrastructure, especially airport facilities and air navigation
services, have significantly expanded and improved to meet the
increasing demands. There has been some time lag between supply
and demand for infrastructure facilities. Lack of financial resources
has been an important factor in retarding expansion of aviation
infrastructure besides environmental constraints in recent times. It is,
however, recognised that airports not only provide infrastructure for
airlines but also contribute to the economy of the region. Airport
management have to address the emerging issues of airport
restructuring, safety and security.
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Recognising these trends, Government of India has decided to make

some far reaching changes in the system. The highest priority is being
given to the development of airport infrastructure with emphasis on
providing efficient and value added services at reasonable prices.
Hitherto all airports in India were under state control. Government
has now committed itself to deregulation of airport operations in
line with international trends. It is felt imperative to invite private
sector to leverage modern technology and management expertise in
this area. Private sector, realizing the potential for growth that the
airport business
offers, is showing keen interest in airport
investments.
India has a federal structure and civil aviation is included in the
Central List in the Constitution of India.
Aviation, therefore, comes
Indian Parliament.
The subject of Civil
within the legislative competence of
Aircraft Act
regulates civil aviation in the
country and Aircraft Rules provide the basic legislative framework

for the sector.
Until the formation of International Airports Authority in 1972 and
National Airports Authority of India in 1986 all airports were
managed by Government of India directly.
professionalising
the
management
of
With a view to
international
airports,
International Airports Authority of India was created in 1972 and

given the responsibility for the international airports at Mumbai,
Delhi, Kolkota and Chennai. Based on the positive experience of this
Authority, National Airports Authority of India was set up in 1986 to
manage and operate the remaining government airports.
This was
followed by another restructuring in 1995 when both these authorities
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were merged to form Airports Authority of India. The primary

objective of the merger was to accelerate development, expansion
and modernization of operational, terminal and cargo facilities at all
airports in the country in conformity with international standards.
AAI now controls 124 airports in the country including international
airports, domestic airports and the civil enclaves in some of the
Defence airports. Airports Authority of India is governed by AAI Act,
1994. In addition to the airports under AAI, there are several airstrips
all over the country which are owned and managed by State
Governments or private sector.
Some data of the present airport operations in India are given below:
! Total number of airports where scheduled airlines operate are 68.
This number includes Cochin and the civil enclaves in Defence
airports.
Aircraft Movements (in numbers)

Year
International
Domestic
Grand Total
1999-2000
99701
368015
467716
2000-2001
103211
386575
489786
2001-2002
107823
402108
509931
2002-2003
560578
Passenger (in numbers)

Year
International
Domestic
Grand Total
1999-2000
13293027
25741521
39034548
2000-2001
14009052
28017568
42026620
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2001-2002
13624712
26358627
2002-03
39983339
43988321
Cargo (in tones)

Year
International
Domestic
Grand Total
1999-2000
531844
265570
797414
2000-2001
557772
288373
846145
2001-2002
560226
294050
854276
2002-2003
982464
Directorate General of Civil Aviation is the authority responsible for

safety and security of aircraft operations in India. At present there is
no economic regulator other than Ministry of Civil Aviation. It is,
however, proposed to set up an economic regulatory mechanism as
private sector starts operating airports. Security matters are overseen
by Bureau of Civil Aviation Security while Air Traffic Control in the
whole country is managed by AAI.
As development of airport infrastructure has become the major thrust
area now, Government of India has taken a number of initiatives to
encourage private sector participation in development, modernization
and upgradation of airport infrastructure:
! AAI Act, 1994 was amended by Indian Parliament recently to
facilitate private sector participation in development of greenfield
airports. Government will have no role in the management of
such private sector airports except for security and Air Traffic
Control. The amendment also provides for levying Advance
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Development Fee at existing airports to finance new airports in

lieu of the existing one and Users Fee at the new airports.
! Government of India formulated a new national policy on airport
infrastructure in 1997 to provide a broad framework
development of airport infrastructure with public and
for
private
sector participation.
! This Policy provides for foreign equity participation in airport
projects upto 74 % with automatic approvals and 100% on case-tocase basis. Foreign airports authorities can also participate. Private
sector participation is encouraged in the development of cargo
infrastructure including satellite freight cities.
! The policy permits development of Greenfield Airports where an
existing airport is unable to meet the projected requirements of
traffic or a new focal point of traffic emerges with sufficient
viability. It can be allowed both as replacement for an existing
airport or for simultaneous operations.
Under the new policy framework, some major initiatives have been
taken for
development of Greenfield airports
by some State
Governments.
! At Cochin, a new greenfield international airport has been built. It
was opened to traffic in 1999. The airport was built by a public
limited company promoted by the state government. While state
government is an important shareholder in the company, private
parties including non-resident Indians (NRI) and certain service
providers like Air India, Bharat Petroleum, State Bank of
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Travancore and Federal Bank are the other shareholders. The

largest shareholding is by about 10,000 NRIs living in 30
countries. Some loans were raised from banks and interest-free
deposits were mobilized from the service providers and
concessionaires.
! Another Greenfield international airport is being developed at
Bangalore to cater to the traffic handled by the existing Bangalore
airport. The present Bangalore airport is owned by Hindustan
Aeronautics Limited (Ministry of Defence) and has very limited
capacity for further expansion. The catchment area of the airport is
fast growing, especially because of the development of computer
software industry in Bangalore. The existing airport handled about
2.4 million passengers and 59, 0000 tonnes of cargo in 2000-01.
On the opening of the new airport, the traffic is likely to increase to
about 4 million passengers and one million tones of cargo. The
new Bangalore airport is a joint venture project in which a private
sector consortium will have 74 per cent equity with the balance
being shared equally by Karnataka State Industrial Development
Corporation and Airports Authority of India. The private
consortium is led by Siemens of Germany.
! Another Greenfield airport is being developed in Hyderabad. In
this project also 74% of the equity is held by a private consortium.
! Some of the other places where Greenfield airports are being
conceptualized include Goa and Pune.
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In all these airports, private sector partner will have majority stake with
operational and management control. Government of India has recently
formulated airport specific and general models of Concession Agreement.
Another major initiative under the new policy is the decision to induct
private sector, including foreign investors, for expanding and
modernizing the existing AAI airports including those in the metro
cities of Delhi, Mumbai, Chennai and Kolkata. The restructuring of
Delhi and Mumbai airports are being taken up at the first instance.
Government is committed to provide a transparent and fair bidding
process while privatizing the AAI airports. The process is likely to
begin very shortly and the private sector partner for each of these projects
will be selected on the basis of global bids. The proposed restructuring
of Delhi and Mumbai airports provides
attractive and strategic
opportunities to international and domestic players in this sector. The

airports have good traffic base and a track record of uninterrupted
operations with unique opportunities for maximization of commercial
revenue streams from non-aeronautical sources.
Some strong fundamentals supporting modernization of Indian airports
with private sector participation are:
1. Air Traffic Growth: Asia-Pacific growth is expected to outperform the
global average over the next decade and India is also expected to benefit
from this.
2. Regulations: Pricing regulation and structure, transparency and the
degree and form of government control are key drivers of airports
valuation.
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a. The concept of dual till agreed to by GOI in the case of BIAL

project ensures that the airport investor has greater flexibility to
expand
non-aeronautical/
commercial
operations,
which
improves airport services and reduces pressure for increasing

airport charges.
b. The process of selection of the investor
through a global
competitive bidding process is completely transparent.
3.Hub Status: The geographical location of India is conducive for

airports in India to develop into Hub airports.
4.Stable economic environment: The Indian economy has, since the start
of liberalization in the early 1990s, grown steadily. The strong GDP
growth has been accompanied by increasing FDI, an information
technology boom and expansion of industrial and services sector.
The
country offers a well established legal, accounting and financial system

and a vibrant capital market. Government of India is committed to
address the concerns of private airport investors and ensure transparency
in its policy. Government will set up a proper regulatory framework for
determining charges for recovery of aeronautical charges. A dual till
regime to encourage private sector to invest in non-aeronautical activities
is also taking shape.
It will be the Governments endeavour to ensure
that the investor has total operational and managerial control in day to
day affairs within the overall legal framework.
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5/30/13
Annexure II
Su bje c t :
BIAL - Tariff determination - Annual Tariff Proposal (ATP)
Fr o m :
Anand Kumar P (AnandKumar@BIALAIRPORT.COM)
To :
radhi_khan@yahoo.co.in; cv.deepak@aera.gov.in; cvdeep@gmail.com;
Cc:
kapil.aera@gmail.com; kapil.chaudhary@aera.gov.in; bhaskar.bodapati@BIALAIRPORT.COM;
Dat e :
Tuesday, 16 April 2013 2:32 PM
Dear Madam,
Dear Sir,
I refer our discussion on the above subject and Pl find enclosed Annual Tariff Proposal (ATP) in Dual till and Single till along
with the ATP forms (Form 15A and 15B) for your needful.
The hard copies will be submitted at your office shortly by our representative. Kindly acknowledge.
Thank you and best regards,
Anand
Anand Kumar P.
Assistant Vice President & Head Controlling & Regulatory affairs
Administration Block, Bengaluru International Airport, Devanahalli,
Bangalore 560300, India
Phone: +91 80 6678 2634 | Mobile: +91 95388 82634 | E-Mail: anandkumar@bialairport.com | Web: www.bangaluruairport.com
The inform ation containe d in this e le ctronic m e ssage and any attachm e nts to this m e ssage are inte nde d for the
e x clusive use of the addre sse e (s) and m ay contain proprie tary, confide ntial or le gally privile ge d inform ation. It should
not be acce sse d by anyone who is not the original inte nde d re cipie nt. Ple ase notify the se nde r if you have e rrone ously
re ce ive d this e -m ail and im m e diate ly de le te it from your syste m . Any unauthorize d re vie w, use , disclosure ,
disse m ination, forwarding, printing or copying of this e m ail or any action tak e n in re liance on this e -m ail is strictly
prohibite d and m ay be unlawful. The re cipie nt ack nowle dge s that BIAL is unable to e x e rcise control or e nsure or
guarante e the inte grity of/ove r the conte nts of the inform ation containe d in e -m ail transm issions and furthe r
ack nowle dge s that any vie ws e x pre sse d in this m e ssage are those of the individual se nde r and no binding nature of the
m e ssage shall be im plie d or assum e d unle ss the se nde r doe s so e x pre ssly with due authority of BIAL.
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Bangalore
Form 15(a) - ATP - 24.4% Dual Till
For tariff year 2013-14 to 2015-16
Sl. No.
1
2
3
Particulars
Yield per passenger (in Rs.)

Error Correction Form (from year t-2)
Estimated Maximum Allowed Yield (EMAY)
2013-14 from
May 01, 2013 to
March, 2014
1,015.95
1,015.95
2014-15
998.50
998.50
2015-16
Remarks
1,042.24
1,042.24
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15(b) for Tariff Year 2013-14 - Dual Till 24.4%

Conditions of Tariff
Tariff Heading
Applicable Discount
Estimated units
(In Millions)
(Rs. In Millions)
Estimated
Revenue
Net
642.76
Landing charges - Domestic pax
Domestic PAX Flights (excl ATR) - Rs. Per ton
15% if paid with in 15 days
2.48 Million Tonnage
Landing charges - International pax
International PAX flights - Rs. Per ton
No Discount
Landing charges - ATR's only
Rs. Per ATM
0.01 Million Flights
Landing charges - Domestic cargo
Domestic Cargo Flights - Rs. Per ton
Landing charges - International cargo
International Cargo Flights - Rs. Per ton
No Discount
Parking Charges - Domestic pax
Domestic PAX Flights - Rs. Per ton
No Discount
Parking Charges - International pax
No Discount
Parking Charges - Domestic cargo
No Discount
Parking Charges - International cargo
No Discount
Housing Charges - Domestic pax
No Discount
Housing Charges - International pax
No Discount
Housing Charges - Domestic cargo
No Discount
Housing Charges - International cargo
No Discount
International UDF
Non Transfer PAX
No Discount
1.22 Million Departing

Passengers
2,075.19
Domestic UDF
Depax plus Transfer PAX
No Discount

Passengers
7,759.72
814.32
63.18
28.27
310.66
10.17
1.34
0.38
2.09
38.43
8.86
6.93
-
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15(b) for Tariff Year 2014-15 - 24.4% Dual Till

Tariff Heading
Applicable Discount
Estimated units
(In Millions)
(Rs. In Millions)
Estimated
Revenue
Net
833.74
No Discount
Rs. Per ATM
No Discount
No Discount
No Discount
No Discount
No Discount
No Discount
No Discount
No Discount
No Discount
International UDF
Non Transfer PAX
No Discount

Passengers
2,711.28
Domestic UDF
No Discount

Passengers
8,906.72
1,041.56
71.43
36.47
395.53
13.18
1.72
0.49
2.67
49.79
11.34
8.95
-
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15(b) for Tariff Year 2015-16 - 24.4% Dual Till

Tariff Heading
Applicable Discount
Estimated units
(In Millions)
(Rs. In Millions)
Estimated
Revenue
Net
969.09
No Discount
Rs. Per ATM
No Discount
No Discount
No Discount
No Discount
No Discount
No Discount
No Discount
No Discount
No Discount
International UDF
Non Transfer PAX
No Discount

Passengers
3,229.17
Domestic UDF
No Discount

Passengers
10,095.85
1,390.52
76.87
42.91
465.39
15.42
2.29
0.58
3.14
58.26
15.17
10.53
-

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Annexure II

BANGALORE INTERNATIONAL AIRPORT LIMITED

Submitted to the Airport Economic Regulatory

CP No. 14/2013-14- MYTP & ATP- BIAL-CP

Annexure II Page 1 of 381

MYTP - Financial statements and assumptions

Approach and consideration ....................................................................... 4

Consideration and applicability................................................................ 4

Financial statements ................................................................................ 5

Financials Aggregated ......................................................................... 5

Financials Aero ................................................................................. 8

Financials Non-Aero ........................................................................... 9

Calculated Aggregate Revenue Requirements (ARR) ...................................... 10

Bifurcation of Aero and Non-Aero assets and costs ........................................ 11

Capex assumptions ............................................................................. 11

WPI and CPI ...................................................................................... 11

Fair Return of Return (FRoR).................................................................. 12

Service Quality parameters ................................................................... 12

Objective parameters .................................................................... 12

Subjective parameters ................................................................... 13

Other charges Aviation concession and non-aviation revenues ................... 13

Operating cost .................................................................................. 13

Personnel Expense ........................................................................ 13

O&M Costs .................................................................................. 14

Concession fee ............................................................................. 14

Lease rent .................................................................................. 14

Marketing, Advertising & Others ........................................................ 14

OMSA fee ................................................................................... 14

General Administration Costs............................................................ 14

Treatment of Real estate business ........................................................... 14

Bangalore International Airport Limited (BIAL)

MYTP - Financial statements and assumptions

1: Auditor's certificate for bifurcation of fixed assets and costs ....................... 15

Bangalore International Airport Limited (BIAL)

MYTP - Financial statements and assumptions

1 Approach and consideration

1.2 Consideration and applicability

Bangalore International Airport Limited (BIAL)

MYTP - Financial statements and assumptions

Bangalore International Airport Limited (BIAL)

MYTP - Financial statements and assumptions

Table 2-2: Balance Sheet (INR million)

Bangalore International Airport Limited (BIAL)

MYTP - Financial statements and assumptions

Table 2-3: Cash Flow Statement (INR million)

Bangalore International Airport Limited (BIAL)

MYTP - Financial statements and assumptions

2.2 Financials Aero

Bangalore International Airport Limited (BIAL)

MYTP - Financial statements and assumptions

2.3 Financials Non-Aero

Bangalore International Airport Limited (BIAL)

MYTP - Financial statements and assumptions

2.4 Calculated Aggregate Revenue Requirements (ARR)

Aggregate Revenue Requirement

Bangalore International Airport Limited (BIAL)

MYTP - Financial statements and assumptions

3.2 Capex assumptions

3.3 WPI and CPI

Bangalore International Airport Limited (BIAL)

MYTP - Financial statements and assumptions

3.4 Fair Rate of Return (FRoR)