2025 Supreme(Online)(TDSAT) 32

TELECOM DISPUTES SETTLEMENT AND APPELLATE TRIBUNAL
Dhirubhai Naranbhai Patel, Chairperson, Subodh Kumar Gupta, Member
Mangaluru International Airport Ltd. – Appellant
Versus
Airports Economic Regulatory Authority of India – Respondent
AERA APPEAL/1/2023|AERA APPEAL/2/2023|AERA APPEAL/3/2023|AERA APPEAL/2/2024|AERA APPEAL/3/2024|AERA APPEAL/4/2024

AERA must determine aeronautical tariffs using actual/prudent costs via CAPM per airport, allow financing/soft costs/actual recoveries without caps/deferrals/penalties, true-up on incurrence; consistency with guidelines/prior orders mandatory.

Headnote:(A) Airports Economic Regulatory Authority Act, 2008 - Section 13(1), 18(3) - AERA Tariff Guidelines, 2011 - Clauses 5.1.3, 5.2.7, A5.5.2.3 - Aeronautical tariff determination for PPP airports - Cost of equity must be estimated using CAPM for each airport operator with consideration of airport-specific factors and submitted reports; simplistic averaging from other airports violates guidelines (Paras 88-109). Cost of debt to be allowed on actuals from reputed lenders, not capped (Paras 110-130). Financing allowance on capital work in progress allowable without greenfield-brownfield distinction as per guidelines (Paras 131-148). Soft costs allowable on actual basis subject to true-up, not capped at 8% (Paras 149-162). Aggregate revenue requirement not deferrable to next period; full recovery mandated in control period (Paras 163-179). Non-aeronautical revenues based on contracted amounts from competitive bidding, not notional presumptions (Paras 180-204). 30% non-aeronautical revenue partakes aeronautical character for tax computation (Paras 205-210). Pre-COD expenses allowable as O&M on actuals (Paras 211-227). Manpower and R&M expenses on actuals, no arbitrary caps or rationalisation (Paras 228-261). Corporate legal costs under allocation allowable (Paras 262-272). Terminal allocation per actual measurements, not IMG norms inapplicable to PPP (Paras 273-282). No penalty via 1% ARR readjustment for project delays (Paras 283-288). Depreciation per submitted technical reports subject to true-up (Para 297). Space rentals and utilities recoveries as non-aeronautical on actuals, not notional (Paras 306-332). Normative costs quashed; actuals with true-up (Paras 333-343).

Facts of the case:
Consolidated appeals by PPP airport operators against tariff orders determining aeronautical tariffs for first control periods, challenging disallowances/caps on equity/debt costs, financing allowances, soft costs, ARR deferral, non-aero revenues, taxes, pre-COD/O&M/R&M expenses, allocations, penalties, escalations, rentals, utilities, normative costs.

Findings of Court:
Impugned orders quashed on all challenged heads; AERA directed to recompute tariffs allowing actuals/true-ups per guidelines, prior TDSAT precedents; consistency mandated; no notional caps/penalties/deferrals.

Issues: Whether AERA correctly determined cost of equity/debt, disallowed financing/soft costs, deferred ARR, presumed non-aero revenues, excluded 30% NAR from taxes, capped pre-COD/O&M/R&M/manpower, applied IMG ratios/penalties, treated rentals aeronautical, imposed notional utilities, used normative costs.

Ratio Decidendi: Tariff determination mandates actual/prudent costs per Section 13(1); guidelines require CAPM per airport, no distinctions/caps absent provision; competitive contracts/non-aero actuals binding; consistency/non-arbitrariness essential; true-up ensures recovery without deferral/penalty.

Result: Appeals allowed; impugned orders quashed/set aside; AERA directed to redetermine tariffs per directions (Para 344).

Table of Content
1. appellants challenge aera tariff decisions on costs (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 28 , 29 , 30 , 31 , 32)
2. aera defends tariff using guidelines and benchmarks (Para 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53 , 55 , 56 , 57 , 58 , 60 , 61 , 62 , 63 , 64 , 65 , 66 , 67 , 68 , 69 , 70)
3. intervenors support aera tariff determinations (Para 71 , 72)
4. tribunal restates facts and lead case (Para 73 , 74 , 75 , 76 , 77 , 78 , 79 , 80 , 81 , 82 , 83 , 84 , 85 , 86 , 87)
5. aera must use capm for airport-specific cost of equity (Para 88 , 89 , 90 , 91 , 92 , 93 , 94 , 95 , 96 , 97 , 98 , 99 , 100 , 101 , 102 , 103 , 104 , 105 , 106 , 107 , 108 , 109)
6. actual cost of debt from reputed lenders allowed (Para 110 , 111 , 112 , 113 , 114 , 115 , 116 , 117 , 118 , 119 , 120 , 121 , 122 , 123 , 124 , 125 , 126 , 127 , 128 , 129 , 130)
7. financing allowance on cwip without greenfield restriction (Para 131 , 132 , 133 , 134 , 135 , 136 , 137 , 138 , 139 , 140 , 141 , 142 , 143 , 144 , 145 , 146 , 147 , 148)
8. soft costs allowed on actual basis subject to true-up (Para 149 , 150 , 151 , 152 , 153 , 154 , 155 , 157 , 158)

FACTUAL MATRIX

A. The appellant in AERA Appeal No.1 of 2023 is a company incorporated under Companies Act, 2013 and is engaged in operating, maintaining, developing, designing, upgrading, modernizing and managing the Airport. Similar is the position of rest of the appellants for their respective airports.

B. The Government of India decided to invite the bids for operation, management, and development of certain airports of Airports Authority of India (AAI-Respondent No.2) on Public Private Partnership basis (PPP) and in furtherance of this, Respondent No. 2-Airport Authority of India (AAI) issued Request for Proposal on 14.12.2018. Adani Enterprises Ltd. (hereinafter referred to as AEL was declared as a successful bidder and was issued a letter of award on 15.07.2019 by Respondent No. 2-AAI. AEL incorporated the appellant of AERA Appeal No.1 of 23 as a Special Purpose Vehicle under the Companies Act, 2013. C. A Concession Agreement was entered into between the present appellant (i.e. MIA) and AAI (Respondent No. 2) on 14.02.2020 whereby the scope of the project work undertaken was narrated as under:

I. design, development, financing, construction, upgradation and expansion of the Airport in a phased manner, on the Site and as per the requirements broadly set forth in Schedule A and Schedule B together with provision of respective Project Facilities as specified in Schedule B, and in conformity with the Specifications and Standards set forth in Schedule C, and in accordance with the Applicable Laws and Applicable Permits;

II. operations, maintenance and management of the Airport in accordance with the provisions of this Agreement, Applicable Laws and Applicable Permits;

III. development, operation and maintenance of City Side, in accordance with the provisions of this Agreement, and in particular Schedule A, Schedule B and Schedule C; and IV. performance and fulfilment of all other obligations of the Concessionaire and matters incidental thereto or necessary for the performance of any or all of the obligations of the Concessionaire under this Agreement, in accordance with the provisions of this Agreement, Applicable Laws and Applicable Permits.

The Concession Agreement dated 14.02.2020 is at Annexure A-2 to the memo of AERA Appeal No.1 of 2023.

D. On 29.09.2020, “First Interim Arrangement order was issued by AERA-R.1 for continuation of existing tariffs for period of 6 months with effect from 01.10.2020 to 31.03.2021 or till the handing over of the airport to the appellant, whichever is earlier and the said order is order number 48/2020-21”.

E. On 31.10.2020, the Commercial Operation Date (COD) was achieved by this appellant. The Respondent No.2/AAI issued on 09.1

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