Aviation: Uncertainty over tariffs slowing investments, says Prabhakara Rao, executive director DIAL
"Uncertainty over tariffs is the first one. As an investor, I don’t know what kind of tariff I will get. This is the kind of challenge which is slowing the investment. That is why we are asking the government to come out with some policy on the same. Can you make a fixed tariff upfront like in Philippines? The investor knows there what the tariff is (before deciding to invest)," said Prabhakara Rao.
Prabhakara Rao, who is currently the executive director of Delhi International Airport (DIAL), has been associated with the GMR Group for nearly eight years, including seven years as its CEO. He told DNA Money’s Shahkar Abidi that uncertainty over tariffs has been slowing investments in the aviation sector. Below are excerpts from the interview.
What are the challenges the private airport operators facing today? Uncertainty over tariffs is one of the most prominent ones, especially for someone like GMR?
Uncertainty over tariffs is the first one. As an investor, I don’t know what kind of tariff I will get. This is the kind of challenge which is slowing the investment. That is why we are asking the government to come out with some policy on the same. Can you make a fixed tariff upfront like in Philippines? The investor knows there what the tariff is (before deciding to invest).
The second challenge is real estate. Though it is an important aspect and funds the aviation growth, there is a lot of uncertainty surrounding its usage.
Thirdly, we are a private company, and there is a lot of scrutiny like that is government sector which makes the decision making slow. I think the government needs to come out with something to make it friendlier for investors. Further, the alignment of stakeholders is the biggest task for us. Around 220 companies work in one airport and aligning them for a common cause is a huge task, especially the government ones like immigration, customs, security among others.
Recently GMR made an arbitration settlement with private equity investors in which it agreed to pay `3,560 cr to them. In addition, PE investors will also acquire a 5.86% stake in the airport business. Will this development affect your current operations and future funding?
Nothing will get affected. Things will continue as planned and we are on track to achieve our growth.
How big is a funding problem in today’s scenario?
It’s a challenge but we have innovative ways to fund the project. Today DIAL doesn’t lack funding. We have gone for international bonds and it helped us in funding our projects.
How has been the growth for private airport sector in general and particularly in GMR?
When we got our first airport in Hyderabad in 2004, it was the first private airport in the country. Later, Delhi, Mumbai, and Bengaluru came into existence. If you look at the decade, these airports have not only brought in the capacity enhancement but also growth. Also, it gave a name to the country.
I remember in 2006, when I went with the Delhi airport card, nobody gave me the treatment. I went to the Changi airport, they did not allow me to come inside. That was the stage for us then. Today, our name is there before us. That is how the growth has happened. Today 50% of passenger traffic is handled by five airports in India (Delhi, Mumbai, Bengaluru, Hyderabad, and Cochin).
Source: DNA Money