The AAI has not yet agreed to give a waiver and has instead asked the two entities to defer the payment by three months. “We took legal opinion from the Solicitor General of India and have decided to defer their payment for April-June. But as of now, we have not agreed to a force majeure event and haven’t given any waiver,” said a senior AAI official.
DIAL and MIAL under concession agreements with the AAI, signed during the privatisation process in 2006, have to pay part of their revenue to the authority.
DIAL pays 45.99 per cent and MIAL 38.7 per cent of its revenue as fees to the AAI. This forms the bulk of the AAI’s revenue, making it one of the few profitable public sector units in the country. A complete waiver, said AAI officials, would force the authority to increase its external borrowings.
The difference in opinion represents the difficulty Indian corporations are set to face to invoke force majeure against their liability, especially to government entities. “Force majeure is not an Indian law concept and therefore corporates are facing huge liabilities on account of disruption caused by Covid-19. This may lead to a long-drawn litigation,” Mohit Saraf, senior partner at law firm Luthra & Luthra, said.
Sources aware of the development said DIAL had decided against invoking the force majeure clause as it wanted to avoid a legal route, which could possibly land in arbitration.
Instead DIAL, sources said, may approach the Airport Economic Regulatory Authority (AERA) for an increase in airport charges to help adjust the losses caused by the coronavirus
outbreak and the subsequent lockdown. The AERA has the mandate to fix airport tariff for a period of five years and is in the process of fixing tariff for 2019-23.
“We have been making representations to the government for various support measure to enable sustenance during this crunch period. Overall traffic got badly impacted in Q1 and will take time to recover. We expect serious impact in FY21,” a DIAL spokesperson said.
Among the relief measures sought by DIAL are a waiver on revenue share, income tax and a sanction of grant which will cover fixed expense of the airport.
The extension of the lockdown, stretching the no-flight period to 40 days, has grounded not just the airlines but also the airports. Major airports like Delhi and Mumbai are staring at a steep 40-60 per cent fall in passenger volume this financial year.
Senior executives of airport operators said a bilateral negotiation, rather than invoking the force majeure clause, was a much safer way to seek a waiver. “Invoking force majeure will also mean that the other party has the right to terminate the contract as the airport operator is basically saying it cannot honour the contract signed during the said period,” said an executive.
“The revenue shortfall due to the dip in air traffic
could be trued up for all the airports on account of the regulatory nature of the sector. With a tariff order yet to be released for all airports, the impact of the same can be factored in and adjusted in the tariff for the subsequent control period,” noted Vishal Kotecha, associate director at India Ratings.