MUMBAI INTERNATIONAL AIRPORT LTD vs AIRPORT ECONOMIC REGULATORY AUTHORITY OF INDIA AND ANR

TELECOM DISPUTES SETTLEMENT & APPELLATE TRIBUNAL
NEW DELHI
Reserved on:10.03.2026
Pronounced on: 29.05.2026
AERA APPEAL/2/2025
Mumbai International Airport Ltd. …Appellant
Versus
1. Airports Economic Regulatory Authority of India;
2. Federation of India Airlines. …Respondent(s)
BEFORE:
HON’BLE MR. JUSTICE DHIRUBHAI NARANBHAI PATEL (CHAIRPERSON)
HON’BLE DR. SANJEEV BANZAL (MEMBER)
FOR APPELLANT FOR RESPONDENT(S)
In AERA Appeal No.2/2025
In AERA Appeal No. 2/2025
For MIAL
For AERA (R-1)
Mr Ritesh Kumar
Mr. Sajan Poovayya, Senior Advocate
Ms Amrita Narayan
Mr Dheerendra Singh Bisht
Mr Palash Maheshwari
Ms Shalini Prasad
Mr Raghav Tiwari
Mr Madhav Sharma
Ms. Yashasvini Chandra For R1;

For FIA(R-2)
Mr Buddy Ranganadhan, Sr Adv
Ms Nishtha Kumar
Mr Prantar Basu Choudhury
Mr Shrom Sethi For R2;
Page 1 of 283

INDEX
S. No.
CONTENT Page No. s
1. SUMMARIUM 4
3. ABBREVIATIONS INVOLVED 5 to 9
5. FACTUAL MATRIX 10 to 12
6. ARGUMENTS OF THE APPELLANT 13 to 38
7. ARGUMENTS OF THE RESPONDENTS 39 to 52
8. REASONS & ANALYSIS 53 to 283
9. Issue No. I: Normative Costing Methodology 63 to 69
10. Issue No. II: Cost of Debt for Third Control Period 70 to 83
11. Issue No. III: General Aviation (GA) Terminal
84 to 88
considered as non-aeronautical asset by AERA
12 Issue No. IV: Adjustment on account of demolition of
89 to 95
Terminal-1 building in HRAB in FY 2029
13. Issue No. V: 1% Penalty on Capex not incurred 96 to 104
Issue No. VI: Inclusion of "Annual Fee" in
14.
105 to 113
determination of "S" factor
15. Issue No. VII: Inclusion of "Other Income" in
114 to 122
determination of "S" factor
Page 2 of 283

16 Issue No. VIII: Revenue from existing assets/demised
123 to 128
premises
17. Issue No. IX: Inclusion Of S Factor in Aeronautical
129 to 141
Revenue for Computation of T
18. Issue No. X: Corporate Cost Allocation Viz Legal
142 to 149
expenses

19. Issue No. XI: Soft Cost for 4th Control Period 150 to 157

20. Issue No. XII: Fixation of minimum amount of non-
158 to 182
aeronautical revenue for 4th Control Period
21. Issue No. XIII: Cost of Equity for Fourth Control Period 183 to 189
22. Issue No. XIV: Cost of Debt For 4th Control Period 190 to 196
23. Issue No. XV: Dividend Income from Fuel Farm Joint
197 to 205
Venture
24. Issue No. XVI: Adjustment of Target Revenue on
206 to 215
account of return on RAB and depreciation allowed on
Alleged Assets as per the Self-Contained Note (SCN) of
Authorized Investigation Agency (AIA).
25. Issue No. XVII: Bad Debts 216 to 220
26. Issue No. XVIII: Aeronautical Allocation of
221 to 247
Digitalization Cost

27. Issue No. XIX: Legal Expenses for Fourth Control
248 to 258
Period.
28. Application of Binding Pronouncement of this Tribunal. 259 to 283
Page 3 of 283

JUDGEMENT
Per Justice D.N. PATEL, Chairperson

SUMMARIUM
This appeal has been preferred by Mumbai International Airport Limited
(MIAL), the operator of Chhatrapati Shivaji Maharaj International Airport,
Mumbai (CSMIA), under Section 18(2) of the AERA Act,2008 against Order No.
01/2025-26 dated 07.05.2025 passed by the Airports Economic Regulatory
Authority of India (AERA), determining the aeronautical tariff for CSMIA for the
Fourth Control Period commencing 01.04.2024 and ending 31.03.2029.
The appeal raises multiple issues relating to the regulatory treatment of capital
and operating expenditure, allocation of costs between aeronautical and non-
aeronautical activities, and the methodology adopted by AERA in determining
key parameters forming part of the Aggregate Revenue Requirement (ARR).
The Respondents, on the other hand, defends the impugned tariff order by
asserting that the determinations have been undertaken in accordance with its
statutory mandate under Section 13 of the AERA Act, 2008. It is contended
that the AERA, as the sectoral regulator, is empowered to examine the
prudence and efficiency of expenditure.
In the present proceedings, this Tribunal is called upon to examine the rival
contentions advanced by the parties and to adjudicate upon the issues arising
from the impugned tariff determination within the framework of the AERA Act,
the governing concession agreements, binding precedents and the applicable
principles of regulatory jurisprudence.
Page 4 of 283

ABBREVIATIONS INVOLVED
Abbreviations Expansion
AAI Airports Authority of India
AAHL Adani Airport Holdings Limited
ACI Airports Council International
ADRM Airport Development Reference Manual
AERA Act Airports Economic Regulatory Authority of India Act,
2008
AERA Airports Economic Regulatory Authority of India
AERAAT Airport Economic Regulatory Authority Appellate
Tribunal
AF Annual Fee
AIC Aeronautical Information Circular
AO Airport Operator
AOC Airlines Operators Committee
APAO Association of Private Airport Operators
Page 5 of 283

ARB Aeronautical Revenue Base
ATC Air Traffic Control
BAC Base Airport Charges
BCAS Bureau of Civil Aviation Security
BIAL Bangalore International Airport Limited
CAGR Compound Annual Growth Rate
CMP Cash Management Process
CNS/ATM Communication, Navigation and Surveillance and Air
Traffic Management Services
CSR Corporate Social Responsibility
CSMIA Chhatrapati Shivaji Maharaj International Airport
CWIP Capital Work in Progress
DE ratio Debt: Equity ratio
DF Development Fee
DGCA Directorate General of Civil Aviation
DIAL Delhi International Airport Limited
Page 6 of 283

ECB External Commercial Borrowing
FCP First Control Period
FDR Fixed Deposit Receipts
FIA Federation of Indian Airlines
F&B Food & Beverage
Forex Losses Foreign Exchange Losses
FRoR Fair Rate of Return
FTC Fuel Throughput Charges
FICCI Federation of Indian Chambers of Commerce
FY Financial Year
GA Terminal General Aviation Terminal
GHIAL GMR Hyderabad International Airport Limited
HIAL Hyderabad International Airport Limited
H-RAB Hypothetical- Regulatory Asset Base
ICAI The Institute of Chartered Accountants of India
IDC Interest During Construction
Page 7 of 283

IGIA Indira Gandhi International Airport
IRS Indian Register of Shipping
JVC Joint Venture Company
MAT Minimum Alternate Tax
MCLR Marginal Cost of Funds based Lending
MIAL Mumbai International Airport Limited
MoCA Ministry of Civil Aviation
MYTP Multi Year Tariff Proposal
OM Operation and Maintenance Expenses
OMDA Operation, Management and Development Agreement
PBT Profit Before Tax
PCN Pavement Classification Number
PNGRB Petroleum and Natural Gas Regulatory Board
PPP Public Private Partnership
PV Present Value
R&S Reserves and Surplus
Page 8 of 283

RAB Regulatory Asset Base
RED Real Estate Deposit
RoI Return on Investment
RSA Revenue Share Assets
RSD Refundable Security Deposit
RTL Rupee Term Loan
SCP Second Control Period
SGSA State Government Support Agreement
SPV Special Purpose Vehicle
SSA State Support Agreement
TAMP Tariff Authority for Major Ports
TCP Third Control Period
TDSAT Telecom Disputes Settlement and Appellate Tribunal
TR Target Revenue
WACC Weighted Average Cost of Capital

Page 9 of 283

AERA APPEAL NO. 2 OF 2025
1. This appeal has been preferred under Section 18(2) of The
Airports Economic Regulatory Authority of India Act,
2008 against the order passed by Respondent- Airports
Economic Regulatory Authority of India (hereinafter referred
to as AERA) bearing Order No. 1/2025-26 dated
th
07.05.2025 (for 4 Control Period) .
th
2. That the 4 Control Period is from 01.04.2024 to
31.03.2029 . This order has been passed by AERA under the
AERA Act. This appeal is in respect of Chhatrapati Shivaji
Maharaj International Airport, Mumbai (hereinafter referred to
as CSMIA for the sake of brevity).
FACTUAL MATRIX
A. In 2004-2005, the Airports Authority of India ( AAI )
invited tenders from private participants competent to and
desirous of operating, maintaining, developing, designing,
constructing, upgrading, modernizing, financing and
managing the CSMIA, Mumbai.
B. Earlier a consortium led by the GVK Group was awarded
the bid for operating, maintaining, developing, designing,
Page 10 of 283

constructing, upgrading, modernising, financing and
managing the CSMIA, Mumbai.
C. Post selection of the private consortium, a special purpose

vehicle, namely Mumbai International Airport Private
Limited (MIAL/the Appellant herein), was incorporated on
02.03.2006 with AAI retaining 26% Equity stake and
balance 74% Equity stake being acquired by members of
private consortium. Private consortium comprised of GVK
Airport Holding Pvt. Ltd., ACSA Global Limited and Bid
Services Division (Mauritius) Ltd.
D. The Appellant entered into an Operation, Management
and Development Agreement ( OMDA ) with AAI on
04.04.2006, whereby the AAI granted to the Appellant,
the exclusive right and authority during the term to
undertake some of the functions of AAI being the
functions of operations, maintenance, development,
design, construction, upgradation, modernization, finance
and management of the CSMIA, Mumbai and to perform
services and activities constituting Aeronautical Services
and Non-Aeronautical Services (but excluding Reserved
Page 11 of 283

activities, defined in OMDA) at the CSMIA. The Appellant
took over the operations of CSMIA, Mumbai on 03.05.2006.
E. Appellant also entered into the State Support Agreement
(hereinafter referred to as “SSA” for the sake of brevity)
dated 26.04.2006 with the President of India acting through
Ministry of Civil Aviation, Govt. of India (hereinafter referred
to as “MoCA” for the sake of brevity)
F. Several other agreements in addition to OMDA and SSA
were entered into by the appellant such as Lease Deed
Agreement, Shareholders’ Agreement State Government
Support Agreement etc. and are collectively referred to as
‘Project Agreements’.
G. MIAL has preferred the present appeal against the order No.
01/2025-26 dated 07.05.2025 titled ‘In the matter of
Determination of Aeronautical Tariff for Chhatrapati Shivaji
Maharaj International Airport, Mumbai (CSMIA) for the
Fourth Control Period (01.04.2024-31.03.2029)’
[ Impugned Order ] issued by AERA on the ground that the
principles of OMDA, SSA read with AERA Act, 2008 have
been disregarded.


Page 12 of 283

ARGUMENTS CANVASSED BY APPELLANT- MIAL
3. Ld. senior counsel appearing for the appellant Mr. Sajan
Poovayya has submitted that the impugned order dated
th
07.05.2025 for the 4 Control Period (01.04.2024 to
31.03.2029) passed by AERA is against the facts, evidence and
law. AERA has also violated the settled principles laid down by
the judgments of this Tribunal in different AERA Appeals and,
therefore, it is submitted that out of the total nineteen issues,
thirteen issues are covered by the earlier decisions rendered
by this Tribunal in various different AERA appeals.
4. It is submitted by the learned senior counsel appearing for the
appellant that the impugned order is contrary to the provisions
of AERA Act and other binding principles. Moreover, the
impugned order has been passed without proper application of
mind. Further, it is submitted that the impugned order has
failed to take into account the materials placed on record and
there is inconsistency in approach by AERA while passing the
impugned order. Similar issues have been decided differently
by AERA for different airports and lastly, it is pointed out that
there are violations of Principles of Natural Justice in several
issues decided by AERA.
Page 13 of 283

5. It is further submitted by the learned senior counsel appearing
for the appellant that the impugned order also suffers from
multiple legal and factual infirmities warranting interference by
this Tribunal. At the threshold, it is contended that the order
is inconsistent with the agreed upon sovereign contractual
framework governing the parties i.e. the Operation,
Management and Development Agreement (OMDA), and the
State Support Agreement (SSA), both of which collectively
define the regulatory framework under which the appellant
operates.
6. The major issues raised by the learned senior counsel
appearing for the appellant are as under:
I. The Respondent No.1/AERA ought not to apply normative
benchmarks while approving the costs of Terminal
Building and Runway/Taxiways/Apron projects in view of
the Hon’ble Tribunal judgment dated 16.04.2025 and
evaluate capital expenditures on an actual basis.
II. The Respondent No.1/AERA ought to have allowed actual
Cost of Debt of 10.98% for Third Control Period as
submitted in MYTP and which is also followed by other
regulatory commissions as efficient cost, to be used for
Page 14 of 283

the computation of Weighted Average Cost of Capital
(“WACC”).
III. The Respondent No.1/AERA ought to have allowed the

construction of General Aviation Terminal as common
asset.
IV. The Respondent No.1/AERA ought not to reduce the
Hypothetical Regulatory Asset Base (“HRAB”) on account
of the demolition of Terminal T1, as such an adjustment
reflects an inconsistent approach adopted in the case of
the Appellant as compared to DIAL, despite both airports
being governed by similar concession agreements i.e.,
OMDA and SSA.
V. The Respondent No.1/AERA ought not to reduce 1% of
the project cost in case of delay in completion of the
project and ought to be set aside by the Hon’ble Tribunal
to ensure fair and proper adjudication of the issue at
hand.
VI. The Respondent No.1 ought to have excluded the Annual
Fee payable to AAI from the revenue generated by the
Appellant from the Revenue Share Assets for the purpose
of calculating the “S” Factor.
Page 15 of 283

VII. The Respondent No.1/AERA ought to have excluded
Other Income (such as interest and dividend income)
from the revenue generated through Revenue Share
Assets, and consequently, from computation of ‘S’ Factor
under the Target Revenue formula.
VIII. The Respondent No.1/AERA ought to have exclude
“Revenue from existing assets/demised premises” from
the revenue generated through Revenue Share Assets,
and consequently, from the computation of the “S” Factor
under the Target Revenue formula.
IX. The Respondent No.1/AERA ought to have considered “S”
Factor as a part of the aeronautical revenue for purposes
of determining Aeronautical Taxes (“T”).
X. The Respondent No.1/AERA ought to have allowed entire
corporate legal expenses amounting to INR 5.67 Crores
as part of the Corporate Cost Allocation in line with the
Concession Agreement and treatment given to similarly
placed airports like DIAL.
XI. The Respondent No.1/AERA ought to have allowed soft
costs to the extent of 16% of the ‘allowable’ Capital
Page 16 of 283

Expenditure which is based on best practices subject to
true-up on an actual incurrence basis.
XII. The Respondent No.1/AERA ought to true-up non-

aeronautical revenues based on actuals, in line with the
consistent regulatory practice adopted by the Respondent
No.1/AERA in the previous control periods. Further,
Respondent No.1/AERA ought not to prescribe a floor or
minimum threshold for non-aeronautical revenues.
XIII. The Respondent No.1/AERA ought to have adopted the
Cost of Equity of 17.30% proposed by the Appellant,
based on the PwC study using the Capital Asset Pricing
Model (“CAPM”) methodology and based on correct asset
beta along with 1% risk premium due to traffic
constraints.
XIV. The Respondent No.1/AERA ought to have allowed actual
Cost of Debt incurred by the Appellant for computation of
WACC, at the time of true-up of Fourth Control Period.
XV. The Respondent No.1/AERA ought to have excluded
dividend income from Fuel Farm Operators from the tariff
computation.
Page 17 of 283

XVI. The Respondent No.1/AERA ought not to consider any
adjustment to the said amounts of tariffs claimed by
Appellant under the heads of Depreciation and Return on
RAB on account of the Self-Contained Note of the
Authorized Investigation Agency as the matter is now
pending trial and there is no finality on the said issue as
on date.
XVII. The Respondent No.1/AERA ought to have allowed
aeronautical bad debts written off on account of defaults
by airlines to be considered as part of O&M expenses.
XVIII. The Respondent No.1/AERA ought to have at least
allowed aeronautical allocation of 60% for the purpose of
determining Digitalization expenses for the Fourth Control
Period, subject to appropriate true-up.
XIX. The Respondent No.1/AERA ought to have allowed the
legal expenses on an upfront basis in the Fourth Control
Period and true-up the same based on actual incurrence
at time of tariff determination of Fifth Control Period.
7. It is further submitted by learned senior counsel appearing for
the appellant that following issues are settled and resolved by
virtue of principles laid down in judgments rendered by this
Page 18 of 283

Tribunal in AERA Appeal No.9 of 2016 and AERA Appeal No.2
of 2021 vide judgment dated 06.10.2023 for Second Control
Period:
A. Cost of Debt for Third Control Period (Para nos.
313 and 320-322 of MIAL SCP & TCP Judgment
dated 06.10.2023 and para no. 466 of GHIAL
TCP judgment dated 14.02.2024).
B. Aviation (GA) Terminal considered as Non-
Aeronautical Asset.
C. Adjustment on account of demolition of T1 in
HRAB in FY 2029 (Paras 341 and 342 of MIAL
SCP & TCP Judgment).
D. Reduction of 1% uncapitalized project cost from
the target revenue in case any particular capital
project is not completed/capitalized as per
approved capitalization schedule in the next
control period. (Paras 308, 309 and 310 of MIAL
SCP & TCP Judgment and Paras 508, 509, 510,
512 and 519 of GHIAL TCP Judgment dated
14.02.2024).
Page 19 of 283

E. Inclusion of “Annual Fee” in Determination of ‘S’
Factor (Para 365 of MIAL SCP & TCP Judgment).
F. “Other Income” not to be included in

determination of ‘S’ Factor (Paras 225, 226 and
227 of MIAL SCP & TCP Judgment).
G. Revenue from Existing Assets/Demised Premises
(Paras 379 to 381 of MIAL SCP & TCP Judgment)
H. Inclusion of ‘S’ factor in Aeronautical Revenue for
computation of ‘T’ (Paras 398 and 399 of MIAL
SCP & TCP Judgment) (Paras 423 and 424 of
GHIAL TCP Judgment dated 14.02.2024)
8. It is submitted by the learned senior counsel for the appellant
that by virtue of judgment and order dated 11.09.2025 passed
by this Tribunal in AERA Appeal No.1 of 2023 and other
connected AERA Appeals as well as by virtue of judgment in
AERA Appeal No. 1 of 2024 dated 11.09.2025, the following
issues have been settled:
A. Corporate Cost Allocation (Paras 271 and 272 of
the Judgment dated 11.09.2025 in AERA Appeal
No. 01 of 2023 and connected appeals).
Page 20 of 283

B. Soft Cost for the Fourth Control Period (Para 162
of the Judgment dated 11.09.2025 in AERA
Appeal No. 01 of 2023 and connected appeals).
C. Non-Aeronautical Revenue (NAR) for the Fourth
Control Period (Para 204 of the Judgment dated
11.09.2025 in AERA Appeal No. 01 of 2023 and
connected appeals) (Paras 221, 223, 227, 228,
229 and 230 of the Judgment dated 11.09.2025
in AERA Appeal No. 1 of 2024).
D. Cost of Equity for the Fourth Control Period (Para
109 of the Judgment dated 11.09.2025 in AERA
Appeal No. 01 of 2023 and connected appeals).
E. Cost of Debt for Fourth Control Period (Paras 130
of the Judgment dated 11.09.2025 in AERA
Appeal No. 01 of 2023 and connected appeals).

9. On the basis of aforesaid decisions, a similar view may be
taken in the present AERA Appeal, as submitted by the learned
senior counsel appearing for the appellant.
10. Thus, in the present AERA Appeal, the issues which are
required to be adjudicated upon afresh are as under:
Page 21 of 283

A. Adjustment in target revenue on account of
return on RAB and depreciation allowed on
alleged assets as per the Self-Contained Note
(SCN) of Authorized Investigative Agency (AIA)
B. Bad Debts
C. Aeronautical allocation of digitalization cost
computed using multi criteria decision analysis
without using objective and scientific approach
D. Legal expenses for Fourth Control Period
11. So far as Normative Costing Methodology adopted by AERA in
the impugned order is concerned, it is submitted by learned
senior counsel that no benchmarks with respect to Capital
Expenditure can be provided by the Respondent No.1-AERA.
In fact, under the AERA Act, 2008, Respondent No.1-AERA has
no power, jurisdiction and authority to review the Capital
Expenditure to be incurred. Similarly, AERA has no power to
suggest its own cost of Capital Expenditure. Learned Senior
Counsel for the appellant has placed reliance upon decision
rendered by this Tribunal in AERA Appeal No.6 of 2016
judgment dated 16.04.2025 especially upon para nos.50, 123
Page 22 of 283

and 124 thereof. Therefore, AERA has committed an error
while passing the impugned order and no Normative
Benchmarks can be applied while approving the Cost of
Terminal Building and runway/taxiways and apron projects.
12. So far as the Cost of Debt for Third Control Period is
concerned, it is submitted that the Actual cost of debt should
have been taken into consideration by AERA. This issue has
been decided more than once by this Tribunal in AERA Appeal
No.2 of 2021 and AERA Appeal No.9 of 2016 in case of MIAL
for Second Control Period and Third Control Period judgment
dated 06.10.2023. Counsel has placed reliance upon
paragraph nos.313, 320, 321 and 322 of the aforesaid decision
and has submitted that AERA ought to have allowed actual
cost of debt incurred by the Appellant. Putting a cap upon the
cost of debt is unreasonable, more particularly when AERA has
in fact allowed actual interest rate for First Control Period and
Second Control Period and the same methodology should have
been applied for next Control Periods also because for Third
Control Period there is a direction by this Tribunal in the
aforesaid decision to apply actual cost of debt. Counsel has
also placed reliance upon other decisions rendered by this
Page 23 of 283

Tribunal in AERA Appeal No.4 of 2021 judgment dated
14.02.2024 as well as reliance has been placed upon decision
rendered by this Tribunal in AERA Appeal No.4 of 2023
judgment dated 13.09.2024. Learned Senior Counsel has also
placed reliance upon other decisions to substantiate the
arguments under this issue that AERA ought to have allowed
actual cost of debt incurred by the appellant while passing the
impugned order.
13. Ld. Senior Counsel appearing for the appellant submitted that
General Aviation Terminal Building is akin to Passenger
Terminal Building and offers similar facilities to the passengers
including check-in, security, customs, immigration and
reserved area for non-aeronautical activities such as F&B
outlets, lounges, etc. and therefore, General Aviation Terminal
Building should be considered as common asset like Passenger
Terminal Building. Moreover, Respondent No.1 has published
a rate-card and the charges mentioned by AERA are classified
as aeronautical and the appellant’s financial statements also
reflects that the facilities served at General Aviation Terminal
Building is an aeronautical function. Therefore, an error has
been committed by AERA in considering General Aviation
Page 24 of 283

Terminal expansion project as non-aeronautical asset for the
purposes of tariff determination. Thus, AERA ought to have
allowed construction of General Aviation Terminal Building as
common asset.
14. It is submitted by learned senior counsel appearing for AERA
that AERA cannot reduce the HRAB on account of demolition
and reconstruction of Terminal T-1. Learned senior counsel for
the appellant has placed reliance upon decisions of this
Tribunal in case of MIAL Second Control Period and Third
Control Period judgment in AERA Appeal No.2 of 2021 and
AERA Appeal No. 9 of 2016 in judgment dated 06.10.2023
especially upon paragraphs 325, 326, 338, 341 and 342.
Learned senior counsel has submitted that AERA has failed to
consider OMDA and SSA while attempting to review the HRAB.
Dissimilar treatment has been given by AERA in case of DIAL
and present appellant even when both the airports are
governed by similar Concession Agreements i.e. OMDA and
SSA. In fact, there is no provision regarding reduction of
HRAB, neither in SSA nor in OMDA. This aspect of the matter
has not been properly appreciated by AERA while passing the
Page 25 of 283

impugned order and hence, it deserves to be quashed and set
aside.
15. So far as the 1% penalty on Capex not incurred is concerned,

it is submitted that under the provisions of AERA Act, there is
no power, jurisdiction and authority with AERA to impose a
penalty of 1%. Reliance has been placed in case of MIAL for
Second Control Period and Third Control Period decided on
06.10.2023 in AERA Appeal No.2 of 2021 and AERA Appeal
No. 9 of 2016 especially on para 308, 309, and 310 thereof.
16. It is submitted that a similar view has been taken by this
Tribunal in the case of GMR Hyderabad International Airport
Limited for Third Control Period judgment dated 14.02.2024 in
AERA Appeal No.4 of 2021. Learned Senior Counsel has placed
reliance upon paragraph nos. 508 to 512 and paragraph
no.519. Learned Senior Counsel has placed reliance upon
AERA Appeal No.1 of 2023 judgment dated 11.09.2025
especially upon paragraph no.288 thereof and submitted that
AERA has no power, jurisdiction and authority to impose 1%
penalty on Capex not incurred.
17. So far as inclusion of “Annual Fee” in determination of ‘S’ factor
is concerned, it is submitted that this issue has been decided
Page 26 of 283

by this Tribunal in case of MIAL Second Control Period and
Third Control Period judgment dated 06.10.2023 in AERA
Appeal No.2 of 2021 and in AERA Appeal No.9 of 2016.
Reliance is placed upon paragraph nos.358, 359 and 365
thereof and has submitted that in view of this decision, Annual
Fee payable to Airport Authority of India (AAI) should be
excluded from the revenue generated by this appellant from
the Revenue Share Assets for the calculation of ‘S’ factor.
18. So far as inclusion of ‘other income’ in determination of ‘S’
factor is concerned, it is submitted that ‘other income’
including interest and dividend income does not form part of
revenue from Revenue Share Assets and, therefore, this
amount of ‘other income’ cannot be included in ‘S’ factor under
the tariff formula. It is submitted that this issue has been
decided by this Tribunal in case of MIAL’s Second Control
Period and Third Control Period judgment dated 06.10.2023 in
AERA Appeal No.2 of 2021 and AERA Appeal No. 9 of 2016
especially in paragraph nos. 225,226 and 227 thereof.
Similarly, this issue has been decided in judgment dated
21.07.2023 in case of DIAL’s Second Control Period and Third
Control Period in AERA Appeal No.1 of 2021 and AERA Appeal
Page 27 of 283

No. 1 of 2016. Learned Senior Counsel has relied upon
paragraph nos. 103 and 105. On the basis of aforesaid
decision, it is submitted that ‘other income’ should be excluded
from revenue generated through Revenue Share Assets and
consequently ‘other income’ is also excluded from computation
of ‘S’ factor under the Target Revenue formula (TR).
19. It is submitted that so far as revenue from existing
assets/demised premises is concerned, revenue from existing
assets does not form part of revenue from Revenue Share
Assets and, therefore, it cannot be included in ‘S’ factor under
the tariff formula. Learned Senior Counsel has placed reliance
upon the decision of MIAL’s Second Control Period and Third
Control Period dated 06.10.2023 in AERA Appeal No.2 of 2021
and AERA Appeal No. 9 of 2016. Learned Senior Counsel has
placed reliance upon paragraph nos. 372, 373, 378, 379, 380
and 381. On the basis of aforesaid decision, it is submitted
that this issue has been decided by this Tribunal and appellant
is relying on this decision.
20. Learned Senior Counsel appearing for the appellant submitted
that an error has been committed by AERA by not treating ‘S’
as an element of revenue pertaining to aeronautical services
Page 28 of 283

for the purposes of calculation of ‘T’. In fact, this issue has
been decided by this Tribunal. Learned Senior Counsel has
placed reliance upon AERA Appeal No.1 of 2021 and AERA
Appeal No. 1 of 2016. Similarly, this Tribunal has also decided
in case of GMR Hyderabad International Airport and DIAL that
‘S’ factor should be considered as a part of Aeronautical
Revenue Base while determining Aeronautical Taxes (T).
21. It is submitted by Learned Senior Counsel that AERA has
committed a grave error in excluding legal cost from the total
corporate cost allocation expense, consisting of allocated costs
of legal teams of Adani Enterprises Ltd (AEL). This issue has
been decided by this Tribunal in AERA Appeal No.1 of 2023 in
judgment dated 11.09.2025 in case of Mangaluru Airport.
Learned Senior Counsel has placed reliance on paragraph nos.
271 and 272 and has submitted that there is no reason for
AERA for excluding legal expenses as a part of corporate cost
allocation nor there is any provision under OMDA or SSA for
such exclusion. Different treatment was given to DIAL while
passing tariff order no.20/2024-25 dated 28.03.2025 where no
such deduction of legal expenses from corporate cost
allocation was done by AERA and, therefore, AERA ought to
Page 29 of 283

have adopted consistent approach for MIAL and DIAL since
they are governed by a similar Concession Agreement i.e.
OMDA and SSA. In case of DIAL in previous Control Periods,
these legal costs were allowed without any deduction. The
case of MIAL is also similar and similar treatment ought to
have been given by AERA.
22. It is further submitted by Learned Senior Counsel appearing
for the appellant Mr. Sajan Poovayya that AERA has erred by
allowing soft costs at a uniform rate of 8% of total capital
expenditure. In fact, AERA ought to have allowed soft costs at
th
the rate of 16% of total capital expenditure for 4 Control
Period. Learned Counsel appearing for the appellant has
placed reliance upon CPWD norms and has pointed out that
AERA has failed to appreciate the guidelines for soft costs as
mentioned in CPWD Norms, 2022.
23. Ld. Senior Counsel appearing for the appellant has also placed
reliance upon “Airport Capital Investments: A Business
Planning and Decision-Making Approach” which is a study
conducted by Airport Cooperative Research Programme
( ACRP ). As per this study report, the soft costs should range
between 10% to 30%. Learned Senior Counsel has also placed
Page 30 of 283

reliance upon Tariff Order No.27/2023-24 dated 07.12.2023
issued for Goa Airport.
24. In case of Goa Airport at Mopa, AERA approved soft cost

(design consultancy, PMC expenses, pre-operative expenses
and contingencies etc.) at 13.16% whereas in the present
case, AERA has allowed only 8% as soft cost.
25. It is further submitted that AERA ought to have allowed the
actual amount of soft cost paid by this appellant while
th
determining tariff for the 4 Control Period.
26. It is submitted that Respondent No.1-AERA has decided to
consider True-Up of non-aeronautical revenues only where
actuals exceed the projections, as per Consultation Paper
published by AERA. AERA has wrongly presumed non-
aeronautical revenue as Rs. 12,504.15 Crores. In fact, this
figure cannot be presumed by AERA nor there can be any
fixation of minimum amount of non-aeronautical revenue.
27. It is further submitted by Learned Senior Counsel for the
appellant that appellant has projected non-aeronautical
revenue at Rs.11,382 Crores.
28. It is submitted that AERA has no power, jurisdiction and
authority to presume anybody’s revenue, much less non-
Page 31 of 283

aeronautical revenue. Non- aeronautical revenue should be
based upon actuals. Counsel has placed reliance upon AA No.1
of 2023 judgment dated 11.09.2025 in case of Mangaluru
Airport as well as in AA No.1 of 2024 judgement dated
11.09.2025 in matter of GMR Goa International Airport
Limited.
29. It is submitted that AERA ought to have determined the cost
of equity at 18.3% instead of 15.13%.
30. Learned Senior Counsel appearing for the appellant has
submitted that as per the judgment delivered by this Tribunal
in AERA Appeal No.1 of 2023 in judgement dated 11.09.2025
in case of Mangaluru Airport, AERA was directed to consider
estimating the cost of equity by using Capital Asset Pricing
Model (CAPM). Appellant has placed reliance upon Cost of
Equity based upon PricewaterhouseCoopers (PwC) study
carried out for Ahmedabad International Airport Limited which
was done in March, 2021 and appellant has considered base
cost of equity at 17.3% with an additional 1% risk premium
for Mumbai Airport and, therefore, Cost of Equity should have
been at 18.3% whereas AERA has determined cost of equity
at 15.13%.
Page 32 of 283

31. It is submitted that AERA has failed to appreciate the actual
cost of debt and has wrongly decided the cost of debt at
th
10.15% for 4 Control Period. As per several decisions
rendered by this Tribunal, AERA ought to have considered
the actual cost of debt as proposed by the appellant.
Counsel for the appellant has placed reliance upon the
decision rendered by this Tribunal in case of MIAL Second
Control Period and Third Control Period Judgment in AERA
Appeal No.9 of 2016 and AERA Appeal No.2 of 2021 dated
06.10.2023.
32. Similarly, Learned Senior Counsel has also placed reliance
upon the case of GMR Hyderabad International Airport
Limited Third Control Period judgment dated 14.02.2024 in
AERA Appeal No.4 of 2021. Similarly, there are other
decisions rendered by this Tribunal and have been relied
upon and submitted that present issue of cost of debt has
already been decided more than once in several decisions
by this Tribunal and it is submitted that AERA ought to have
considered actual cost of debt instead of capping the cost of
th
debt at 10.15% for the 4 Control Period.
Page 33 of 283

33. Learned Senior Counsel submitted that AERA has wrongly
considered the dividend income from fuel farm joint venture
as aeronautical. The income from dividend is neither
aeronautical nor non-aeronautical. It is “other income”. As
per the decisions rendered by this Tribunal in several other
appeals that “other income” as for e.g. interest income or
dividend income is neither aeronautical nor non-
aeronautical and the same is out of the purview of
jurisdiction of AERA. Learned Senior Counsel has placed
reliance upon decisions including MIAL’s Second Control
Period and Third Control Period judgment and Third Control
Period judgment dated 06.10.2023 in AERA Appeal No.9 of
2016 and AERA Appeal No.2 of 2021. On the basis of this
decision, it is submitted that AERA has failed to appreciate
the decision rendered by this Tribunal. Dividend income
from fuel farm joint ventures is because of financial
management by this appellant of their money. The income
of dividend is obtained by the appellant not because of any
aeronautical or non-aeronautical services rendered by the
appellant. Appellant is getting the dividend income because
Page 34 of 283

of their investment in fuel farm joint venture. This aspect of
the matter has not been properly appreciated by AERA and
hence the impugned order deserves to be quashed and set
aside.
34. It is further submitted that AERA has recently relied upon
“Self-Contained Note” written by authorized Investigating
Agency to AERA, whereby Investigating Agency has requested
AERA to adjust the amount of Rs.305 Crores from the total
amount of tariff. This type of note written by a third-party
cannot be relied upon by AERA especially when no such
document was provided to the appellant. The letter written
by the agency for the predecessor of this appellant cannot be
accepted as a gospel truth and, therefore, reduction of amount
of Rs.305 Crores is absolutely baseless in the eyes of law. It is
considered as “extraneous consideration”, which is also known
as Wednesbury’s Principle or Wednesbury’s unreasonableness.
The predecessor of the appellant against whom the
investigation was going on, and, there may be some
allegations against the predecessor which are yet to be
decided by the competent courts and, therefore also, the so-
called “self-contained note” cannot be relied upon by the
Page 35 of 283

appellant. Tariff determination process is being governed by
the principles enunciated under Section 13 of AERA Act, 2008
and not by such type of a letter issued by the Investigating
th
Agency. Hence, the impugned order for 4 Control Period of
AERA dated 07.05.2025 deserves to be quashed and set aside.
35. It is further submitted by learned senior counsel for the
appellant that the appellant has recognized bad debt of
approximately Rs.6 Crores in FY 2021-2022 which is only
4% (approximately) of the total receivables of Rs.160 Crores
dues from Air India. The appellant has recovered majority
of receivables except for an unreconciled amount of Rs.12
Crores and the outstanding was pending since 2014 and as
per final settlement with Air India, the appellant was bearing
50% of the sum which is Rs.6 Crores and this bad debt of
Rs.6 Crores ought to have been taken into consideration by
th
AERA while deciding tariff for 4 Control Period. This aspect
of the matter has not been properly appreciated by AERA.
36. It is submitted that AERA has wrongly decided to allocate
only 30% digitalization cost. In fact, AERA ought to have
allowed actual digitalization cost.
Page 36 of 283

37. It is submitted that a huge cost has been incurred by this
appellant towards digitalization. Expensive Capex has been
planned over the next few years and appellant needs to
focus on augmenting airport infrastructure and enhancing
passenger handling capacity along with improving overall
service quality and hence, the appellant has to undertake
these activities with the help of subject matter experts from
the relevant fields and, therefore, appellant has incurred
annual maintenance towards maintenance and holding of
the digital platform. This platform will provide a wide array
of services, both aeronautical and non-aeronautical to the
passengers.
38. It is submitted that at least 82% of the total expenditure
towards digitalization cost which is based upon activity wise
manpower allocation of each type of service which should
be considered as aeronautical expenses. This aspect of the
matter has not been properly appreciated by AERA and
AERA has allowed only 30% of total digitalization cost.
Counsel has placed reliance upon a multi criteria decision
analysis approach.
Page 37 of 283

39. Appellant further submitted that legal expenses actually
incurred by this appellant have not been considered by
th
Respondent No.1 while determining tariff for 4 Control
Period. AERA ought to have appreciated actual legal expenses
on a case-to-case basis. These legal expenses are required to
be incurred as legal costs to have positive impact upon smooth
operations of airport and for its efficient running, this aspect
of the matter has not been properly appreciated by AERA and
AERA has wrongly excluded legal expenses from the scope of
O&M expenditure and hence, the impugned order passed by
th
AERA for 4 Control Period of AERA dated 07.05.2025
deserves to be quashed and set aside.
40. In view of the aforesaid arguments on different law points
based on factual aspects and on the judgments rendered by
this Tribunal in different AERA Appeals have not been properly
appreciated by AERA while passing the impugned order and
th
hence the impugned order passed by AERA for 4 Control
Period of AERA dated 07.05.2025 (01.04.2024 to 31.03.2029)
which is at Annexure A-1 deserves to be quashed and set
aside.
Page 38 of 283

ARGUMENTS CANVASSED BY R.1 - AERA
41. Ld. Counsel appearing for AERA Mr. Ritesh Kumar submitted
that AERA has all the power to follow the normative costing
methodology as per Section 13(1)(a) of AERA Act, 2008 to be
read with provisions of SSA ( Annexure A-5 ). Learned
Counsel appearing for Respondent No.1 has taken this
Tribunal to Clause 3.1.1 of SSA to be read with Schedule-I of
the SSA and submitted that AERA has the right to assess the
efficiency with which the capital expenditure is undertaken.
Learned Counsel appearing for Respondent No.1 has also
placed reliance upon the decision rendered by Hon’ble the
Supreme Court of India reported in (2024) 1 SCC 716. It is
also submitted that even the Civil Aviation Authority (CAA)
which is the UK’s Aviation Regulator routinely applies
normative benchmarks while assessing airport CAPEX. In view
of these facts, no error has been committed by AERA in
following normative costing methodology.
42. Ld. Counsel appearing for AERA - Respondent No.1 submitted
th
that as per impugned tariff order passed by AERA for 4
Control Period, AERA has considered cost of debt at 10.30%
for Third Control Period. It is submitted that Respondent No.1
Page 39 of 283

is of the view that it shall allow only efficient borrowing with
an aim to not pass-on the inefficiencies in borrowings by the
airport operator to the airport users, and therefore, no error
has been committed by AERA in restricting or in capping the
cost of debt at 10.30%.
43. On the basis of Section 13(1)(a) of the AERA Act, it is
submitted by Learned Counsel appearing for AERA -
Respondent No.1 that AERA is discharging regulatory
functions which is vested with wide discretion and hence, the
cost of debt which was prevailing at the relevant time has been
allowed by AERA while passing the impugned order and no
error has been committed by AERA for capping the cost of
debt at 10.30%.
44. So far as General Aviation (GA) Terminal which is considered
as non-aeronautical assets by the impugned order is
concerned, it is submitted that the said decision is based on
OMDA and as per provisions of OMDA, General Aviation
services are non- aeronautical services and, therefore, the
General Aviation Terminal is considered as a non- aeronautical
asset and OMDA is binding on the appellant. Learned Counsel
appearing for AERA - Respondent No.1 has placed reliance
Page 40 of 283

upon a decision rendered by Hon’ble the Supreme Court of
India reported in (2024) 1 SCC 716. It is also submitted that
even in the MYTP, “General Aviation Terminal” has been
considered as non-aeronautical asset and this appellant has
not raised any dispute or objection to the aforesaid provision
mentioned in Concession Agreement. Thus, General Aviation
Terminal cannot be included in RAB and hence, no error has
been committed by AERA in treating General Aviation Terminal
as non-aeronautical asset. It is submitted that HRAB can be
reduced on account of demolition of Terminal-T1 at Mumbai
Airport as a demolished portion of the terminal is admittedly
neither an existing nor a usable aeronautical asset. This aspect
of the matter has been properly appreciated by AERA and
hence, no error has been committed by AERA in reducing
HRAB on account of demolition of Terminal T-1.
45. It is further submitted by Learned Counsel appearing for AERA
- Respondent No.1 that Respondent No.1 has all power,
jurisdiction, and authority to readjust (reduce) by 1% of
uncapitalized project cost from target revenue in case any
particular capital project is not completed as per approved
capitalisation schedule in the next Control Period, this
Page 41 of 283

adjustment shall take place only during true-up exercise for
th
the 5 Control Period and that too in case of any delay in
completion of a project. Learned Counsel appearing for AERA
- Respondent No.1 submitted that Respondent No.1 has
placed reliance upon a decision rendered by this Tribunal in
AERA Appeal No.8 of 2018 vide judgment dated 16.12.2020.
On the basis of the said decision, it is submitted that for
delayed projects, AERA has power to impose a penalty of 1%.
46. It is further submitted that no error has been committed by
AERA in including annual fee payable to Airport Authority of
India ( AAI ) in determination of ‘S’ factor. It is submitted that
annual fee is basically an amount which is collected by the
appellant and, therefore, the said amount should be included
by computing factor ‘S’. Learned Counsel appearing for AERA
- Respondent No.1 submitted that Respondent No.1 has taken
this Tribunal to the formula for calculating the target revenue
as provided in Schedule-I of SSA and has submitted that as
per SSA ( Annexure A-5 ), 30% of gross revenue generated
by the joint venture company-appellant from the “revenue
share assets” is nothing but 30% of gross non-aeronautical
revenue generated by the appellant.
Page 42 of 283

47. In view of the aforesaid provisions of SSA, it is submitted by
Learned Counsel appearing for AERA - Respondent No.1 that
annual fee should be included in determination of ‘S’ factor.
48. It is further submitted that no error has been committed by
AERA in including “other income” in determination of ‘S’ factor.
It is submitted that any income earned by or collected by
Airport Operator whether it is by way of interest, dividend, etc.
will be computed in gross revenue and, therefore, as per the
definition of ‘S’ given in Schedule-I of SSA, 30% of the said
gross revenue should be reduced from the target revenue.
“Other income” is also a revenue received from the services
other than aeronautical services and, therefore, no error has
been committed by AERA in including the amount of “other
income” in determination of ‘S’ factor. Learned Counsel
appearing for AERA - Respondent No.1 submitted that
Respondent No.1 has taken this Tribunal through various
definitions under OMDA and SSA and also to the formula of
Target Revenue mentioned in Schedule-I of SSA and has
pointed out that revenue collected by way of “other income”
can always be included while computing ‘S’ factor.
Page 43 of 283

49. It is submitted by Learned Counsel appearing for AERA -
Respondent No.1 that revenue received by this appellant from
existing assets/demised premises should be included in the
revenue from non-aeronautical assets and consequently the
same is to be included in ‘S’ factor computation. Looking to
the definition of ‘S’ given in Schedule-I of SSA, the revenue
generated from or collected because of existing assets can
always be included while calculating ‘S’ factor. In fact, the
reference to “existing assets”, “demised premises” etc. are not
relevant in view of New National Civil Aviation Policy ( NCAP )
which provides for determination of tariff at all the airports in
future on a hybrid-till basis and, therefore also, the revenue
generated from existing assets should be included for
computing ‘S’ factor.
50. It is submitted that no error has been committed by AERA in
excluding the legal cost from total corporate cost allocation
expense. It is submitted that Corporate Allocation Costs from
Adani Enterprises Ltd. (AEL) and from Adani Airport Holdings
Ltd. (AAHL), if included in the legal costs, will increase the
administration cost. Thus, only those costs which have a direct
nexus with aeronautical services are admissible and,
Page 44 of 283

therefore, the cost towards support services received from the
holding companies viz.- AEL and AAHL cannot be included in
the legal costs of the appellant. This aspect of the matter has
been properly appreciated by AERA while excluding the legal
cost of Rs.5.67 Crores from the total corporate cost allocation
expense.
51. It is further submitted by Learned Counsel Mr. Ritesh Kumar
appearing on behalf of Respondent No.1 – AERA, that no error
has been committed by AERA in allowing soft cost at the rate
of 8% of the total expenditure as against 16% claimed by the
appellant. It is further submitted by Learned Counsel appearing
for Respondent No.1 that CPWD Standard Operative Procedure,
th
2022, dated 13 July, 2022 is not applicable in the facts of the
present case. Soft cost cannot be unreasonably high and,
therefore, AERA has allowed 8% of the total expenditure as soft
cost because AERA has all power to assess the efficiency with
which capital expenditure is undertaken. Counsel appearing on
behalf of Respondent No.1 has taken this Tribunal to various
provisions of SSA and OMDA and has pointed out that AERA has
power to check efficiency of the capital expenditure and hence
Page 45 of 283

8% of the total expenditure is allowed as soft cost instead of the
16% demanded by the appellant.
52. It is further submitted by the Learned Counsel appearing on
behalf of Respondent No. 1 - AERA that AERA has all power,
jurisdiction and authority to fix minimum non-aeronautical
revenue which must be earned by the appellant and this
minimum non-aeronautical revenue fixed by AERA is at
Rs.12,504.15 Crores.
53. It is submitted by Learned Counsel appearing on behalf of
Respondent No.1 - AERA that as per SSA ( Annexure A-5 ), while
computing S-factor, the cost in relation to such revenue shall not
be included while calculating aeronautical charges. The non-
aeronautical revenue is determined on a gross-receipt basis.
54. It is further submitted by Learned Counsel appearing on behalf
th
of Respondent No. 1 - AERA that the cost of equity for 4
Control Period has been fixed at 15.13% as against 18.30%
proposed by the appellant. AERA has relied upon the study
carried out in the past for several airports, including Mumbai
International Airport. The relevant part of the said study is as
follows:
Page 46 of 283

“ v. The asset beta of airports in developing countries is
consistently higher than the asset beta of airports
in developed economies. This can be
demonstrated by the data provided in the IIM-B
study in which the asset beta for Sydney airport is
0.40 whereas the asset beta for Airports of
Thailand is 0.86.”

55. On the basis of the report given by IIM Bangalore Study for
MIAL (December, 2019), the cost of equity has been fixed at
15.13% and hence, no error has been committed by AERA
while passing the impugned order.
56. Counsel for the Respondent has placed reliance upon the
decision rendered by Hon’ble the Supreme Court of India in
(2024) 1 SCC 716.
57. It is submitted by Respondent No.1 that cost of debt is fixed
at 10.15% as against the actual cost of debt proposed by the
appellant and AERA has all power to put a cap upon the cost
of debt which in the present case is at 10.15%.
58. It is contented that the appellant ought to have obtained the
loan at the prevailing market rate. If the loans are obtained at
higher cost of debt than what is prevailing in the market
cannot be allowed by AERA.
Page 47 of 283

59. Learned Counsel appearing on behalf of Respondent No. 1 -
AERA has taken this Tribunal to MYTP and the impugned order
passed by AERA, especially paragraph 7.2.5 to paragraph
7.2.11 of the impugned order and has submitted that no error
has been committed by AERA while allowing the cost of debt
at 10.15%.
60. It is submitted by Learned Counsel appearing on behalf of
Respondent No. 1 - AERA that dividend income obtained by
the appellant from Fuel Farm Subsidiary is a revenue from
aeronautical services because as per the provisions of OMDA
and SSA, Fuel Farm Subsidiary activities is aeronautical in
nature and, therefore, dividend income obtained therefrom is
aeronautical revenue.
61. It is submitted by Learned Counsel appearing for Respondent
th
No. 1 that AERA has received a letter dated 30 August, 2023
from an Investigating Agency that the predecessor of the
present appellant has siphoned away Rs.705 Crores. This note
has a self-contained note and on the said basis, target revenue
has been reduced while passing the impugned order. In fact,
th
AERA has acted on the basis of self-contained note dated 30
August, 2023 received from Investigating Agency. A charge-
Page 48 of 283

sheet has also been filed against the predecessor of the
appellant and, therefore, there is a prima facie case and,
therefore, no error has been committed by AERA in reducing
or adjusting target revenue by Rs.705 crores.
62. So far as bad debt is concerned, it is submitted by Learned
Counsel appearing on behalf of Respondent No.1-AERA that
bad debt has arisen from insufficiencies of the appellant
and, therefore, the amount of bad debt cannot be included
in the O&M cost in the target revenue formula and,
therefore, no error has been committed by AERA in
excluding the amount of bad debt from O&M expenses.
63. Digitalization cost as proposed by the appellant has rightly
been not allowed as operational and maintenance cost for
th
the 4 Control Period because digitalization cost is for
aeronautical and non-aeronautical services and, therefore,
30% of the total digitalization cost has been treated as a
cost towards aeronautical services, and therefore, AERA has
allowed a part of the digitalization cost up to 30% of the
aeronautical services.
Page 49 of 283

64. Learned Counsel appearing for Respondent No. 1 stated that
AERA has placed reliance upon paragraph no. 9.3.13 to
9.3.21 of the consultation paper published by AERA. Thus,
looking to the mixed-use nature of the digital platform, only
30% of the total digitalization cost is allowed as O&M
expenses.
65. It is submitted by AERA that Schedule-1 of SSA ( Annexure
th
A-5 ) dated 26 April, 2006 does not include the legal
expenses. The legal expenses for engaging an advocate
cannot be included in O&M expenses because the same is
not towards aeronautical expenses.
66. There is no direct and proximate nexus of legal expenses
with aeronautical services and, therefore, no error has been
committed by AERA in excluding the legal expenses from
calculation of O&M expenses. Allowing legal expenses would
defeat the cost discipline.
67. In view of the aforesaid submissions, it is contented by AERA
that appeal preferred by this appellant may not be
entertained by this Tribunal.

Page 50 of 283

ARGUMENTS CANVASSED BY FEDERATION OF INDIAN
AIRLINES (FIA) – RESPONDENT NO.2

68. It is submitted by Mr. Buddy Ranganadhan, Learned Counsel
appearing on behalf of Federation of Indian Airlines ( FIA ),
that FIA - Respondent No. 2, is adopting all the arguments
advanced by Learned Counsel appearing on behalf of
Respondent No. 1-AERA.
69. Nonetheless, specifically, for General Aviation Terminal

building, it is submitted by Respondent No. 2 that as per
OMDA ( Annexure A-4 to the memo of this Appeal), the
General Aviation Services is non-aeronautical in nature and,
therefore, General Aviation Terminal is a non-aeronautical
asset and, therefore, no error has been committed by AERA
while passing the impugned order.
70. It is submitted that the General Aviation Terminal building is
a dedicated facility at the airport for private, corporate and
chartered flights and the General Aviation Terminal building
is not used by every passenger. This aspect of the matter is
properly appreciated by AERA.

Page 51 of 283

71. Mr. Buddy Ranganadhan, Learned Counsel appearing on
behalf of FIA - Respondent No.2 has also submitted that bad
debt cannot be treated as O&M expenses while calculating
the target revenue.
72. It is submitted that Bad debt is a non-recovered revenue,
and it is suggested by the counsel appearing for Respondent
No.2 that non-recovered revenue has an effect on our
working capital. The working capital is reduced to the extent
of non-recovered revenue and, therefore, working capital is
to be enhanced instead of O&M expenses.
73. Learned Counsel appearing on behalf of FIA - Respondent
No.2 has placed reliance upon the judgment rendered by
th
this Tribunal in AERA Appeal No.8 of 2018 dated 16
December, 2020 and on the basis of this decision, especially
paragraph nos. 109 to 112,
74. It is submitted by Learned Counsel appearing on behalf of
FIA - Respondent No.2 that 10% higher working capital
should be allowed by AERA only upon the aforesaid two
points.

Page 52 of 283

REASONS & ANALYSIS
75. In the present appeal preferred by the Appellant (MIAL),
Order No. 1 of 2025-26 dated 07.05.2025 which is an order
th
of determination of Aeronautical Tariff for 4 Control Period
(01.04.2024 to 31.03.2029) for Chhatrapati Shivaji Maharaj
International Airport (CSMIA, Mumbai) passed by AERA-
Respondent No.1 is under challenge mainly on the following
grounds amongst others:
(a) Order has been passed contrary to the provisions
of the AERA Act, and other binding principles.
(b) Impugned Order has been passed without
proper application of mind;
(c) Impugned Order has failed to take into account
the materials placed on record;
(d) Impugned Order adopts an inconsistent
approach, as several issues have been dealt with
differently; Blatant disregard of the Principles of
Natural Justice.
76. After hearing the Ld. Counsels for the parties, this Tribunal has
framed following specific issues:
Page 53 of 283

I. Whether the Respondent No.1/AERA ought not to apply
normative benchmarks while approving the costs of
Terminal Building and Runway/Taxiways/Apron projects
in view of the Hon’ble Tribunal judgment dated
16.04.2025 and evaluate capital expenditures on an
actual basis.
II. Whether the Respondent No.1/AERA ought to have
allowed actual Cost of Debt of 10.98% for Third Control
Period as submitted in MYTP and which is also followed
by other regulatory commissions as efficient cost, to be
used for the computation of Weighted Average Cost of
Capital (“WACC”).
III. Whether the Respondent No.1/AERA ought to have
allowed the construction of General Aviation Terminal as
common asset.
IV. Whether the Respondent No.1/AERA ought not to reduce
the Hypothetical Regulatory Asset Base (“HRAB”) on
account of the demolition of Terminal T1, as such an
adjustment reflects an inconsistent approach adopted in
the case of the Appellant as compared to DIAL, despite
both airports being governed by similar concession
agreements i.e., OMDA and SSA.
Page 54 of 283

V. Whether the Respondent No.1/AERA ought not to
reduce 1% of the project cost in case of delay in
completion of the project and ought to be set aside by
the Hon’ble Tribunal to ensure fair and proper
adjudication of the issue at hand.
VI. Whether the Respondent No.1 ought to have excluded
the Annual Fee payable to AAI from the revenue
generated by the Appellant from the Revenue Share
Assets for the purpose of calculating the “S” Factor.
VII. Whether the Respondent No.1/AERA ought to have
excluded Other Income (such as interest and dividend
income) from the revenue generated through Revenue
Share Assets, and consequently, from computation of
‘S’ Factor under the Target Revenue formula.
VIII. Whether the Respondent No.1/AERA ought to have
exclude “Revenue from existing assets/demised
premises” from the revenue generated through
Revenue Share Assets, and consequently, from the
computation of the “S” Factor under the Target
Revenue formula.
Page 55 of 283

IX. Whether the Respondent No.1/AERA ought to have
considered “S” Factor as a part of the aeronautical
revenue for purposes of determining Aeronautical
Taxes (“T”).
X. Whether the Respondent No.1/AERA ought to have
allowed entire corporate legal expenses amounting to
INR 5.67 Crores as part of the Corporate Cost
Allocation in line with the Concession Agreement and
treatment given to similarly placed airports like DIAL.
XI. Whether the Respondent No.1/AERA ought to have
allowed soft costs to the extent of 16% of the
‘allowable’ Capital Expenditure which is based on best
practices subject to true-up on an actual incurrence
basis.
XII. Whether the Respondent No.1/AERA ought to true-up
non-aeronautical revenues based on actuals, in line
with the consistent regulatory practice adopted by the
Respondent No.1/AERA in the previous control periods.
Further, Respondent No.1/AERA ought not to prescribe
a floor or minimum threshold for non-aeronautical
revenues.
Page 56 of 283

XIII. Whether the Respondent No.1/AERA ought to have
adopted the Cost of Equity of 17.30% proposed by the
Appellant, based on the PwC study using the Capital
Asset Pricing Model (“CAPM”) methodology and based
on correct asset beta along with 1% risk premium due
to traffic constraints.
XIV. Whether the Respondent No.1/AERA ought to have
allowed actual Cost of Debt incurred by the Appellant
for computation of WACC, at the time of true-up of
Fourth Control Period.
XV. Whether the Respondent No.1/AERA ought to have
excluded dividend income from Fuel Farm Operators
from the tariff computation.
XVI. Whether the Respondent No.1/AERA ought not to
consider any adjustment to the said amounts of tariffs
claimed by Appellant under the heads of Depreciation
and Return on RAB on account of the Self-Contained
Note of the Authorized Investigation Agency as the
matter is now pending trial and there is no finality on
the said issue as on date.
Page 57 of 283

XVII. Whether the Respondent No.1/AERA ought to have
allowed aeronautical bad debts written off on account
of defaults by airlines to be considered as part of O&M
expenses.
XVIII. Whether the Respondent No.1/AERA ought to have at
least allowed aeronautical allocation of 60% for the
purpose of determining Digitalization expenses for the
Fourth Control Period, subject to appropriate true-up.
XIX. Whether the Respondent No.1/AERA ought to have
allowed the legal expenses on an upfront basis in the
Fourth Control Period and true-up the same based on
actual incurrence at time of tariff determination of Fifth
Control Period.
77. It is further submitted by Learned Senior Counsel appearing
for the appellant that some of the issues under challenge in
the present Appeal stand resolved by virtue of the principles
laid down in the order/judgment passed by this Hon’ble
Tribunal in AERA Appeal Nos. 09 of 2016 and 02 of 2021
dated 06.10.2023 for the Second Control Period (“SCP”) and
Third Control Period (“TCP”) (“MIAL SCP & TCP Judgment”),
as also in AERA Appeal Nos. 01 of 2016 and 01 of 2021 dated
Page 58 of 283

21.07.2023 for the Second Control Period (“SCP”) and Third
Control Period (“TCP”) (“DIAL SCP & TCP Judgment”). It was
also submitted that this Tribunal also clarified some of these
issues while deliberating on similar contentions in its
Judgment and Order of GMR Hyderabad International Airport
Ltd. vs. AERA passed in AERA Appeal No. 04 of 2021 dated
14.02.2024 for the Third Control Period (“GHIAL TCP
Judgment”). The details of those issues as mentioned by the
counsel for the appellant are as under:
I. Cost of Debt for Third Control Period (Paras 321
and 322 of MIAL SCP & TCP Judgment) (Para
466 of GHIAL TCP Judgment dated 14.02.2024)
II. General Aviation (GA) Terminal considered as
Non-Aeronautical Asset (Paras 282 and 283 of
MIAL SCP & TCP Judgment)
III. Adjustment on account of demolition of T1 in
HRAB in FY 2029 (Paras 341 and 342 of MIAL SCP
& TCP Judgment)
IV. Reduction of 1% uncapitalized project cost from
the target revenue in case any particular capital
project is not completed/capitalized as per
Page 59 of 283

approved capitalization schedule in the next
control period (Paras 308, 309 and 310 of MIAL
SCP & TCP Judgment) (Paras 508, 509, 510, 512
and 519 of GHIAL TCP Judgment dated
14.02.2024)
V. Inclusion of “Annual Fee” in Determination of ‘S’
Factor (Para 365 of MIAL SCP & TCP Judgment)
VI. “Other Income” not to be included in
determination of ‘S’ Factor (Paras 225, 226 and
227 of MIAL SCP & TCP Judgment)
VII. Revenue From Existing Assets/Demised Premises
(Paras 379 to 381 of MIAL SCP & TCP Judgment)
VIII. Inclusion of ‘S’ factor in Aeronautical Revenue for
computation of ‘T’ (Paras 398 and 399 of MIAL
SCP & TCP Judgment) (Paras 423 and 424 of
GHIAL TCP Judgment dated 14.02.2024)
78. The following five issues have also been decided by this
Tribunal by judgments in different AERA Appeals. it is
submitted by Learned Senior Counsel appearing for the
appellant that some of the issues under challenge in the
present Appeal stand resolved by virtue of the principles laid
Page 60 of 283

down in the order/judgment dated 11.09.2025 passed by this
Hon’ble Tribunal in AERA Appeal No. 01 of 2023 and
connected appeals and judgment dated 11.09.2025 in AERA
Appeal No. 01 of 2024 in the matter of GMR Goa International
Airport vs. AERA. The issues that are settled by virtue of
aforesaid are as follows:
i. Corporate Cost Allocation (Paras 271 and 272 of
the Judgment dated 11.09.2025 in AERA Appeal
No. 01 of 2023 and connected appeals).
ii. Soft Cost for the Fourth Control Period (Para 162
of the Judgment dated 11.09.2025 in AERA Appeal
No. 01 of 2023 and connected appeals).
iii. Non-Aeronautical Revenue (NAR) for the Fourth
Control Period (Para 204 of the Judgment dated
11.09.2025 in AERA Appeal No.01 of 2023 and
connected appeals) (Paras 221, 223, 227, 228, 229
and 230 of the Judgment dated 11.09.2025 in
AERA Appeal No. 1 of 2024).
iv. Cost of Equity for the Fourth Control Period (Para
109 of the Judgment dated 11.09.2025 in AERA
Appeal No. 01 of 2023 and connected appeals).
Page 61 of 283

v. Cost of Debt for Fourth Control Period (Paras 130
of the Judgment dated 11.09.2025 in AERA Appeal
No. 01 of 2023 and connected appeals).
79. In view of the aforesaid decisions in different AERA Appeals, it
is submitted by counsel for the appellant that most of the
issues in the present appeal have already been decided in
previous decisions rendered by this Tribunal and this appellant
is relying upon the aforesaid decisions, the following are the
issues which require determination afresh in the present
appeal:
I. Adjustment in target revenue on account of
return on RAB and depreciation allowed on
alleged assets as per the Self-Contained Note
(SCN) of Authorized Investigative Agency
(AIA).
II. Bad Debts
III. Aeronautical allocation of digitalization cost
computed using multi criteria decision analysis
without using objective and scientific
approach
IV. Legal expenses for Fourth Control Period
Page 62 of 283

I. Normative Costing Methodology
80. It is submitted by Learned Senior Counsel appearing for the
appellant -MIAL that Respondent No.1-AERA has issued Order
No.7 of 2016 dated 06.07.2016 in the matter of Normative
Approach to Building Blocks in Economic Regulation of major
airports – regarding capital costs.
81. Looking to the impugned order dated 07.05.2025 (Annexure
A-1) especially paragraph 1.5.1, it has been observed by AERA
that Normative Approach Order is applicable to the appellant
as it is a major airport and will be appropriately applied by the
Respondent No.1 - AERA in tariff determination process. For
ready reference, paragraph 1.5.1 of the impugned order reads
as under:
“1.5.1 Normative approach to Building Blocks in Economic
Regulation of Major Airports- Capital Costs Reg.
(i) The Authority issued Order No. 07/2016-17
th
dated 06 June 2016 in the matter of Normative
Approach to Building Blocks in Economic
Regulation of Major Airports – Capital Cost Reg.
(ii) Normative Approach Order is applicable to
CSMIA as it is a major airport and will be
appropriately applied by the Authority in tariff
determination process.”
Page 63 of 283

82. It has been held by this Tribunal that no benchmarks with
respect to capital expenditure can be provided by the
respondent, the cost of passenger terminal and associated
works depends upon varieties of factors. This issue has already
been argued out and has been decided by this Tribunal in the
aforesaid decision between MIAL Vs. AERA in AERA Appeal
No.6 of 2016 dated 16.04.2025 in paragraph nos. 50, 123 (xi,
xiii, xiv) and 124 as under:
“ 50. AERA has no power, jurisdiction and authority to
review the “capital expenditure to be incurred”.
AERA has no power to suggest its own cost of
capital expenditure. Similarly, AERA is not
empowered to determine the specifications of
materials which have to be used while
undertaking the capital work. AERA cannot review
the capital expenditure to be incurred.
123. It is also stated by Learned Senior Counsel for
AERA that the impugned order (Annexure A-1)
enhances the transparency and it also encourages
the economic efficiency and it ensures that only
efficient capital cost would be considered for
determination of the aeronautical tariff. Hence,
the impugned order is legal and valid. This
Page 64 of 283

contention is not accepted by this Tribunal for the
following facts and reasons:
(xi) Looking to the impugned order which is dated
6.6.2016, normative value of the cost has been
fixed which is impermissible because the concept
of the cost is a floating one. Cost changes by the
passage of time. The cost of project depends on
a variety of factors like passenger traffic,
investment commitments, project scope, design
standards, passenger traffic projections,
geographical constraints, regulatory requirements ,
financial structures, maintenance, cost of
upgradation of modernizing, cost of labor, cost of
raw materials, cost of transportation.
(xiii) AERA by way of Impugned Order seeks to pre-
emptively 'estimate' the costs that may be
incurred based on estimated prices and
disregards the actual cost arrived at through
market discovery which is contrary to its mandate
under Section 13(1)(a)(i) to determine tariff for
the Aeronautical services taking into consideration
the capital expenditure 'incurred' i.e. actually
spent.
(xiv) If impugned order is held as a valid one and if the
cost of runway has to be revaluated by AERA and
subsequently allowed to be reduced, it will have a
disastrous effect because with a lower cost, lower
quality of runway will be given. This is not
Page 65 of 283

permissible especially for the construction at the
airport because every construction at the airport
has a definite specification and sometimes as per
international standards (i.e. for runway etc.). If
the international standards are to be maintained,
then the cost arrived at after due process of
bidding which is known as “market discovered
price” ought to have been allowed by AERA
because it is a “cost incurred” as per Section
13(1)(a)(i) of AERA Act, 2008. At no cost, the
project cost can be reduced by AERA which has a
direct bearing upon the operational efficiency of
the airport and, therefore, Section 13(1)(a) of
AERA Act, 2008 has used the words “the Capital
Expenditure incurred”. Thus, by virtue of the
impugned order (Annexure A-1), AERA cannot
provide benchmark of capital expenditure.
124. In view of the aforesaid facts, reasons and judicial
pronouncements, we hereby, quash and set aside
the impugned order No.7/2016-17 dated 6.6.2016
(Annexure A-1). All the aforesaid AERA Appeals
are hereby allowed.”

83. Moreover, it has been held by this Tribunal in Mangaluru
International Airport Limited Vs. AERA in AERA Appeal No.1 of
2023 judgment dated 11.09.2025 in paragraph 209 as under:
Page 66 of 283

“ 209. AERA should have followed the earlier decisions
pronounced by this Hon’ble Tribunal in more than
one AERA Appeals especially when no stay has been
granted by Hon’ble the Supreme Court of India.
Merely because Appeal is pending, no stay could
have been presumed by AERA otherwise it will
tantamount to a situation that ‘though stay has not
been granted by Hon’ble the Supreme Court of
India, AERA has granted stay on their own upon the
decision of TDSAT’. This approach of AERA is against
several decisions rendered by Hon’ble the Supreme
Court of India in which it has been held that trial
courts/tribunals/authorities cannot presume stay
when the same has not been granted by Hon’ble the
Supreme Court of India.”
84. Looking to the facts of the present case, it appears that Airport
Operator - Appellant-MIAL is required to prepare master plan
as well as major development plan for major aeronautical
projects, these plans are subsequently examined by Airport
Authority of India (AAI) as well as Ministry of Civil Aviation
(MoCA).
85. It ought to be kept in mind by AERA that the appellant has to
follow the bidding process as per OMDA ( Annexures A-4 )
and SSA ( Annexure A-5 to the memo of the appeal). Thus,
Airport Operator i.e. the Appellant undertakes a development
Page 67 of 283

project and the cost of project will be as per the requirements
of the development project which is approved. The cost of
project will be finalized at the touchstone of competitive
bidding process. Competitive bidding process brings on surface
is a price driven by market forces which is also known as
“ market driven prices ”.
86. Once the process of giving contract is followed by the appellant
as per OMDA and SSA and through competitive bidding
process and once the market driven price is arrived at, for a
particular development project, a separate contract is always
entered into by the Airport Operator with a successful bidder.
This contract is binding and AERA cannot alter this binding
contract between Airport Operator and successful bidder.
87. It must be borne in the mind that the cost of project which is
being paid by Airport Operator to the successful bidder is by
the way of bank entries and, therefore also, AERA cannot
reduce the cost of project otherwise it will tantamount to
change in terms of contract between Airport Operator and a
successful bidder. If this type of change is permitted at the
behest of AERA then there will be a breach of contract.

Page 68 of 283

88. Thus, a thing which cannot be done directly, can never be done
indirectly meaning thereby to, AERA cannot alter the terms of
contract especially the cost/consideration for a particular
project which is arrived at through “market discovered
price” (bidding process). AERA cannot alter the price or cost
of the project under the guise of efficient cost or “economic
efficiency” or “maintaining more transparency”. AERA
cannot rewrite the contract.
89. In view of the aforesaid reasons and looking to the provisions
of OMDA (Annex A-4) and SSA (Annexure A-5) and also the
decision rendered by this Tribunal in AERA Appeal No.6 of 2016
dated 16.04.2025, we hereby hold that observations in
paragraph 1.5.1 of the impugned order dated
th
07.05.2025 for 4 Control Period for MIAL is quashed
and set aside .
90. The observations in impugned order in paragraph 1.5.1 is also
in violation of provisions of the AERA Act especially of Section
13 (1)(a)(i). We hereby direct AERA to allow the actual
cost incurred by the appellant for passenger terminal
building and associated works.

Page 69 of 283

II. Cost of Debt for Third Control Period

91. Having heard the counsel for both the sides and looking to the
facts and circumstances of the case and the impugned order,
it appears that AERA has decided to consider the cost of debt
at 10.30% for Third Control Period whereas actual cost of debt
incurred by the appellant is 10.98% as submitted by the
appellant in MYTP, for computation of FRoR.
92. At the outset, it is necessary to reiterate that the determination
of tariff under Section 13(1)(a) of the AERA Act, 2008, though
regulatory in nature, is not unbridled. The discretion vested in
AERA is structured and guided by statutory considerations,
inter alia, capital expenditure incurred, economic and viable
operation, and efficiency of service.
93. The expression “to determine tariff” cannot be read as
conferring a licence to disregard actual & commercially
incurred costs and substitute the same with normative
assumptions.
94. This issue has already been decided by this Tribunal in MIAL
Vs. AERA in AERA Appeal Nos. 9 of 2016 and 2 of 2021. Both
Page 70 of 283

these appeals were decided by common judgment and order
dated 06.10.2023. It has been held by this Tribunal that the
actual cost of borrowing should be considered by AERA-
Respondent No.1. It has been held in paragraph 313, 320,
321, 322 as under:
“ 313. This contention of respondent no.1 is not accepted
by this Tribunal mainly for the reason that there
cannot be a fixed cost of debt for the entire 3rd
Control Period of five years which is from 2019-
2024. The cost of debt which is actually incurred
by the appellant should have been considered by
AERA. The cost of debt depends upon marginal
cost of funds based lending rate and the time
period within which the loan is to be repaid.
Inflation is one of the most important factor for
determination of market forces for further
determination of MCLR rates. Moreover, 9 the
spread for the time within which loan is to be
repaid depends upon the credit profile of the entity.
320. In view of this, actual cost of debt shall be allowed
by AERA for 3rd Control Period especially looking
to the provisions of Section 13(1)(a)(i) of the AERA
Act, 2008. For the ready reference, Section 13(1)
of AERA Act, 2008 reads as under: - 13. Functions
of Authority. - (1) The Authority shall perform the
following functions in respect of major airports,
Page 71 of 283

namely: - (a) to determine the tariff for the
aeronautical services taking into consideration- (i)
the capital expenditure incurred and timely
investment in improvement of airport facilities; (ii)
the service provided, its quality and other relevant
factors; (iii) the cost for improving efficiency; (iv)
economic and viable operation of major airports;
(v) revenue received from services other than the
aeronautical services; (vi) the concession offered
by the Central Government in any agreement or
memorandum of understanding or otherwise; (vii)
any other factor which may be relevant for the
purposes of this Act: Provided that different tariff
structures may be determined for different airports
having regard to all or any of the above
considerations specified at sub-clauses (i) to (vii);
(b) to determine the amount of the development
fees in respect of major airports; (c) to determine
the amount of the passengers service fee levied
under rule 88 of the Aircraft Rules, 1937 made
under the Aircraft Act, 1934 (22 of 1934); (d) to
monitor the set performance standards relating to
quality, continuity and reliability of service as may
be specified by the Central Government or any
authority authorized by it in this behalf; (e) to call
for such information as may be necessary to
determine the tariff under clause (a); (f) to perform
such other functions relating to tariff, as may be
Page 72 of 283

entrusted to it by the Central Government or as may
be necessary to carry out the provisions of this Act.

(Emphasis Supplied).
321. In view of the aforesaid provision, AERA ought to
have allowed actual cost of debt incurred by the
appellant especially looking to the fact that debt
availed by this appellant is from reputed lenders.
Putting a cap upon cost of debt is uncalled for, as
AERA has in fact, allowed actual interest rate for
First Control Period and Second Control Period and
therefore the same methodology should be applied
for Third Control Period as well. We therefore direct
AERA to consider actual cost of debt and necessary
true up shall be done accordingly. Further, this
action of AERA is also in violation of provisions of
AERA Act, 2008 especially Sec. 13 thereof because
the expenditure incurred ought to be allowed to be
recovered as per formula of Target Revenue given
in SSA.
322. Thus, Issue No. XVIII is answered in negative i.e.
the decision of AERA to cap the Cost of Debt at
10.30% while examining the Fair Rate of Return
(FRoR) is incorrect, improper and not justified.”

95. Similarly, it has been held by this Tribunal in AERA Appeal
No. 4 of 2021 between GMR Hyderabad International Airport
Limited Vs. AERA judgment dated 14.02.2024 that AERA
Page 73 of 283

must consider actual cost of debt incurred by the Airport
Operator. Paragraph 466 of the said judgment reads as
under:
“ 466. In view of this judgment, AERA must consider Cost
of Debt actually incurred by the airport operator.
These aspects of the matter have not been
properly appreciated by AERA while passing the
impugned order especially in the correction of Cost
of Debt especially in FY 2018 and has wrongly
considered the cost of Debt at 7.94% instead of
9.28%. We, therefore, direct AERA to consider
9.28 for Cost of Debt for FY 2018 as stated in table
number 40 of the impugned order.”
96. It has been held by this Tribunal in AERA Appeal No.4 of 2023
between MIAL vs. AERA judgment dated 13.09.2024 in
paragraph nos. 112 and 113 as under:
“ 112. The aforesaid aspects of the matter have not been
properly appreciated by AERA and, therefore, we,
hereby, quash and set aside the decision of AERA
in capping the rate of interest at 11.25% p.a. as
the cost of loan upon securitization of DF amount.
Consequently, we hereby quash and set aside the
calculation of total amount to be levied as DF along
with interest thereupon as mentioned by AERA.
We, therefore, quash and set aside the Order No.9
of 2023-2024 dated 14.06.2023 (Annexure A-1 to
Page 74 of 283

the memo of this appeal). We, hereby, direct
AERA-Respondent No.1 that “actual rate of
interest” upon DF securitization shall be calculated
for the purpose of allowing levy of development fee
by the Airport Operator.”

97. It has been held by this Tribunal in Mangaluru International
Airport Limited Vs. AERA in AERA Appeal No.1 of 2023
judgment dated 11.09.2025 in paragraph 130 as under:
“ 130. In view of the aforesaid facts, reasons and judicial
pronouncements, we hereby quash and set aside
the decision of AERA whereby AERA has considered
CoD at 9% p.a. for computation of Fair Rate of
Return (FroR). We hereby hold that, looking to the
facts of the present case, simply because the
appellant has availed debt from its one of the
shareholders, the same cannot by itself disallow
the appellant to claim actual Cost of Debt. This is
more so when the entity from which the appellant
has availed debt has in turn, availed debt from
reputed lenders. Thus, AERA ought to have allowed
actual Cost of Debt incurred by the appellant.
Putting a cap upon Cost of Debt is uncalled for and
unwarranted. We therefore direct AERA to allow
actual Cost of Debt incurred by the appellant and
necessary True Up shall be given for previous
Control Periods accordingly.”
Page 75 of 283

98. It has been held by this Tribunal in GMR Goa International
Airport Vs. AERA in AERA Appeal No.1 of 2024 judgment dated
11.09.2025 in paragraph 123, 126, 139 and 140 as under:
“ 123. In the facts of the present case, this appellant has
secured debt from Axis Bank led consortium of
banks at the rate of A- MCLR+ 2% which is revised
annually. The said Concession Letter is at Annexure
A-8 to the memo of the present appeal. As per this,
appellant has secured the debt with 10.45% of the
CoD whereas AERA has disregarded the actual CoD
and has calculated FRoR considering 9% of the
CoD. This is in violation of Section 13(1)(a)(i) of
the AERA Act, 2008. As per this section, AERA is
required to determine the tariff in accordance with
actual capital expenditure incurred.
126 . Thus, the sanction letter issued by Axis Bank led
consortium of banks at the rate of A-MCLR+2% of
Lending Rate which is dated 18.09.2024 (Annexure
A 8). Since MCLR of Axis Bank range between
8.95% to 9.3%, the appellant could not have
procured CoD at 9% as claimed by AERA. In fact,
the CoD as per Annexure A-8 is A-MCLR+2% which
is an admitted and actual CoD.
139 . In view of the aforesaid facts, reasons, and judicial
pronouncements, we, hereby quash and set aside
the decision of AERA to normatively cap the Cost
Page 76 of 283

of Debt at 9% for the First Control Period and to
compute FRoR/ARR on that basis.
140. We hereby direct AERA to consider the actual
weighted average cost of debt at 10.45%, subject
to true-up on an actual basis in the next control
period, and to carry out all consequential
recalculations of FRoR, ARR (including “T”), and
the tariff card.”

99. It is pertinent to denote that the Cost of Debt is a combined
function of benchmark lending rates, credit spread, tenure of
borrowing, and the risk profile of the borrowing entity. These
variables are neither static nor within the unilateral control of
the airport operator. The Inflationary trends, monetary policy
adjustments, and sectoral stress, particularly during
extraordinary events such as the COVID-19 pandemic,
materially impact borrowing costs and any attempt to freeze
the Cost of Debt at a predetermined normative level
necessarily ignores these realities and leads to distortion in
tariff determination.
100. Furthermore, the statutory mandate under Section
13(1)(a)(iv) of the AERA Act requires the Authority to ensure
economic and viable operation of major airports and viability
Page 77 of 283

necessarily entails recovery of prudently incurred costs. Thus,
Denial of actual Cost of Debt, which is a fundamental
component of the Fair Rate of Return, directly undermines the
financial viability of the airport operator.
101. We are unpersuaded by the Respondent's characterization of
post-July 2021 borrowings as inefficient commercial choices.
The bridge-to-bond facility availed during the pandemic
reflected market realities, wherein the Appellant was tagged
as a 'RFA' (Restructured Facilities Account) with default rating,
rendering it ineligible for fresh borrowings from traditional
lenders. The One-Time Restructuring offered by existing
lenders would have further deteriorated the capital structure.
102. For this urgency, a sponsor support was obtained from the
Adani Group enabling bridge debt from Standard Chartered
Bank and subsequent ECB refinancing was availed at market-
discovered rates, which reflects the commercial and financial
management necessitated by the circumstances.
The assertions by Respondent that these were merely
" commercial decisions" post-ownership change disregards the
causative link between pandemic-induced distress and the
borrowing structure.
Page 78 of 283

103. Further, the below mentioned table demonstrates that even if
the Appellant considers the lowest MCLR rate during the entire
Control Period i.e. 7% as considered by AERA, and applies a
Credit Spread of 482 basis points corresponding to a “BBB”-
rating (notwithstanding the Appellant’s actual rating of “D”),
the resulting Cost of Debt would amount to 11.82%.
Calculation of cost of debt as per the Authority
methodology
Particulars Rate
MCLR rate (A) 7.00%
Spread (B) 4.82%
Cost of Debt (A+B) 11.82%

104. The Cost of Debt arises from binding contractual
arrangements entered into between the Appellant and its
lenders and such obligations are legally enforceable and must
be serviced irrespective of tariff determination. AERA cannot
ignore liabilities that exist in law and substitute them with
hypothetical or notional constructs that bear no nexus to the
actual financial position of MIAL.
Page 79 of 283

105. The stated framework under the AERA Act requires tariff
determination to ensure economic and viable operations of the
CSMIA while balancing consumer interest. A cost-reflective
tariff necessarily includes the actual financing costs incurred
by MIAL, provided such costs are prudently incurred. Any
exclusion of actual Cost of Debt would distort tariff
determination and undermine the financial viability of MIAL.
106. It is a settled principle of regulatory jurisprudence that once
an expenditure is found to be prudently incurred, it is not open
to AERA to disallow the same on the basis of artificial or
normative considerations. The correct test is whether the
borrowing was necessary and undertaken on reasonable
commercial terms and not whether it conforms to a pre-
determined benchmark.
107. In our view, ignoring the actual Cost of Debt and substituting
it with a notional rate introduces arbitrariness into the tariff
determination process, as it lacks any rational nexus with the
expenditure actually incurred. Such an approach would be
contrary to the principles of reasonableness and of non-
arbitrariness that govern regulatory decision-making.
Page 80 of 283

108. It is a fundamental principle that capital employed for the
creation of infrastructure necessarily carries a cost. When such
capital is funded through debt, the interest thereon must be
serviced at the rate at which it has been contracted. Any
deviation from this principle would result in a mismatch
between the cost incurred and the cost allowed. The
regulatory framework is not intended to render the Appellant
financially inviable. Non-recognition of actual Cost of Debt
incurred by the Appellant would impair the ability of the
Appellant to service its obligations, adversely affect its credit-
worthiness and ultimately undermine the stability of the
CSMIA.
109. Further, infrastructure sectors such as airports are dependent
on long-term financing and regulatory uncertainty in the
recovery of financing costs would act as a disincentive to
investment. The denial of actual Cost of Debt to the Appellant
would therefore be contrary to the objective of promoting
infrastructure development.
110. There can be no doubt that the interest rates are reflective of
prevailing economic conditions and the tine value of money.
A static normative rate cannot be adequately captured in the
Page 81 of 283

dynamic nature of financial markets, whereas, actual Cost of
Debt represents the economic cost incurred by MIAL.
111. At the same time, consumer interest is adequately

safeguarded through the mechanism of prudence review,
whereby only those costs which are found to be reasonable
and justified are allowed. AERA is neither expected nor entitled
to punish the Appellant by applying artificial Cost of Debt
without any basis, much less substance. No such powers are
vested with AERA under the AERA Act and/or the Concession
document either. There is therefore no justification for a
blanket substitution of actual Cost of Debt with normative
assumptions.
112. In view of the above, it is held that the Cost of Debt for the
Third Control Period, being a real and unavoidable financial
obligation, is liable to be allowed on an actual basis, subject
to prudence check and any deviation from this principle would
render the tariff determination arbitrary and unsustainable.
113. It cannot be said that the appellant was negligent in obtaining
the debt or they were negligent in incurring the cost of debt.
Looking to the static need of the appellant and keeping in mind
the situations in relevant years, it cannot be said that the
Page 82 of 283

appellant was inefficient in getting the debt. The cost of debt
depends upon two primary factors:
i. Benchmark rates and;

ii. Credit spread, which is dependent on
business risks as perceived by the
lenders. Higher the perceived risk leads to
higher credit spread. The overall cost of
debt increases in proportion to the risk
profile of the borrowing entity.
AERA has completely ignored the second factor of credit
spread which was significantly increased in the wake of the
financial stress induced by COVID-19 and because of this,
deterioration in credit rating of the appellant, which was a
result of the default on the part of the Appellant, the cost of
debt has been increased.
114. In view of above facts and circumstances, AERA’s
decision to put a cap upon cost of debt at 10.30% is
absolutely arbitrary in nature and hence the same is
quashed and set aside. We hereby direct AERA to allow
actual cost of debt incurred by this appellant as true-
th
up in 4 Control Period .
Page 83 of 283

III. General Aviation (GA) Terminal considered
as non-aeronautical asset by AERA
115. Looking to the facts of the present case, it appears that AERA

has in their tariff order for the Third Control Period, also
treated General Aviation Terminal Building as non-aeronautical
asset and it has been decided by this Tribunal in AERA Appeal
No.9 of 2016 and AERA Appeal No.2 of 2021 in judgment
dated 06.10.2023 in case of MIAL Vs. AERA in paragraph nos.
279-282 as follows:
“ 279. It is submitted by Learned Senior Advocate
appearing on behalf of the respondent that
General Aviation Asset shall be treated as
nonaeronautical asset by AERA. The general
aviation asset is basically meant for private
aircrafts as per Part-I of Schedule-6 of OMDA.
General aviation services is a non-aeronautical
service and, therefore, AERA has submitted that
there will be no change in asset allocation ratio
in general aviation.
280. In fact, general aviation is meant for private
aircrafts but they are also using runways which is
purely aeronautical asset and other purely
aeronautical assets and, therefore, in fact general
aviation assets should be treated as “common
Page 84 of 283

assets”. Passengers of private planes are also using
aeronautical assets before reaching and using their
private planes or aircrafts and, therefore, general
aviation assets ought to have been treated as
common assets. The landing and parking charges
for the private aircrafts are considered as
aeronautical in nature. Even in terminal area there
are certain portions for non-aeronautical activities.
281. Learned Senior Advocate appearing on behalf of the
appellant submitted that general aviation terminal
assets have been classified in Fixed Assets Register
(FAR) as common assets by respondent no.1 in
calculation of weighted average aeronautical area
of all terminals (T-1, T-2 and GA).
282. Moreover, this ratio has been applied by AERA on
common assets of airport for calculation of their
aeronautical cost, but, while doing asset
classification, AERA has treated general aviation
assets as non-aeronautical. This is the inconsistent
approach of AERA. We, therefore, direct AERA to
treat general aviation asset as common asset
because private aircrafts are using runways, their
parking place is also utilized by these private
aircrafts which are all aeronautical assets. Thus,
necessary asset allocation ratio will be calculated
by AERA in 4th Control Period on actual basis.”
Page 85 of 283

116. In view of the aforesaid decision, it has been held by this
Tribunal that General Aviation is meant for private aircrafts,
but, they are also using runways which are purely aeronautical
assets and other aeronautical assets. General Aviation
Terminal Building is akin to Passenger Terminal Building (PTB)
and it offers similar facilities to the Passengers, including-
i. Check-in,
ii. Security;
iii. Customs;
iv. Immigration and;
v. Reserved AERA for non-aeronautical activities like F&B
outlets, lounges, etc.
117. Thus, GATB ought to have been considered by AERA as a
common asset like PTB.
118. There is a remarkable difference between the terms “ General
Aviation Services ” and “ General Aviation Terminal ”.
Both the terms cannot be used interchangeably. As per
Schedule-VI of OMDA (Annexure A-4), “General Aviation
Services” have been characterized as non-aeronautical
services. AERA has wrongly considered “General Aviation
Services” and “General Aviation Terminal" as
interchangeable terms. Both the aforesaid terms are different.
Page 86 of 283

“General Aviation Terminal Building (GATB)" is akin to
“Passenger Terminal Building (PTB)” and it offers similar
facilities to passengers which are being offered at PTB.
119. Moreover, General Aviation Terminal Assets have been classified
in a Fixed Asset Register ( FAR ) as common assets by
Respondent No.1 for calculation of weighted average
aeronautical area of all Terminals (T-1, T-2 and GA).
120. Thus, in the conspectus of the above it is apparent that the
fundamental fallacy in the respondent no.1’s decision lies in
conflating the service with the asset. The OMDA, in Schedule 6,
classifies “General Aviation Services” as non aeronautical
services.
121. However, as noted above that the General Aviation Terminal is
not itself a “service”; it is a physical asset that facilitates the
delivery of both aeronautical and non aeronautical activities. The
private aircraft that use this terminal are subject to landing,
parking, and route navigation facility charges, all of which are
undisputedly aeronautical in nature.
122. The passengers travelling through this terminal undergo security
screening, customs and immigration checks, which are
regulatory functions integrally connected with the operation of
the airport.
Page 87 of 283

123. Now to treat the terminal building as entirely non aeronautical
would ignore the reality that it houses critical aeronautical
functions and serves as the interface between the airside and
the landside for a category of flights that are themselves
recognised as aeronautical operations.
124. Furthermore, it is an admitted fact that GA passengers contribute
a significantly higher quantum of aeronautical revenue per capita
i.e. approximately INR 10,526 as against INR 284 from
scheduled passengers. This disproportionate contribution to the
airport’s aeronautical pool actually serves to alleviate the tariff
burden on the common passenger through the cross-subsidy
mechanism of the Hybrid Till.
125. In view of these facts and circumstances, we hold that
“General Aviation Terminal Building (GATB)" is a
common asset. We, therefore, quash and set aside the
decision of AERA to treat General Aviation Asset as non-
aeronautical asset and we hereby direct AERA to treat
General Aviation Asset as common asset .
126. AERA ought to have followed the decision of this Tribunal which
has been given in AERA Appeal No.9 of 2016 and AERA Appeal
No.2 of 2021 in judgment dated 06.10.2023 because the
impugned order was passed on 07.05.2025.
Page 88 of 283

IV. Adjustment on account of demolition of
Terminal-1 building in HRAB in FY 2029
127. This issue has already been decided by this Tribunal in

judgment dated 06.10.2023 in AERA Appeal No.9 of 2016 and
AERA Appeal No.2 of 2021 between MIAL Vs. AERA. It has
been observed in para 325, 326, 338 and 341, 342 as under:

“ 325. This contention of the counsel for respondent no.1
is not accepted by this Tribunal mainly for the
reason that as per the provisions of SSA, RBo is the
opening RAB. When a return of WACC and
depreciation is to be allowed on RBo, it implies that
HRAB has also taken colour of RAB, meaning
thereby to that any treatment that is meted out to
RAB has to be extended to HRAB. Therefore, if in
case demolition of any asset is out of the existing
initial assets of the airport (from HRAB), the same
has to be allowed as enabling cost of construction
of the new asset.
326. Moreover, as per OMDA and SSA, once the HRAB is
fixed, it cannot be reviewed meaning thereby to,
on the basis of existing constructions, the airport
operator took charge of the airport, RB has been
calculated as RBo and it is known as a Hypothetical
RAB. HRAB should be given the same treatment as
of RAB under SSA and OMDA and, therefore, once
Page 89 of 283

the said amount is fixed (HRAB), the same cannot
be reduced even in case of demolition.
338. As per OMDA, the construction work related to T-2
building had to be undertaken by this appellant and
it was mandatory capital project and, therefore,
construction of new T-2 building has resulted in
demolition of the old T-2 building and, therefore,
the value of the old T-2 building would be
considered as enabling cost for the construction of
new T-2 building. Thus, there will be a reduction of
the value of old T-2 building and it would be
considered as enabling cost for the construction of
new T-2 building, thus, there will be a reduction of
the value of old T-2 building and there will be
addition of the very same value in the cost of new
T 2 building and hence RAB will be the same.
341. We, therefore, quash and set aside the decision of
AERA of reducing the HRAB written down value in
respect of old T-2 building which is demolished.
342. Thus, Issue No. XIX is answered in negative i.e. the
decision of AERA to reduce Hypothetical Regulatory
Asset Base (HRAB) in respect of written down value
attributable to old T-2 demolished is incorrect,
improper and not justified.”

128. AERA should have appreciated the fact that when HRAB was
computed by R1-AERA, no reference was made to the value
Page 90 of 283

of any asset , either book value or market value. Computation
of HRAB was based upon revenue and expenses. Thus,
discarding any asset does not trigger reduction of HRAB. Thus,
once HRAB is calculated, it cannot be reduced even if any
existing Terminal Building is being demolished. The reduction
of HRAB is not permissible. Neither there are any provisions in
SSA (Annexure A-5) for such a type of reduction of HRAB nor
there are any provisions in OMDA (Annexure A-4) for reduction
from HRAB.
129. AERA has failed to consider OMDA and SSA in their attempt to
review the value of HRAB. SSA does not restrict the
computation of HRAB to the actual existence of assets. As per
provisions of SSA, RB o is opening RAB. When return at WACC
and depreciation is to be allowed on RB o , it implies that HRAB
has also taken the colour of RAB and whatever treatment is
meted to RAB has to be extended to HRAB.
130. It is important to take note of the fact that in the case of DIAL,
as part of the phase 3A expansion, it demolished the old
Terminal T-1A and constructed new Terminal T-1 with
enhanced capacity of 40 million passengers in 2024. During
the tariff determination exercise for the Fourth Control Period,
Page 91 of 283

Respondent No. 1/AERA did not propose any reduction in
HRAB on account of demolition of old Terminal T-1.
131. AERA is giving different treatment to the present appellant

than what is given to DIAL, this type of zig-zag approach of
AERA is hereby deprecated because both MIAL as well as DIAL
are governed by similar Concession Agreements viz.- OMDA
(Annexure A-4) and SSA (Annexure A-5). AERA should have
adopted a similar and consistent approach for tariff
determination for DIAL and MIAL on similar issues.
132. It is also necessary to address the contention of the
Respondent that non reduction of HRAB would confer a double
benefit upon the Appellant by permitting return on both
demolished and newly constructed assets. This submission
overlooks the principle of enabling cost, which has been
expressly recognised by this Tribunal. Where demolition of an
existing asset is necessitated for construction of a new
mandatory capital asset, the value of the demolished asset is
subsumed as an enabling cost of the new asset, thereby
maintaining equilibrium in the asset base. The regulatory
framework does not envisage a punitive reduction of base
merely because infrastructure is modernised or upgraded.
Page 92 of 283

133. When HRAB was originally computed, no reference was made
to the book value or market value of any individual asset.
It was arrived at on the basis of revenue and expenses for FY
2008-09 as per the formula prescribed in the SSA. The figure
is therefore sacrosanct and not open to revision merely on the
ground that a particular physical structure has since been
demolished. Neither the OMDA nor the SSA contains any
provision authorising a mid-stream reduction in HRAB on
account of demolition and the Respondent’s attempt to import
such a power through the backdoor of “regulatory discipline”
is impermissible.
134. Thus, following from above it is apparent that the HRAB does
not represent the sum of individually valued asset
components. It represents the total opening regulatory base
of the entire airport, computed on a revenue-and-cost basis
and Terminal 1 had no assigned value within the HRAB.
135. Hence, the demolition of that terminal does not reduce the
revenue-generating and cost-bearing capacity of the airport in
any manner that can be isolated from the HRAB formula.
136. There is an additional factual ground that reinforces the
conclusion. As the appellant has pointed out, Terminal T1B
Page 93 of 283

was constructed in the 1960s and Terminal T1A was built in
1992. According to the respondent Authority’s own
regulatory framework governing the useful life of airport
assets, both structures had already outlived their prescribed
useful life well before the commencement of the Fourth
Control Period. Their written-down value in the regulatory
books had consequently reached zero.
137. However, the Authority now proposes to reduce the HRAB
by the written-down value of Terminal 1. If that
written-down value was already zero, the proposed
adjustment yields no reduction in the HRAB whatsoever,
rendering the exercise an empty formality. Conversely, if the
Authority contends that the written-down value is a positive
number, it must explain how that positive value was derived
from an HRAB computation that was never disaggregated
into individual asset values. No such explanation has been
offered. This inconsistency further demonstrates that the
proposed reduction lacks any sound legal, factual or
arithmetic basis.
Page 94 of 283

138. As regards to the appellant’s conditional acceptance of the
adjustment during the consultative process, it is well settled
that a party may challenge the correctness of a legal position
even if it had previously indicated conditional acceptance,
especially when such acceptance is expressly made subject
to the outcome of judicial proceedings.
139. The appellant’s comment, reproduced in the respondents’
submissions, explicitly states that the adjustment was
sought to be made “subject to the final outcome of the
Supreme Court order on the similar matter for T2”. The
matter pertaining to Terminal 2 is now pending before the
Hon’ble Supreme Court. The appellant cannot be estopped
from agitating the same issue before this Tribunal merely
because it had, in the course of the consultative process,
indicated a conditional acceptance while preserving its rights.
140. We, therefore, quash and set aside the decision of
AERA of reducing HRAB written down value in respect
of the Old Terminal-1 Building which is demolished and
we hereby reiterate that the value of HRAB cannot be
reduced once it is fixed, even in case of demolition.
Page 95 of 283

V. 1% Penalty on Capex not incurred
141. Looking to facts of the present case and impugned order
passed by AERA dated 07.05.2025 (Annexure A-1), AERA has
decided to consider the provision for adjustment to the extent
of 1% of the project cost while determining ARR in case of
delay in capitalization of the project beyond the stipulated
dates. The observations to this effect have been made in
paragraph 6.10.15 of the impugned order.
142. This issue has already been decided in MIAL vs AERA in AERA
Appeal No.9 of 2016 and AERA Appeal No.2 of 2021 dated
06.10.2023 in paragraphs 308, 309 and 310 thereof which
reads as under:
“ 308. Moreover, in absence of any provision for penalty
under OMDA or SSA or AERA Act, 2008, no such
penalty can be imposed, otherwise highly
discriminatory position will prevail because today
1% of project cost penalty is imposed and
subsequently it may be increased to 1.5%. If 1%
penalty is allowed then 1.5% penalty would also
have to be allowed then in forth coming years, as
there are unguided powers, the penalty might be
3% also and, thereafter it can be 5% or more
also. There will be no end to penalty in absence of
any provision under OMDA, SSA and AERA Act,
Page 96 of 283

2008. It ought to be kept in mind that unguided
and uncontrolled power always leads to
discrimination. In case of one airport operator
penalty imposed will be 1% and in case of another
airport operator it can be 2% because there is no
law, there is no contract, there is no provision and
there are no guidelines. The balance has already
been created under OMDA and SSA in the
methodology of true up in next control period and
as stated hereinabove, as per the said
methodology, excess amount recovered shall be
trued up with carrying cost in next control period.
Therefore, in the aforesaid example, if Rs.83
Crores has been recovered, the true up amount
in the next control period, if the project is not
commenced or completed within the time bound
schedule, would be at Rs.121 Crores which is in
fact more than sufficient revenue clawed back from
the airport operator and perhaps for this very
reason no powers have been given to AERA for
imposing penalty. Hence, we hereby quash and set
aside the decision of AERA of carrying out 1% of
readjustment to project cost and applicable
carrying cost in the target revenue at the time of
determination of tariff for next control period.
309. Here in the facts of the present case, AERA has
failed to appreciate the prevailing pandemic
situation of COVID-19 and its aftermath. Curfew
Page 97 of 283

type situation or lockdown type situation was
prevailing. Labourers were not available and
hence, there is bound to be delay in execution of
the project work. Such a big factor ought to have
been appreciated by AERA. The genuine difficulty
of airport operator ought to have been
appreciated.
310. Thus, Issue No. XVII is answered in negative i.e. the
decision of AERA of carrying out 1% re-
adjustment to Project Cost and applicable carrying
cost in the Target Revenue at the time of
determination of Tariff for 4th Control Period is
incorrect, improper and not justified.”
143. A similar issue had also been decided in the case of GMR
Hyderabad International Airport Limited Vs. AERA in AERA
Appeal No.4 of 2021 judgment dated 14.02.2024, paragraphs
508, 509, 510, 512, and 519 thereof reads as under:
“ 508. AERA has penalized for delay in execution of
projects, the airport operator – Appellant which is
equal to reduction of 1% of the total cost of project
from ARR.
509. Much has been argued out by the counsels for both
the sides on this issue, it has also been submitted
by Learned Senior Counsel for the Appellant that
the issue of imposition of penalty has already been
decided by this Tribunal by a detailed judgment
Page 98 of 283

and order dated 06.10.2023 in AERA Appeal No.2
of 2021 and AERA Appeal No.9 of 2016, in a
discussion in Issue No. XVII of that Judgement.
510 . Looking to the facts and circumstances of the present
case and also keeping in mind the AERA Act, 2008
and Concession Agreement under dated 20.12.2024
(Annexure-A3 to the memo of this appeal) there is
no provision under the AERA Act, 2008 nor in there
is any provision in the Concession Agreement which
contemplates the levy of penalty much less levy of
penalty 1% there is no provision in the AERA Act nor
in the Concession Agreement which contemplates
the levy of any penalty and as such the levy of 1%
penalty on delayed execution is beyond the power of
AERA.
512. Imposition of the penalty by 1% is absolutely arbitrary
in nature because today AERA has imposed 1% and
tomorrow it could be 1.5% and thereafter it can be
2%, so on and so forth. The penalty has to be
prescribed under law. Penalty cannot be imposed at
the whims and caprice of the authority.
…
519. Therefore, by trueing up the cost of incomplete
project, much higher amount is going to be
deducted, therefore, again second time penalty
cannot be imposed by 1%. Hence, we hereby quash
and set aside of carrying out 1% of readjustment to
project cost and applicable carrying cost in ARR.”
Page 99 of 283

144. Similarly, in case of Mangaluru International Airport Vs. AERA
in AERA Appeal No.1 of 2023 and in other connected appeals,
it has been decided by this Tribunal vide judgment dated
11.09.2025 that AERA has no power, jurisdiction and authority
to re-adjust the ARR of the Airport Operator or re-
adjust/reduce 1% of uncapitalized project cost from
ARR/Target Revenue during true-up exercise of next Control
Period, if any particular project is not capitalized as per CAPEX
schedule approved in the tariff order, paragraph 288 of the
aforesaid judgment reads as under:
“ 288. In view of the aforesaid facts, reasons and judicial
pronouncements, AERA has no power, jurisdiction
and authority to readjust in the ARR of the Airport
Operator or readjust/reduce 1% of un-capitalised
project cost from ARR/Target Revenue during
True-Up exercise of next Control Period, if any
particular project is not capitalised as per CAPEX
schedule, approved in the tariff order. We,
therefore, quash and set aside this decision of
AERA in the impugned order.”

Page 100 of 283

145. If AERA’s decision to impose a penalty of 1% is allowed
especially when there is no such provision of imposition of
penalty in SSA and OMDA nor in AERA Act, 2008, in that
eventuality, AERA may impose a 1.5%, 2% or 2.5% penalty
and so on. Imposition and levy of penalty requires existence
of special provisions and such powers cannot be presumed by
AERA. Penalty has to be prescribed under the law. Penalty
cannot be based upon fanciful ideas of the Authority.
146. There is already a provision under OMDA and SSA of truing-
up in next Control Period, this aspect of the matter has been
explained in detail with example in paragraph 308 of the
judgment dated 06.10.2023 in AERA Appeal No.9 of 2016 and
AERA Appeal No.2 of 2021 in case of MIAL Vs. AERA.
147. There cannot be a double penalty for the incomplete projects
because while truing-up in next Control Period, a sizable
amount shall be deducted for incomplete projects, therefore,
there cannot be a penalty of 1% again for the very same
purpose of incompletion. This aspect has been explained in
detail with example in paragraph 308 of the judgment dated
06.10.2023 in AERA Appeal No.9 of 2016 and AERA Appeal
No.2 of 2021 in case of MIAL Vs. AERA.
Page 101 of 283

148. The respondent no.1 AERA’s reliance on Section 13(1)(f) and
Section 14(4) of the AERA Act, 2008 to justify the reduction is
entirely misplaced. Section 13(1)(f) empowers the Authority
to perform such other functions relating to tariff as may be
entrusted to it by the Central Government or as may be
necessary to carry out the provisions of the Act. Section 14(4)
empowers the Authority to issue directions to service providers
for the purposes of monitoring performance standards.
149. Neither of these provisions, nor any other provision of the
AERA Act, confers upon the Authority the power to impose a
reduction or penalty of the nature contemplated in the
impugned tariff order. The power to determine tariff under
Section 13(1)(a) is to be exercised by taking into consideration
the factors enumerated in that provision. It does not include
an ancillary power to impose what is, in substance and effect,
a financial penalty for delay, especially when the concession
agreement itself does not provide for any such penalty and
when the true-up mechanism already addresses the
consequences of delay.
150. There is a further and more fundamental infirmity in the
Authority’s approach. As has been repeatedly observed by this
Page 102 of 283

Tribunal, the true-up mechanism under the OMDA and the SSA
already addresses the consequences of delay. If a project is
not capitalized within the approved schedule, the associated
capital expenditure is not included in the regulatory asset base
for that period, and any amounts recovered in anticipation are
trued-up with carrying cost in the next control period.
151. This mechanism ensures that the airport operator does not retain
any benefit that is not justified by actual capital deployment. To
impose a further reduction of 1% of the project cost is to impose
a second consequence for the same delay, which is not
contemplated by the contractual framework and is not
authorised by statute. It is, in effect, a double penalty, and it is
well settled that penalties cannot be imposed by implication or
by an expansive reading of regulatory powers.
152. Furthermore, the respondent no.1’s reliance on the decision of this
Tribunal in AERA Appeal No. 8 of 2018 (BIAL matter) is equally
unavailing. That decision, rendered on 16-12-2020, must be read
in the context of the facts and submissions of that case. In that
matter, the Authority had agreed to treat the capitalization year for
Terminal II Phase 1 as 2020-21 on the basis of the airport
operator’s own assurance that the project would be completed by
March 2021. The penalty was proposed as a measure to ensure
Page 103 of 283

that the operator did not derive an undue advantage from its own
promise and this Tribunal in that case, while noting the stand of
the Authority, did not lay down a general principle that such a
reduction is permissible under the AERA Act in all circumstances.
153. More importantly, the subsequent decisions of this Tribunal
in MIAL v. AERA (06-10-2023), GHIAL v. AERA (14-02-2024)
and Mangaluru International Airport v. AERA (11-09-2025) have
all held, after a detailed examination of the OMDA, the SSA, and
the AERA Act, that the Authority has no power to impose such a
reduction and hence the law on this issue has been settled by these
later decisions of this Tribunal.
154. Thus, we hereby quash and set aside the decision of
AERA to consider the provision of adjustment to the
extent of 1% of the project cost while determining ARR
in case of delay in capitalization of project beyond the
stipulated dates. AERA has no power, jurisdiction and
authority to re-adjust the ARR of the Airport Operator-
Appellant or reduce 1% of un-capitalized project cost
from ARR/Target Revenue in the next Control Period, if
any particular project is not capitalized as per CAPEX
schedule approved in the tariff order.

Page 104 of 283

VI. Inclusion of “Annual Fee” in
determination of “S” factor

155. By the impugned order dated 07.05.2025 (Annexure A-1),
AERA has decided to include Annual Fee payable to Airport
Authority of India from the revenue pertaining to Revenue
Share Assets while determining ‘S’ factor for the purpose of
cross-subsidization while calculating Target Revenue. In fact,
this is not permissible , this issue has already been decided
by this Tribunal in AERA Appeal No.9 of 2016 and AERA Appeal
No.2 of 2021 in MIAL Vs. AERA for Second Control Period and
Third Control Period vide judgment dated 06.10.2023, it has
been observed in paragraphs 358, 359, 365 of the aforesaid
decision which reads as under:
“ 358. We do not agree with the aforesaid contentions
of the respondent. Annual Fee payable to Airport
Authority of India (AAI) is not a cost, because
the cost is an amount paid to acquire the
revenue. Cost is that amount which the
entrepreneur pays for procuring the revenue.
The cost is an expenditure incurred by any
company or firm to produce the goods or
services for sale. The cost is an amount that is
Page 105 of 283

incurred to earn that revenue prior to such
revenue is being earned. In the facts of the
above case, if the aforesaid concept is applied,
Annual Fee accrues to AAI after “Revenue” (as
defined under OMDA) has been earned by MIAL.
This aspect of the matter has not been properly
appreciated by AERA and hence the decision of
AERA of inclusion of Annual Fee in determination
of “S”-factor is hereby quashed and set aside.
359. Moreover, the cost is such an amount which has
to be incurred first and thereafter the revenue
can be incurred, but, here in the facts of the
present case, and looking to the provisions of
OMDA & SSA, “Annual” Fee is not a prerequisite
for earning Revenue. In fact, here Revenue is to
be calculated first and thereafter 38.70% of
revenue is to be calculated as Annual Fee. Thus,
Annual Fee is not a cost at all for the purpose of
calculation of “S” factor. Further, Clause 3.1.1 of
SSA provides “GOI’s intention is to establish an
independent Airport Economic Regulatory
Authority (the “Economic Regulatory Authority”),
which will be responsible for certain aspects of
regulation (including regulation of Aeronautical
Charges) of certain airports in India. GOI agrees
to use reasonable efforts to have the Economic
Regulatory Authority established and operating
within two years from the Effective Date. GOI
Page 106 of 283

further confirms that subject to applicable law, it
shall make reasonable endeavours to procure
that the Economic Regulatory shall regulate and
set/re-set Aeronautical Charges, in accordance
with the broad principles set out in Schedule 1
appended hereto. Provided however, the
Upfront Fee and the Annual Fee paid/payable by
the JVC to AAI under the OMDA shall not be
included as part of costs for provision of
Aeronautical Services and no pass-through
would be available in relation to the same”, means
Annual Fee is not a cost of provision of
Aeronautical Service, similarly by applying the
same principle, Annual Fee on revenue from
Revenue Share Assets also, is not a cost of
provision of Non-Aeronautical Services or
aeronautical related services arising at the Airport.
…
365. In light of the aforesaid facts and circumstances,
we hereby quash and set aside the decision of
AERA to the extent it includes the Annual Fee in
gross revenue generated by JVC from the Revenue
Share Assets for calculation of “S” factor and 18
we thereby hold that Annual Fee payable to AAI
should be excluded from the revenue generated
by JVC from the Revenue Share Assets for the
calculation of “S” factor. And consequently, true-
Page 107 of 283

up has to be given for the earlier Control Periods
also.”

156. In fact, the issue involved in present AERA Appeal has been
discussed in detail in the aforesaid decision along-with
definitions of Annual Fee, etc. from paragraphs 347 to 365
thereof, the same reasons which have been mentioned from
paragraph 347 to 365 are also applicable in the facts of the
present case and for the very same reasons, we hereby quash
and set aside the decision of AERA to the extent it includes the
Annual Fee in gross revenue generated by Joint Venture
Company (JVC) from the Revenue Share Assets for calculation
of ‘S’ factor. We hereby hold that Annual Fee payable to
Airport Authority of India should be excluded from the revenue
generated by JVC from Revenue Share Asset for the
calculation of ‘S’ factor.
157. This issue was also decided in the case of DIAL Vs. AERA for
Second Control Period and Third Control Period in AERA
Appeal No.1 of 2016 and AERA Appeal No.1 of 2021 judgment
dated 21.07.2023, it has been observed in paragraphs 123 and
124 as under:
Page 108 of 283

“ 123 … c. Annual Fee is not a cost. Cost refers to the
amount of payment made, to acquire any goods or
services or revenue to be generated therefrom.
Cost in relation to a particular revenue is the cost
incurred, to earn that revenue and is incurred
before such revenue can be earned. In the facts of
the present case, “Annual Fee” accrues to AAI after
the revenue as defined under OMDA has been
earned by DIAL. In view of this, the amount of
Annual Fee should be excluded from the gross
revenue generated by JVC from the Revenue Share
Assets;
…
124. We therefore, quash and set aside the decision of
AERA to the extent it includes the Annual Fee in
gross revenue generated by JVC from the Revenue
Share Assets for calculation of “S” factor and we
thereby hold that Annual Fee payable to AAI should
be excluded from the revenue generated by JVC
from the Revenue Share Assets for the calculation
of “S” factor. And consequently, true-up has to be
given for the earlier Control Periods also.”
158. It is rightly contended by Learned Senior Counsel Mr. Sajan
Poovayya appearing on behalf of the appellant that the
definition of “Revenue” under OMDA is solely for the purpose
of computation of Annual Fee, which the Appellant does not
Page 109 of 283

deduct from its revenues. The exclusion of Annual Fee from
the revenue derived from Revenue Share Assets for
determination of the S-Factor does not, in any manner, reduce
the quantum of entitlement of AAI toward Annual Fee.
159. We are in full agreement with the aforesaid argument
canvassed by the Learned Senior Counsel for the appellant.
160. It has been held by Hon’ble the Supreme Court of India in the
case DIAL Vs. AERA in Civil Appeal No.8378 of 2018 in
judgment dated 11.07.2022 in paragraphs 116 and 117 as
under:
“ 116. The first part of the proviso is clear in its terms that
upfront fee and the Annual Fee paid/payable by the
Airport Operators to AAI under the OMDA shall not be
included as part of costs for provision of Aeronautical
Services. There is no doubt a second part to it which
states that “no pass-through would be available in
relation to the same”. It is the latter part which is
sought to be emphasised in the decision-making
process of the AERA. This is because if the first part is
implemented there will be an element of pass-through.
However, if we were to accept the view of the AERA, it
would be in a sense amount to nullifying the first part
of the proviso. No construction should be given to a
contract where the first part itself is nullified by a
reading of the latter part. This clause is more general
Page 110 of 283

in its terms. Pass-through would not be permitted in
normal circumstances as per the clause. However,
insofar as the tax element is concerned, there appears
to be an exception because of the manner in which
the ‘T’ in the formula itself has been derived. Qua the
Annual Fee, the SSA does not contemplate a
subtraction from the expenses. There is also no direct
extraction from other stakeholders qua the annual fee
and thus there is no pass-through. This would also be
harmonious construction of the clauses of the contract
so that one part of it does not do violence to the other.
117. Thus, the aforesaid is the only aspect on which we are
inclined to interfere with the impugned orders and
find merit in the contention of the Airport Operators
that the Annual Fee paid by them should not be
deducted from expenses pertaining to aeronautical
services before calculating the ‘T’ element in the
formula.”
161. In view of the aforesaid decision, “pass-through of a cost”
necessarily means that such cost is recovered from the users
as part of the aeronautical tariff unless there is a direct
extraction from the shareholders, it cannot be said that there
is a “pass-through”. There is no claim of appellant that
Annual Fee should be allowed as “pass-through”.
162. The fundamental flaw in the respondent no.1’s reasoning in
the impugned order lies in its failure to appreciate that the
Page 111 of 283

Annual Fee is not a cost in the sense in which that term is used
in the tariff determination framework. As this Tribunal has
consistently held, a cost is an expenditure incurred to earn
revenue, and it is incurred prior to the revenue being earned.
In the case of the Annual Fee, the fee accrues to AAI only after
the revenue has been earned by the airport operator. The
Annual Fee is not a prerequisite for earning revenue; rather, it
is a share of the revenue that is paid out after the revenue has
been received.
163. The definition of 'Revenue' in the OMDA, which forms the basis
for computing the Annual Fee obligation at 38.70% of revenue,
is a definition created for a specific and limited purpose within
the OMDA namely, to determine what the JVC owes to AAI by
way of Annual Fee. It is not a definition that was imported into
Schedule 1 of the SSA for the purpose of defining 'gross
revenue from Revenue Share Assets' in the target revenue
formula.
164. The Annual Fee, which is a contractual obligation to share
revenue with AAI, is not a service rendered by any asset
belonging to the class of Revenue Share Assets. It is a
downstream consequence of revenue generation, not a
Page 112 of 283

component of the revenue itself. Thus, to say that the Annual
Fee is part of the 'gross revenue generated from Revenue Share
Assets' is to confuse the revenue that the assets generate with
the obligations that arise from that revenue being generated.
165. Thus, in the conspectus of the above the inclusion of Annual Fee
in the computation of the ‘S’ factor results in an artificial inflation
of the revenue base and distorts the cross subsidisation
mechanism envisaged under the State Support Agreement. It
amounts to rewriting the contractual formula under the guise of
literal interpretation and introduces a component which the
parties consciously excluded from the regulatory framework.
166. In view of the aforesaid decisions, Respondent No.1-
AERA is hereby directed to exclude the Annual Fee
payable to Airport Authority of India from the revenue
generated by the appellant from the Revenue Share
Assets for the purpose of calculating the ‘S’ factor in
Target Revenue formula and we hereby quash and set
aside the decision of AERA to include Annual Fee payable
to Airport Authority of India from the revenue pertaining
to Revenue Share Assets while determining ‘S’ factor for
the purpose of cross-subsidization while calculating
Target Revenue.
Page 113 of 283

VII. Inclusion of “Other Income” in
determination of “S” factor
167. “Other Income” like income arises out of interest and dividend
income does not form part of revenue from Revenue Share
Assets. Revenue Share Assets have been defined and,
therefore, looking to the definition of Revenue Share Assets
defined in SSA ( Annexure A-5 ) and looking to the said
definition, income arising out of interest or dividend cannot be
treated as revenue from Revenue Share Assets.
168. Moreover, “Other Income” like interest income, dividend
income, and dividend upon delayed payments is included in
Schedule VI of OMDA ( Annexure A-4 ) and hence, this type
of addition by AERA as part of revenue from Revenue Share
Assets is beyond bargain i.e. beyond the terms of the contract.
Moreover, “Other Income” is not relatable to rendition of any
services by MIAL, much less AERA, aeronautical or non-
aeronautical.
169. There is inconsistency in the approach of AERA because
previously “Other Income”, especially from dividend, interest
Page 114 of 283

income, interest upon delayed payments obtained by the
appellant, was not collected or was not added or was not
treated as revenue from Revenue Share Assets. This was a
position during Second Control Period FY 2009-2014. In the
First Control Period FY 2014-2019, AERA treated “Other
Income” as part of revenue from Revenue Share Assets except
rd
dividend income and in 3 Control Period in the FY 2019-2024,
even dividend is included in the “Other Income” as part of
revenue from Revenue Share Assets. It ought to have been
kept in mind by AERA that “ Revenue Share Assets” is a
defined term as per Schedule-1 of SSA ( Annexure A-5 ).
“Other Income” does not form part of revenue arising out of
Revenue Share Assets. “Other Income” has no causal
connection with any services rendered by the appellant.
170. In fact, such type of income to the appellant is because of
Cash Management Process (“CMP”). There is no legal base
to treat income as part of revenue from Revenue Shares
Assets (for inclusion of cross-subsidization for calculation of
S-factor).
171. It is the responsibility of AERA to maintain consistency in their
approach. During First Control Period, “other income” of the
Page 115 of 283

appellant was not treated as part of revenue from “Revenue
Share Assets” and no reasons have been given by AERA for
departure from the principles adopted in First Control Period
and thus, there is a violation of Section 13(4) of AERA Act,
2008. Unjustifiably inconsistent interpretations of the rules of
the game are more problematic, in so far as they create severe
uncertainty and unpredictability in the making of investments
and for national regulatory choice. AERA cannot take different
views in different Control Periods. Certainty of regulatory
philosophy is key to create a predictable environment for
clarity to all the stakeholders. If different approaches are
adopted for different Control Periods, it will lead to uncertainty
which will ultimately lead to unwarranted litigation. As a result,
it will be the end consumer who would be at sufferance. We
are of the opinion that such unnecessary and unwarranted
litigation needs to be curbed which can only happen when the
regulator (AERA) strictly maintains consistency in its approach.

172. Learned Counsel for the Respondent No.1 AERA, has
submitted at length that "Other Income" encompassing
interest, dividend, and interest on delayed payments,
Page 116 of 283

constitutes a derivative of cash flow management integral to
airport operations, warranting its inclusion within 'revenue
from Revenue Share Assets' for 'S' factor computation. This
contention cannot be sustained for the following determinative
reasons:
I. Firstly, "Other Income" of the nature indicated lacks any
statutory or contractual foundation for aggregation with
revenue from Revenue Share Assets and such passive
accruals as interest or dividends do not qualify
thereunder, rendering their inclusion legally baseless.
II. Secondly, Other Income does not emanate from non-
aeronautical services enumerated in Schedule 6 (Parts I
& II) of OMDA, nor from aeronautical-related services.
III. Thirdly, the Respondent's attempt to include "other
income" in the 'S' factor proceeds on a fundamental
misconception of the regulatory bargain. The hybrid till
model, as embodied in the SSA, permits cross-
subsidization only from revenue generated from
specified assets i.e. Revenue Share Assets. This is the
bargain struck between the concessionaire and the
Page 117 of 283

government. To extend cross-subsidization to income
streams that have no nexus with these assets is to
unilaterally alter the terms of the bargain.
IV. Fourthly, there is a patent inconsistency in the
Respondent's approach across control periods that
remains wholly unexplained. During the First Control
Period (FY 2009-2014), "other income" was not treated
as part of revenue from Revenue Share Assets.
In the Second Control Period (FY 2014-2019), AERA
treated "other income" as part of revenue from Revenue
Share Assets, but made an exception for dividend
income. In the Third Control Period (FY 2019-2024),
even dividend income was brought within the fold of
"other income" and included in the 'S' factor. No reasons
have been furnished for these successive departures
from the approach adopted in the First Control Period.
V. Fifthly, "Other income" is neither ascribable to nor
engendered by the provision of any service by the
Appellant-MIAL, but emanates from ancillary fiscal
transactions detached from core airport activities
Page 118 of 283

VI. Sixthly, the tariff determination mechanism already
incorporates the adjustment of under-recovery and
over-recovery through the true-up process across
control periods, together with the addition of carrying
cost or time value of money. Where such financial
adjustments are already taken into account within the
regulatory framework, the inclusion of financial receipts
such as interest or dividend income within the revenue
base risks resulting in double consideration of the same
financial effects.
VII. Seventhly, the concession agreements constitute a
carefully negotiated contractual framework that
allocates specific rights and obligations between the
parties. Once the parties have contractually defined the
scope of Revenue Share Assets, it is not open to the
regulator to expand that definition by incorporating
revenue streams that the parties themselves did not
contemplate.
VIII. Eighthly, as Section 13(4) of the AERA Act mandates
transparency in the exercise of the Authority's functions.
Unjustified inconsistency in regulatory treatment creates
Page 119 of 283

uncertainty, undermines investor confidence, and is
antithetical to the rule of law. AERA cannot take different
views in different Control Periods without cogent
justification. Certainty of regulatory philosophy is key to
creating a predictable environment for all stakeholders.
If different approaches are adopted for different Control
Periods, it will lead to uncertainty, unwarranted
litigation, and ultimately, the end consumer will suffer.
173. The aforesaid aspect of the matter has not been properly
appreciated by AERA while passing the impugned order. We,
therefore, quash and set aside the decision of AERA to
consider “Other Income” as revenue pertaining to Revenue
Shares Assets while determination of S-factor for the purpose
of cross-subsidization while calculating target revenue.
174. The reasons given in paragraph 192 to 226 in judgment
delivered by this Tribunal in AERA Appeal No. 2 of 2021 with
AERA Appeal No.9 of 2016 in case of MIAL Vs. AERA & Ors.,
th
judgment dated 6 October, 2023 are applicable in the facts
of the present case also and, therefore, all these reasons are
Page 120 of 283

adopted in the present matter also for deciding the issue of
“Other Income”.
175. For the ready reference, paragraph 225, 226 and 227 of the
judgment delivered by this Tribunal in AERA Appeal No.2 of
th
2021 and AERA Appeal No.9 of 2016 dated 6 October, 2023
reads as under:
“225. Learned senior counsel for the respondent has
further argued that “other income” is a
function of cash management earned through
airport operations and, therefore, other
income must be included in the revenue as it
is generated from revenue share assets and
has placed reliance upon paragraph number
57 of this Tribunal’s judgment dated 23rd
April, 2018 in AERA Appeal No. 06 of 2012 and
contended that dividend income needs to be
included as part of “S” factor even if services
are provided through its servants and agents.
This contention is not accepted by this
Tribunal mainly for the reason that
because in the case of Bangalore International
Airport Ltd. (BIAL), the concession Page 145
of 253 does not provide for a specific tariff
calculation methodology which is mentioned in
Schedule
case of MIAL-the present Appellant in
Page 121 of 283

1 of SSA where “S” factor is limited to the revenue
from Revenue Share Assets. Moreover, looking to
the definition of Revenue Share Assets, given in
Schedule-1 of SSA (ANNEXURE A-3 (Colly), the
said term is a pre-defined terminology and it does
not encompass within its sphere, the interest
income and dividend income.
226. In light of the aforesaid, “other income” cannot be
a part of revenue, from revenue share assets and
consequently, in calculation of “S” factor in target
revenue formula which is TR= RB x WACC + OM
+ D + T – S. To the aforesaid extent, the
impugned orders which are under challenge in
both the aforesaid AERA Appeals which are at
ANNEXURE A-1 in both the aforesaid AERA
appeals are hereby quashed and set aside.
227. Thus, in view of the aforesaid facts and reasons,
Issue No. VII is answered in negative i.e. “Other
income” cannot be treated as a part of revenue
from Revenue Share Assets.”
176. Thus, in the facts and circumstances and legal
position as discussed above, we hereby hold that
“Other Income” cannot be treated as part of revenue
from Revenue Share Assets and hence, it cannot be
considered in determination of S-factor while
calculating target revenue.
Page 122 of 283

VIII. Revenue from existing assets/demised premises
th
177. Looking to the impugned order passed by AERA dated 7 May,
th st st
2025 for 4 Control Period (1 April, 2024 to 31 March, 2029)
which is at ANNEXURE A-1 , AERA has decided to include
revenue from existing assets/demised premises in the S-factor
computation under target revenue formula, especially
paragraph 10.2.13 of the impugned order.
178. This issue has already been decided by this Tribunal in case of
MIAL Vs. AERA & Ors. in AERA Appeal No.2 of 2021 and AERA
th
Appeal No.9 of 2016, judgment dated 6 October, 2023, and
it has been held that revenue from existing assets does not
form part of revenue from Revenue Share Assets, and,
therefore, it cannot be included while calculating X-factor in
the tariff formula. Paragraphs 372, 373, 378, 379, 380, 381 of
the aforesaid decision reads as under:
“372. In light of the definitions stated above, it is submitted
by counsel appearing for respondent nos. 1 and 3
that revenue earned by this appellant from existing
assets/demised premises should be treated as
“Revenue Share Assets” and 30% of the gross
Page 123 of 283

revenue generated by this JVC-Appellant will be
calculated towards the calculation of “S” factor. This
contention is not accepted by this Tribunal because
looking to the definition of “Revenue Share Assets”,
as stated hereinabove it shall mean a Non-
Aeronautical Assets and the assets required for
provision of aeronautical related services arising at
the Airport and not considered in revenues from Non-
Aeronautical Assets. Looking to the definition of Non-
Aeronautical Assets, all the assets required or
necessary for the performance of Non-Aeronautical
Assets at the Airport as listed in Part-I of Schedule –
6 of OMDA as located at the Airport irrespective of
whether they are owned by JVC or any third party to
the extent such assets are located within or form part
of any terminal building or are conjoined to any other
Aeronautical assets, asset including in Paragraph (i)
above , and such assets are incapable of
independent access and independent existence or
are prominently Page 235 of 253 serving/catering
any terminal complex/categorically complex and
shall specifically include all the additional land (other
Page 124 of 283

than demised premises), property and structures
thereupon acquired or leased during the Term in
relation to such non-aeronautical assets.
373. Non-Aeronautical Services are the services which are
listed in Part- I and Part-II of Schedule – 6 of OMDA.
In view of the aforesaid definition of Revenue Share
Assets, Non-Aeronautical Assets and Non-
Aeronautical Services, it is explicitly clear that Non-
Aeronautical Revenue accruing from exiting
premises/ demised premises could not be considered
as part of revenue from “Revenue Share Assets” and
consequently it cannot be used for cross
subsidization. Looking to the definition of “Third
Party” as per lease agreement it appears that Third
Party means an entity other than party to the leased
agreement meaning thereby to Third Party means a
party which is neither the AAI nor the MIAL. The
word “entity” has also been defined as per OMDA
means any Person, Body Corporation, Trust,
Partnership Firm or other Association of
persons/individuals whether registered or not. Upon
Page 125 of 283

conjoint reading of the definition of “Entity” (from
OMDA), of “Third Party” (as per Lease agreement)
and definition of “Revenue Share Assets”, it is
explicitly clear that the “Third Party” as mentioned in
Page 236 of 253 the definition of “Non-Aeronautical
Assets” cannot include AAI. Meaning thereby to, any
asset which is owned by AAI and is leased to MIAL,
but, not categorised as “Aeronautical Assets” or
“Non-Aeronautical Assets”, cannot be considered as
“Non-Aeronautical Assets”. As a resultant effect, the
revenue accrued from such asset cannot be
considered towards calculation of “S factor” or it
cannot be considered for cross subsidization.
378. AERA has erred in dismissing the appellant’s
contention regarding revenue from the existing
assets should be excluded from the calculation of “S-
factor” for 3rd Control Period and consequent true
up merely on the ground that the MIAL has not raised
this issue in the previous Control Periods. This
reasoning of AERA is erroneous mainly for the reason
that the issue which is raised by this appellant
Page 126 of 283

involves interpretation of the complex agreements
like OMDA, SSA, Lease Agreement etc. which are first
of its kind. Failure of appellant to raise this issue was
not deliberate. As stated hereinabove there is no
need to maintain consistency by the appellant in
wrong interpretation of the terms of the contract.
Correct interpretation of the contracts involves in the
present proceedings in both the aforesaid AERA
Appeals can always Page 239 of 253 be done even if
such issues could not be raised in earlier control
periods. No estoppel is created thereby.
379. We, therefore, quash and set aside the decision of
AERA bearing No. 64/2020-21 dated 27.02.2021 (for
3rd Control Period) of inclusion of revenue from
existing assets/demised premised in the calculation
of “S”-factor.
380. In light of the aforesaid facts and circumstances, we
hereby hold that looking to the provisions of OMDA
to be read with the provisions of SSA and of the
definitions as stated in this point, we hereby hold
that revenue accrued from the existing
Page 127 of 283

assets/demised premises by the appellant cannot be
considered as part of revenue from “Revenue Share
Assets” for the calculation of “S” factor and
consequently, true up has to be given for the earlier
Control Periods also.
381. Thus, in view of the aforesaid facts and reasons, Issue
No. XXII is answered in negative. As stated
hereinabove, we hold that revenue accrued from the
existing assets/demised premises cannot be
considered as a part of revenue from “Revenue
Share Assets”.
179. All the reasons given in paragraph 372 to 380 of the
aforesaid decision are applicable in the facts of the
present case also, and for very same reasons, we
hereby quash and set aside the decision of AERA of
inclusion of revenue from existing assets/demised
premises in calculation of S-factor and we hereby hold
that the revenue accruing from existing assets
/demised premises cannot be considered as a part of
revenue from Revenue Share Assets .
Page 128 of 283

IX. INCLUSION OF ‘S’ FACTOR IN
AERONAUTICAL REVENUE FOR COMPUTATION OF ‘T’
180. Having examined the impugned order and the submissions
advanced by the learned senior counsel appearing for the
parties, the principal controversy which arises for
consideration under the present issue is whether the amount
represented by the “S-factor”, which constitutes 30% of the
gross revenue generated from Revenue Share Assets, is
required to be treated as forming part of the aeronautical
revenue base for the purpose of computation of “T”, namely
the amount equal to corporate taxes on earnings pertaining
to aeronautical services, in the Target Revenue formula
prescribed under the State Support Agreement (SSA).
181. At the outset, it is necessary to bear in mind the structure
of the Target Revenue formula contained in Schedule-1
of the SSA, which reads as follows:
Tri = Rbi × WACCi + Omi + Di + Ti − Si
Page 129 of 283

182. The Target Revenue so determined represents the total
permissible revenue recoverable by the airport operator
through aeronautical charges. In the said formula, “S”
represents 30% of the gross revenue generated by the Joint
Venture Company (JVC) from Revenue Share Assets, which
effectively operates as a cross-subsidy from non-
aeronautical revenues towards aeronautical services.
183. When the Target Revenue is computed under the aforesaid
formula, the effect of the "S-factor" is that a portion of the
non-aeronautical revenue generated from Revenue Share
Assets is notionally utilised to reduce the quantum of
aeronautical charges recoverable from users. Thus, the
cross-subsidy embodied in the "S-factor" directly impacts
the determination of the permissible aeronautical revenue.
184. In the impugned order, AERA has proceeded on the basis
that the component represented by the "S-factor" ought not
to be treated as forming part of the aeronautical revenue
base for the purpose of computing "T".
185. We are unable to accept the aforesaid reasoning of AERA.
The Target Revenue formula itself demonstrates that the “S-
factor” forms an integral component of the aeronautical
Page 130 of 283

revenue determination mechanism. The formula determines
the permissible aeronautical revenue only after accounting
for cross-subsidy from non-aeronautical revenues through
the deduction represented by “S”.
186. Once the cross-subsidy amount represented by the “S-
factor” is embedded within the Target Revenue
determination process, the said component inevitably
assumes the character of aeronautical revenue for
regulatory purposes . In other words, the computation of
aeronautical revenue under the SSA framework necessarily
incorporates the economic effect of the S-factor.
187. The definition of "T" under the SSA refers to an amount
equal to corporate taxes on earnings pertaining to
aeronautical services. The expression employed in the
agreement is not the amount of tax actually paid, but an
amount equal to corporate taxes computed on earnings
pertaining to aeronautical services. Consequently, the
computation of "T" forms part of the regulatory building-
block methodology used for determination of aeronautical
tariffs. Section 13(1)(a)(vi) of the AERA Act mandates the
Authority to take into consideration "the concession offered
Page 131 of 283

by the Central Government in any agreement or
memorandum of understanding or otherwise."
188. If the S-factor is treated as part of the aeronautical revenue

computation mechanism while determining the Target
Revenue, it logically follows that the tax component "T",
which represents corporate taxes on earnings pertaining to
aeronautical services, must also be computed by taking into
account the full aeronautical revenue base as determined
under the agreed formula. Section 13(1)(a)(iv) of the AERA
Act requires the Authority to consider the "economic and
viable operation of major airports."
189. AERA has proceeded on the assumption that unless the
airport operator actually incurs income tax liability during the
relevant control period, the component of “T” ought not to
be recognised in the tariff determination. This approach is
inconsistent with the plain language of the SSA which
mandates computation of an amount equal to corporate
taxes irrespective of whether the tax is actually payable or
paid in that period.
190. The computation of Target Revenue under the regulatory
formula and the actual payment of income tax under the
Page 132 of 283

Income Tax Act operate in entirely different domains. The
former is a tariff-determination exercise undertaken for
regulatory purposes, whereas the latter concerns statutory
tax liability under fiscal legislation.
191. Consequently, the interpretation adopted by AERA, whereby
"T" is equated with corporate taxes actually paid by the
airport operator, amounts to rewriting both the definition of
"T" and the Target Revenue formula contained in the SSA
and such modification of the contractual regulatory
framework is beyond the scope of AERA's authority under
the AERA Act.
192. This Tribunal in similar matter between GMR Hyderabad
International Airport Vs. AERA in AERA Appeal No. 4 of 2021
th
judgment dated 14 February, 2024 has held in paragraph
423 and 424 as under:
“ 423. The aforesaid facts of the matter have not been
properly appreciated by AERA, and therefore, the
decision of AERA not to consider 30% of Non-
Aeronautical Revenue (NAR) as part of
Aeronautical Revenue Base for computation of
aeronautical taxes is incorrect, improper and
unjustified.
Page 133 of 283

424. We, hereby direct AERA to consider (i) the
calculation of “T” on 30% of Non-Aeronautical
Revenue because it partakes the character of
Aeronautical Revenue in calculation of ARR as per
the aforesaid formula, (ii) the aeronautical taxable
income computed as per the normal provisions of
the Income Tax Act, 1961.”
193. It has been held by this Tribunal in case of DIAL Vs. AERA for
nd rd st
2 Control Period and 3 Control Period judgment dated 21
July, 2023 in paragraph numbers 140, 141, 145 as under:
“ 140. AERA’s contention that including S- Factor in
calculation of Tax will result in an artificial tax
benefit and overstate aeronautical tax is also
misconceived and misleading. S factor has been
considered in aeronautical Profit & Loss to arrive at
Aeronautical Profit Before Tax (PBT) and the
allocation of actual tax paid by DIAL is in the ratio
of Aeronautical and Non-Aeronautical PBT and thus
will not result in creation of artificial tax. Further,
inclusion of S Factor in Tax and consequent
consideration of S Factor as aeronautical revenue
will provide true aeronautical profit and accurate
base to calculate ‘T'.
141. AERA’s observation regarding reduction in the level
of cross subsidy is also misconceived in as much as
Page 134 of 283

the nonaeronautical revenue cross subsidizes
aeronautical revenue and the tax is only resultant
on the profit earned and thus, the cross subsidy is
nothing but a part of recovery of eligible
aeronautical revenue only and thus has to be
considered while drawing aeronautical Profit &
Loss.” …
145. …This definition cannot be amended nor the formula
can be amended by AERA. AERA has presumed
that T is equal to amount of corporate taxes paid
by the appellant. This definition cannot be
amended nor the formula can be amended by
AERA. AERA has presumed that T=corporate taxes
paid by the Appellant. This addition of the words,
neither in the definition nor the formula is
permissible because it is an agreement between
the appellant and the Government of India. We,
therefore, quash and set aside observations of
AERA for 2nd Control Period as well as for 3rd
Control Period, so far as they are related to
exclusion of “S” factor as part of aeronautical base,
while determining aeronautical taxes (i.e. T). We,
hereby hold to include “S”-factor as part of
aeronautical revenue base while determining
aeronautical taxes (i.e. T), for 2nd as well as 3rd
Control Period. Thus, in view of the aforesaid facts
and reasons, Issue No. IV is answered in
Page 135 of 283

affirmative. “S-factor” should be considered as a
part of Aeronautical Revenue Base while
determining Aeronautical taxes (i.e. T), and
consequently true up has to be given for the earlier
control periods also.”
194. We hereby adopt all the reasons which are given in paragraph
th
number 382 to 389 given in judgment dated 6 October, 2023
in AERA Appeal No.2 of 2021 between MIAL Vs. AERA and Ors.
which are reproduced hereinbelow:
“382. As per the combined reading of OMDA and SSA to
be read with the Provisions of AERA Act, the
aeronautical charges are to be determined by
AERA. Target Revenue is a methodology for
calculating the aeronautical charges in the shared
till inflation - X price cap model. The very purpose
of AERA has been mentioned in Clause 3.1.1 and
Clause 3.1.2 of SSA (ANNEXURE A-4). The formula
for the target revenue (TR) as per Schedule-1 to
the SSA is as under:
TRi = RBi x WACCi + OMi + Di + Ti – Si
This target revenue is an amount which can be
collected by the JVC Appellant-MIAL where “S” is
equal to 30% of gross revenue generated by JVC
Page 136 of 283

from the Revenue Share Assets. “Revenue Share
Assets” shall mean (a) non aeronautical assets; and
b… non-aeronautical assets have not been defined in
SSA and, therefore, the definition of non-
aeronautical assets has to be read from OMDA which
is at ANNEXURE A-3.
Non-Aeronautical assets mean all assets required or
necessary for the performance of non-aeronautical
services at the Airport as listed in Part I of Schedule-
6….… and all the assets required or necessary for the
performance of non-aeronautical services at the
Airport as listed in Part II of Schedule-6 hereof as
located at the Airport.
. In light of the aforementioned definition of Revenue
383
Share Assets to be read with definition of non-
aeronautical assets for the calculation of “S-factor” it
is 30% of gross revenue generated by JVC from
revenue share assets. This will be the component of
“S-factor” which is also referred by the counsel for
the appellant as well as respondents as the amount
for cross-subsidization. Meaning thereby to, in
calculation of target revenue (TR), there will be
deduction from the total amount which is equal to
30% of the revenue collection from the non-
aeronautical services.

Page 137 of 283

384. In light of the provisions of AERA Act, OMDA and SSA,
only aeronautical charges are being controlled
whereas non-aeronautical charges for non-
aeronautical services and the tariff for non-
aeronautical services is not controlled by AERA. Tariff
for non-aeronautical charges and for non-
aeronautical services can be fixed by the JVC-
Appellant MIAL.
385. Upon reading the formula of target revenue, it further
appears that while calculating the target revenue by
AERA, they are deducting 30% of gross revenue
generated from non-aeronautical services. Now the
question here is the calculation of amount of tax.
386. The learned senior counsel for the appellant
submitted that on the amount of 30% of gross
revenue generated by JVC from non-aeronautical
services, the tax ought to be calculated which is
being denied by AERA in both the aforesaid AERA
Appeals.
387. In light of the impugned order in the present appeal
passed by AERA, it appears that AERA has calculated
tax on the amount = RB x WACC + OM + D, out of:
TRi = RBi x WACCi + OMi + Di + Ti – Si Thus, upon
the aforesaid encircled amount, the AERA has
permitted the addition of amount equal to tax,
Page 138 of 283

whereas, this appellant’s contention is that the
amount of tax upon “S” should also be calculated.
388. We fully agree with the contention of this appellant
mainly for the reason that: a. The basic function of
AERA under the AERA Act to be read with SSA and
OMDA is to control and guide and determine the
tariff for aeronautical services. Non-aeronautical
services, non-aeronautical charges and non-
aeronautical tariffs like tariff of the hotel, rent of
the shops, entry fee for the visitors at CSMIA,
Mumbai, vehicle parking charges etc. which are
referred in Schedule-6 appended with OMDA is in
the control of the JVC. b. Looking to the formula of
target revenue TRi = RBi x WACCi + OMi + Di + Ti
– Si, it is to be kept in mind that by addition of
various components as stated hereinabove in the
formula what is arrived at is the target revenue for
aeronautical services. c. Once the amount of “S-
factor” which is 30% of the gross revenue
generated from Revenue Share Asset becomes
part and parcel of the target revenue, it also having
a color of aeronautical revenue and, therefore, tax-
T ought to be calculated even upon amount equal
to “S” factor.
389. In light of the impugned order for 3rd Control Period
(F.Y 2019- 2024) which is at ANNEXURE A-1, it has
Page 139 of 283

been observed in paragraph 2.5.7 and 2.5.8 by
AERA that in pursuance of the order passed by this
Tribunal for Mumbai International Airport Ltd.
(MIAL) dated 15th November, 2018 in AERA Appeal
No. 04 of 2013, the matter was remanded upon the
issue of “S-factor” for being considered as a part of
aeronautical revenue and it has been decided by
AERA that the amount equal to “S-factor” is not
aeronautical revenue base for computation of
aeronautical taxes for 1st Control Period. As per
paragraph 8.5.1 of the Impugned Order for 3rd
Control Period (ANNEXURE A-1), it has been
decided by AERA that since “S-factor” does not find
place in aeronautical services earning pertaining to
Aeronautical Services should not include “S-factor”
and addition of tax in target revenue upon an
amount of S factor would result in undeserved
enrichment to the airport operator effectively
reducing the cross-subsidy benefit.
390. We do not agree with the aforesaid reasons by
AERA mainly for the reason that because the target
revenue as per the aforesaid formula is
determined, based on aeronautical building block
post cross subsidy of 30% revenue from Revenue
Share Assets and, therefore, out of total target
revenue, 30% has been recovered from the
revenue generated by JVC from Revenue Share
Page 140 of 283

Assets. In view of this formula of Target Revenue,
it is abundantly clear that in a recovery of Target
Revenue for aeronautical services, “S-factor” is one
of the mechanism of calculation in the formula of
TR thus, the amount of “S-factor” partakes the
character of aeronautical revenue and, therefore,
once the part of aeronautical revenue has been
recovered from 30% of revenue from evenue
Share Assets, the effect of “S-factor” should also
be given in “T” (i.e. corporate tax pertaining to
aeronautical services). ”
195. The aforesaid reasons given in paragraphs 382 to 390 of the
judgment of this tribunal are applicable in the facts of the
present case and for the said reasons also we hereby quash
and set aside the decision of AERA in so far as it is
decided by AERA that amount equal to S-factor is
excluded for the purpose of calculation of “T” and
accordingly, the findings recorded by AERA in the
impugned tariff in this regard cannot be sustained in
law and are liable to be set aside.
196. We hereby direct AERA to include S-factor as part of
aeronautical revenue base while determining
aeronautical taxes (T) in the target revenue formula.
Page 141 of 283

X. Corporate Cost Allocation – Legal expenses
197. AERA has decided to exclude legal cost of Rs.5.67 Crores from
total corporate cost allocation expense. AERA has decided to
exclude expenses comprising of allocated cost of legal teams
of Adani Enterprises Limited (AEL) for Rs.1.99 Crores and for
Adani Airports Holding Limited (AAHL) Rs.3.58 Crores.
198. This issue has already been decided by this Tribunal in AERA
Appeal No.1 of 2023 and other connected AERA Appeals,
th
judgment dated 11 September, 2025. This Tribunal has
quashed and set aside the decision of AERA of partly allowing
expenses towards in-house legal team of the appellant and
has directed AERA to include corporate cost under the
operating expenses on actual basis. Paragraph 271 and 272 of
the aforesaid decision reads as under:
“271. It ought to be kept in mind by AERA that the Cost
of legal department employees cannot be treated
as Legal Services, as there is a restriction on
advocates from taking up other employments.
Meaning thereby to, an advocate can either be a
Page 142 of 283

counselor an employee. In-House legal department
employees cannot provide legal services of arguing
a case in court of law. They can merely check the
legal side of the documents for better
understanding of the management who are not
qualified in law.
272. In view of the aforesaid facts, reasons and judicial
pronouncement, we hereby quash and set aside
the decision of AERA of partly allowing expenses
towards the in-house legal team of the appellant.
We, hereby direct AERA to include Corporate Cost
under the Operating Expenses on actual basis.
Necessary True-up shall also be given in next
Control Period. Hence, AERA is directed to allow
the cost of legal employees under the Corporate
Allocation Cost.”
199. It is a fundamental principle of administrative and regulatory
law that a statutory regulator must act with consistency and
provide a level playing field to similarly situated entities. The
Appellant has demonstrated, through a reference to Tariff
Page 143 of 283

Order No. 20/2024-25 and Consultation Paper No. 15/2020-21
for Delhi International Airport Limited (DIAL), which is at
Annexure-A-1 Page 310, Vol. 2 to the memo of this appeal,
that AERA has consistently allowed corporate cost allocation
for legal services without such deductions for DIAL, which is a
similarly situated entity operating under similar OMDA and SSA
framework.
200. Moreover, MIAL and DIAL are governed by substantially
similar concession frameworks (OMDA and SSA). In the
absence of any distinguishing factor or a rational nexus for
differential treatment, the Authority cannot adopt a "pick and
choose" policy. Regulatory certainty is a virtue that ensures
stakeholders can predict the admissibility of expenditures;
arbitrary deviations undermine the very "economic and viable
operation" that the Authority is mandated to protect under
Section 13(1)(a)(iv) of the AERA Act.
201. Further schedule 5 of OMDA, at Annexure A-4 Page 767 to the
memo of these appeals, lists Aeronautical Services at Serial
No. 11 as follows:
Page 144 of 283

“11. any other services deemed to be necessary for
the safe and efficient operation of the Airport.”
202. The definition of 'OM' in Schedule 1 of the SSA, at Annexure
A-5 to the memo of this appeal, is a functional open-ended
definition, which incorporates 'efficient operation and
maintenance cost pertaining to Aeronautical Services.'
It requires application of a functional test to each cost
category; it does not require express statutory or contractual
authorisation for each specific cost head.
203. The Legal costs of the corporate company's legal function is
proportionately allocated to MIAL, if it satisfies both limbs of
the functional test:
(a) When they are 'efficient', where the centralised
corporate model is demonstrably more efficient than an
equivalent decentralised structure; and
(b) When they 'pertain to' aeronautical services, if the legal
function manages the Appellant's obligations under the
OMDA and SSA.
Page 145 of 283

204. The Respondent No. 1’s contention that legal expenses lack
nexus with aeronautical services is untenable. The functions
performed by corporate legal personnel, are akin to strategic
advice on regulatory compliance, coordination of litigation
affecting airport operations, formulation of policies governing
airport management and internal audit of statutory compliance
have direct and proximate nexus with the Appellant's ability to
provide aeronautical services efficiently and in accordance
with law. That these services are performed at a corporate
location rather than at the airport site is irrelevant in an era of
centralized corporate functions.
205. AERA has acted in an inconsistent and arbitrary manner in
disallowing the legal corporate costs to the Appellant,
particularly when, the Consultation Paper no. 15/2020-21
pertaining to DIAL, similar corporate cost allocation was
allowed without any deductions on account of legal expenses.
The failure of AERA to maintain consistency in its regulatory
approach, without providing any cogent justifications for such
deviation, renders the impugned decision discriminatory and
violative of settled principles of regulatory certainty.
Page 146 of 283

206. It is a well-established principle that the consistency in
decision-making is an essential facet of regulatory fairness and
deviation from an established approach must be supported by
sound reasoning. In absence of any distinguishing factors
between the case of DIAL and the present Appellant, the
differential treatment meted out my AERA is arbitrary and
unsustainable in law.
207. AERA has failed to appreciate that the Corporate Legal
Department performs functions analogous to those carried out
by in-house legal personnel of the Appellant. This centralised
corporate legal structure enables the Appellant to maintain a
lean and efficient legal team at the airport level, while relying
on the expertise and resources of the Corporate Legal
Department for a substantial portion of legal work, including
litigation, advisory, regulatory compliance and contract
management.
208. The disallowance of such costs fails to recognise the
operational and economic efficiency achieved through this
structure. If the Appellant is denied reimbursement of
expenses incurred towards the Corporate Legal Department it
would be compelled to duplicate such functions at the airport
Page 147 of 283

level by hiring additional personnel thereby leading to an
unnecessary increase in overall costs, which is contrary to the
very objective of efficient tariff regulation.
209. The Appellant had placed on record detailed submissions
explaining the distinct roles, responsibilities and functions of
legal personnel at both the airport level and corporate level.
These submissions clearly demonstrate that there is no
duplication or redundancy, but, rather a complimentary division
of functions designed to ensure efficiency and specialisation.
However, AERA has failed to appreciate these submissions in any
meaningful manner and has instead proceeded to disallow the
costs on mere assumptions of overlap without any substantive
analysis or evidence.
210. It ought to be noted that such an approach is contrary to
principles of reasoned decision-making, as AERA is obliged to
consider the material placed before it and provide clear and
cogent reasons for rejecting the same. The absence of such
reasoning renders the decision, arbitrary and hence is liable to
be set aside.
211. In the OMDA, there is no provision that restricts the inclusion of
legal expenses as part of such allocation. In the absence of any
contractual prohibition, the disallowance of legal corporate costs
Page 148 of 283

is contrary to the contractual framework governing the
relationship between the parties.
212. In view of the above, it is held that disallowance of corporate
legal cost is arbitrary, unsupported by reasoning, inconsistent
with past regulatory practice and contrary to both the contractual
framework in principles of effective cost allocation. Accordingly,
AERA ought to allow the entire corporate cost allocation,
including legal expenses as claimed by the Appellant.
213. Furthermore, the Respondent No. 1 reliance on "recent
concession agreements entered by AAI” to justify exclusion of
legal expenses is legally untenable. The Appellant's rights and
obligations are governed by the OMDA and SSA executed in
2006, which contain no exclusion for legal expenses.
214. In the backdrop of the above, we believe that AERA was not
entitled to disallow the entire corporate legal cost allocation
without engaging with the Appellant's evidence on the roles and
responsibilities of the corporate legal team, without examining
the allocation methodology, and without identifying any specific
error in the Appellant's figures.
215. In view of the aforesaid facts and reasons, we hereby
direct AERA to include corporate cost under the
operating expenses on actual basis .
Page 149 of 283

th
XI. Soft Cost for 4 Control Period
216. The Cost claimed towards technical services, project
management consultancy (PMC), preliminary expenses and
pre-operative contingencies, statutory provisions, labour cess,
site projections and preparations, insurance, etc., which is
conjointly known as soft cost.
217. AERA has decided to allow soft cost at a uniform rate of 8%
of total capital expenditure as against 16% claimed by the
th
appellant for 4 Control Period.
218. As per Central Public Works Department (CPWD), Norms, 2022
th
( Annexure A-23 ), dated 13 July, 2022, various costs are to
be considered while preparing preliminary estimates and
include the following components:
I. Planning Consultancy 4% and Project Management
Consultancy 5%”.
II. Other Technical Services like Preliminary Sketches,
Detailed Drawings, Preliminary Estimates,
Structural Design, Execution, Audit & Account etc.
is ranging between 7% to 24% depending upon
size of the project.
III. Contingency cost is 3%.
IV. ESI & EPF ranging between 0.85% to 4.2%.
219. Thus, considering CPWD Norms, 2022 soft cost would range
between 15% to 20%.
Page 150 of 283

220. It has also been pointed out by Learned Senior Advocate Mr. Sajan
Poovayya on behalf of the appellant that Airports Comparative
Research Programme, a study which is conducted by Transport
Research Board sponsored by (US Government Federal Aviation
Administration), the soft cost is ranging between 10% to 30% even
in developed countries.
221. Therefore, AERA ought to have provided for true-up of all the soft
costs based on actual incurrence as per calculation as per Section
13(1)(a)(i) of AERA Act, 2008.
222. AERA has failed to appreciate that as per the Tariff Order
th
No.27/2023-24 dated 7 December, 2023 issued for MOPA, Goa
Airport, AERA had approved soft cost, design consultancy, PMC
expenses, pre-operative expenses and contingencies at 13% to
16%. AERA ought to have maintained consistency in their
approach.
223. AERA has sought to distinguish the allocation of Goa Airport at
Mopa on the ground that MOPA is a greenfield airport.
We do not accept that this distinction is a ground for departing from
the principle of actual-cost-based allowance. The greenfield
/brownfield distinction may affect the quantum of soft costs
ultimately incurred at the verification and true-up stage. It does not
justify an a priori blanket cap.
Page 151 of 283

224. It must be kept in mind that a brownfield airport undergoing
simultaneous major CAPEX across terminal construction, runway
expansion, airside works, and technology upgrades will incur
significant soft costs including PMC, design consultancy, pre-
operative expenses, independent engineer fees, and statutory
expenses, all of which are legitimate operational expenditures.
225. Moreover, looking to our previous decision in AERA Appeal No.1 of
th
2023 and other connected appeals, judgment dated 11
September, 2025, which reads as under:
“162. In view of the aforesaid facts and reasons, we hereby
quash and set aside the decision of AERA in the
impugned order (Annexure A-1) so far as it relates to
Soft Cost and we hereby direct AERA to allow actual
Soft Cost incurred by the Appellant. Putting an artificial
cap upon Soft Cost is not contemplated under the
applicable laws. Therefore, AERA shall allow actual
Soft Cost incurred by the appellant and necessary true
up shall be given for the previous control periods
accordingly."
226. We see no reason to deviate from our precedent. The Authority’s
function is to "scrutinize the efficiency" of expenditure, not to
impose arbitrary ceilings that may force an operator to compromise
on the quality of technical supervision or project management. An
efficient airport requires high-quality "soft" infrastructure planning
to ensure the "hard" infrastructure is delivered safely and
effectively.
Page 152 of 283

227. The respondent No.1 has also contended that the appellant’s
proposal of a flat 16% soft cost on total capital expenditure is
inherently illogical because soft costs do not scale proportionately
with capital outlay. There is merit in the observation that a uniform
percentage across all projects may not reflect the actual effort
required for each category of work. However, the solution to this
concern is not to impose a different uniform percentage cap of 8%,
but to allow soft costs on the basis of actual incurrence, with a
true-up mechanism.
228. The true-up mechanism is precisely designed to address the risk of
over-estimation. If the appellant ultimately incurs soft costs lower
than the estimated amount, the excess will be trued up in the next
control period, with carrying cost, and no burden will be placed on
the users. Conversely, if the appellant incurs higher soft costs than
the capped amount, the artificial cap would prevent the recovery of
legitimate expenditure
229. The Soft Cost claimed by the Appellant deserves to be allowed, as
the issue is no longer res integra in view of judgment dated 11-09-
2025 delivered by this tribunal in AA no. 1 of 2023 and in connected
appeals, wherein it has been expressly held that AERA shall allow
the actual Soft Cost incurred by the Airport Operator and that
introducing an artificial cap on Soft Cost is not contemplated under
Page 153 of 283

the applicable law. Once this Tribunal has already laid down that
actual Soft Cost is to be allowed and necessary true-up is to be
granted accordingly, AERA could not have mechanically imposed a
uniform cap of 8% of the total capital expenditure in derogation of
the binding findings of this Tribunal.
230. The decision of AERA to restrict the Soft Cost to 8% is arbitrary and
unsupported by any cogent material, particularly when the material
placed on record by the Appellant demonstrates that the Soft Cost
claimed is based on recognised norms, industry practice and
rational estimation.
231. AERA has failed to appreciate that under the CPWD Norms, 2022,
the various components ordinarily forming part of Soft Cost,
including:
i. planning consultancy,
ii. project management consultancy,
iii. technical services,
iv. contingencies and,
v. statutory employee-related costs,
232. Further, the above cumulatively indicate that Soft Costs would
reasonably range between 15% to 20% of the project cost. In such
circumstances, the Appellant’s claim of 16% cannot be said to be
Page 154 of 283

unreasonably excessive or abnormal. On the contrary, it is well
within the range contemplated by the established domestic norms.
233. AERA has further failed to consider internationally accepted
benchmarks placed on record by the Appellant. The study titled as
“Airport Capital Improvements: A Business Planning and
Decision-Making Approach” conducted by the Airport Co-
operative Research Program under the Transport Research Board,
sponsored by the Federal Aviation Administration of the United
States Government, clearly states that Soft Costs typically range
between 10% to 30% of the total project cost and include:
i. Design fees,
ii. Permitting fees,
iii. Utilities,
iv. Inspection-related expenses,
v. Land acquisition-related expenses,
vi. Procurement costs,
vii. Project administration and management costs.
234. This study is a reputable and industry-recognised source dealing
specifically with airport infrastructure projects and it clearly shows
that the Soft Cost claimed by the Appellant falls within the normal
and accepted range for such projects.
Page 155 of 283

235. The impugned approach of AERA is inconsistent with its own recent
regulatory practice. In Tariff order no. 27/2023-24 dated 07-12-
2023 issued in respect of Manohar International Airport, Goa, AERA
itself approved Soft Cost components such as:
i. Design consultancy,
ii. PMC expenses,
iii. Pre-operative expenses, and
iv. Contingencies ranging from 13% to 16%.
236. The approval of such Soft Cost percentages in the case of another
airport project demonstrates that AERA has itself recognised that
Soft Costs at such levels are reasonable ad permissible in airport
infrastructure projects. In absence of any intelligible differentia or
project-specific reasons justifying a departure, AERA could not have
adopted a drastically lower figure at 8% for the Appellant. Such
inconsistent treatment offends the principle of regulatory certainty
and renders the impugned decision arbitrary.
237. It is also important to note that the Appellant has not sought
allowance of any inflated or hypothetical figure, but, has based its
claims on rational estimates derived from accepted practice,
technical norms, and comparable airport orders. The proper
regulatory course in such cases is to allow the Soft Cost as
Page 156 of 283

reasonable estimated for tariff purposes, subject to true-up on the
basis of actual incurrence. Such an approach adequately protects
consumer interest, while at the same time ensuring that the Airport
Operator is not denied recovery of legitimate project-related
expenditure at the projection stage.
238. In these circumstances, we hereby allow the Soft Cost claimed
by the Appellant as the same is supported by the binding
judgment of this Tribunal, and is also consistent with CPWD Norms
and is also falling within the internationally recognised benchmarks
for the airport projects and is also in line with AERA’s own treatment
of comparable airport projects such as Goa airport.
239. In view of the aforesaid facts and reasons, the restrictions of
Soft Cost to 8% as imposed by AERA is hereby quashed and
set aside . We hereby hold that Appellant is entitled to
allowance of Soft Cost as claimed by the Appellant, subject
to true-up on the actual incurrence basis.
240. We hereby quash and set aside the decision of AERA in so
far as it relates to Soft Cost, and we hereby direct AERA to
allow Soft Cost incurred by the appellant . Putting artificial cap
upon Soft Cost is not contemplated under the applicable laws and
therefore, AERA shall allow actual Soft Cost incurred by the
appellant.
Page 157 of 283

XII. Fixation of minimum amount of
th
non-aeronautical revenue for 4 Control Period
241. Looking to the impugned tariff order passed by AERA dated
th th
7 May, 2025 for 4 Control Period (01.04.2024 to
31.03.2029) which is at Annexure A-1 , AERA had decided
to consider non-aeronautical revenue at Rs.12,504.15
Crores (as against Rs.11,382.29 Crores projected by the
Appellant). It has also been decided by AERA that true-up
shall be given for the non-aeronautical revenue in the next
Control Period (2029-2034) only if the actual non-
aeronautical revenue exceeds Rs.12,504.15 Crores. AERA
has decided in the impugned order ( Annexure A-1 ) that
non-aeronautical revenue shall be minimum of Rs.12,504.15
Crores. This fixation of minimum amount of non-
aeronautical revenue is under challenge.
242. It ought to have been kept in mind by AERA that AERA has
no power, jurisdiction and authority to fix minimum non-
aeronautical revenue at Rs.12,504.15 Crores and AERA
cannot decide to set-off only if the actual non-aeronautical
revenue exceeds Rs.12,504.15 Crores. The revenue cannot
be presumed by AERA. Revenue should be considered on
Page 158 of 283

actual basis, whether it is aeronautical or non-aeronautical,
and therefore, even if the non-aeronautical revenue is lesser
than Rs.12,504.15 Crores, set off must be given by AERA.
243. Moreover, there is no provision under AERA Act whereby
AERA can fix minimum amount of non-aeronautical revenue,
nor there is any provision under OMDA and SSA ( Annexure
A-4 and Annexure A-5 respectively) which permits AERA
to fix minimum amount of non-aeronautical revenue.
244. It appears that AERA had given detailed calculation of
th
minimum non-aeronautical revenue for the 4 Control
period (1.4.2024 to 31.3.2029) in Table 343 and Table 344
of the impugned order in paragraphs number 10.5.8 and
10.5.9 which reads as under:
Table 343: Non-Aeronautical Revenues as decided by the Authority for
the Fourth Control Period
(Rs. in crores)
Particular
Ref FY25 FY26 FY27 FY28 FY29 Total
s
Retail
Licenses
Revenue


F&B
157.05 159.84 170.66 186.81 216.52 890.89

Flight
Kitchen
60.22 53.14 52.26 57.83 70.35 293.80
Page 159 of 283

Retail
Concession
155.95 147.99 147.61 161.35 189.89 802.80

Foreign
Exchange,
Banks &
ATM
94.16 74.26 67.85 72.02 76.97 385.25

IT &
Communica
tion
146.35 126.97 122.61 133.20 159.25 688.38

Car Rental
& Hotel
Reservation
27.38 23.76 22.94 24.92 29.80 128.80

Duty Free
Shops
377.00 298.80 277.57 296.31 316.32 1,566.00
Advertising
Income
235.82 204.75 197.84 214.93 256.88 1,110.23

Car Parking
/ Ground
Transport
63.40 57.62 58.30 66.35 83.10 328.78

Ground
Handling
150.06 132.06 126.33 135.82 161.06 705.33
Others 58.32 50.60 48.86 53.08 63.46 274.32
Total
Retail
Licences
Revenue
A 1,525.
71
1,329.
77
1,292.
84
1,402.
62
1,623.
63
7,174.5
7

Rent &
Services
Revenue


Land Rent
& Lease
199.24 214.18 230.25 247.52 266.08 1,157.27

Hanger
Rent
35.49 19.07 - - - 54.56

Terminal
Building
Rent
116.93 113.95 109.86 118.10 140.36 599.19

Cute
Counter
Charges
14.16 11.93 10.93 11.26 12.79 61.07
Page 160 of 283

Lounges
161.65 148.78 149.56 163.42 192.30 815.70

Cargo
Building
Rent &
Other
Building
Rent
37.71 40.54 43.58 46.85 50.36 219.04
Total Rent
& Services
Revenue
B 565.1
7
548.4
6
544.1
8
587.1
4
661.8
9
2,906.8
3

Cargo
Revenue


Domestic
Cargo
32.46 32.78 33.80 36.55 41.79 177.38

Perishable
Cargo
39.25 36.19 28.43 30.00 31.65 165.52

Courier
Revenue
21.67 10.33 9.31 9.78 10.27 61.36

Internation
al Cargo
Revenue
345.68 332.78 289.88 307.96 327.20 1,603.49

Cargo
Handling
Revenue
32.93 34.57 36.30 38.12 40.02 181.95
Total
Cargo
Revenue
C 471.9
9
446.6
5
397.7
3
422.4
0
450.9
3
2,189.6
9

Other
Income
D 42.75 44.55 46.51 48.55 50.69 233.05

Total
Non-
Aeronauti
cal
Revenue
E =
A+B+C
+D
2,605.
62
2,369.
42
2,281.
25
2,460.
72
2,787.
13
12,504.
15

Table 344: Non-Aeronautical Revenue and 'S'-Factor as decided by the
Authority for the Fourth Control Period
Page 161 of 283

(Rs. in crores)
S-Factor
Calculation
FY25 FY26 FY27 FY28 FY29 Total
Total Non-
Aeronautical
2,605.62 2,369.42 2,281.25 2,460.72 2,787.13 12,504.15
Revenue
(A+B+C)
(Refer Table
343)
Cross
Subsidy
(S-factor @
30%) from
Revenue
Share Assets
781.69 710.83 684.38 738.22 836.14 3,751.24

245. The aforesaid calculation given by AERA cannot be a minimum
amount of revenue as a non-aeronautical revenue, the present
th
appellant has projected non-aeronautical revenue for 4
Control Period at Rs.11,382 Crores. AERA cannot presume the
income of the present appellant. Actual income ought to have
been appreciated at the time of set up or true up and,
therefore, the decision of AERA that true-up of the non-
aeronautical revenues will be given in next Control Period only
if the actual non-aeronautical revenue exceeds Rs.12,504.15
Crores as notional adopted by Respondent No.1. This is not
permissible under the AERA Act, 2008. True-up must be given
Page 162 of 283

by AERA on the basis of actual non-aeronautical revenue
th
collected by the appellant during 4 Control Period. We,
therefore, quash and set aside the decision of AERA of fixing
the minimum amount of non-aeronautical revenues at
Rs.12,504.15 Crores. AERA shall consider Rs.11,382 Crores as
projected by appellant as a tentative non-aeronautical revenue
and true-up shall be given by AERA in the next Control Period
th
i.e. in 5 Control Period (2029-2034) on actual amount of non-
th
aeronautical revenue collected by the appellant during 4
Control Period. The verification shall be made by AERA of
actual non-aeronautical revenue collected by appellant during
th
4 Control Period which shall be on the basis of audited books
of accounts and balance sheets by the auditor.
246. The present appellant has projected non-aeronautical revenue
th
for the 4 Control Period at Rs.11,382.29 Crores. This has
been highlighted in Table no. 333 in Paragraph Number 10.1.4
of the impugned order dated 07.05.2025 ( Annexure A-1 ).
For the ready reference, Table no. 333 which is non-
aeronautical revenue projected by appellant, reads as under:
Table 333: Non-Aeronautical Revenue/Revenue Share Assets
Projections submitted by MIAL for Fourth Control Period:
Page 163 of 283

(Rs. in crores)
Particulars Ref FY25 FY26 FY27 FY28 FY29 Total
Retail
Licenses
Revenue

F&B
151.45 155.04 163.80 176.99 201.97 849.25

Flight
Kitchen
57.65 51.17 49.38 53.63 64.02 275.85

Retail
Concession
149.65 142.58 139.90 150.29 173.52 755.94

Foreign
Exchange,
Banks &
ATM
94.16 78.46 71.68 76.08 81.30 401.68

IT &
Communica
tion
146.35 130.06 125.60 136.44 163.13 701.58

Car Rental
& Hotel
Reservation
26.73 23.76 22.94 24.92 29.80 128.15

Duty Free
Shops
348.01 286.05 260.41 272.32 284.84 1,451.63
Advertising
Income
230.23 204.75 197.84 214.93 256.88 1,104.63

Car Parking
/ Ground
Transport
61.89 57.62 58.30 66.35 83.10 327.26

Ground
Handling
144.84 121.04 110.91 114.22 129.74 620.75

Others
27.17 22.99 21.15 21.88 24.91 118.10
Total
Retail
A 1,438.
13
1,273.
54
1,221.
92
1,308.
06
1,493.
23
6,734.8
8
Page 164 of 283

Licences
Revenue


Rent &
Services
Revenue


Land Rent &
Lease
199.24 214.18 230.25 247.52 266.08 1,157.27

Hanger
Rent
35.49 19.07 – – – 54.56
Terminal
Building
Rent
116.93 113.95 109.86 118.10 155.42 614.26

Cute
Counter
Charges
14.28 11.93 10.93 11.26 12.79 61.19

Lounges
79.80 77.67 79.55 85.91 98.02 420.95

Cargo
Building
Rent &
Other
Building
Rent
37.71 40.54 43.58 46.85 50.36 219.04
Total Rent
& Services
Revenue

B 483.44 477.34 474.17 509.64 582.67 2,527.2
6


Cargo
Revenue

Domestic
Cargo
33.26 32.78 33.80 36.55 41.79 178.18

Perishable
Cargo
35.83 30.49 28.43 30.00 31.65 156.40

Courier
Revenue
19.51 10.33 9.31 9.78 10.27 59.20
Page 165 of 283

Internationa
l Cargo
Revenue
323.52 295.87 289.88 307.96 327.20 1,544.43
Cargo
Handling
Revenue
32.93 34.57 36.30 38.12 40.02 181.94
Total
Cargo
Revenue
C 445.05 404.04 397.73 422.40 450.93 2,120.1
4

Total Non-
Aeronautic
al
Revenue
D=
A+B
+C
2,366.
61
2,154.
93
2,093.
83
2,240.
10
2,526.
82
11,382.
29

247. It has been held by this Tribunal in AERA Appeal No. 1 of
2023 and connected appeals in case of Mangaluru
International Airport Limited Vs. AERA judgment dated
11.09.2025 in para 204 which reads as under:
“204. Thus, in view of the aforesaid facts, reasons and judicial
pronouncements, we hereby quash and set aside the
decision of AERA that non-aeronautical revenue
projected by the appellant is lower than actual NAR
earned by Respondent No.2-AAI in Pre COD period i.e.
the period running from FY 2016-21 till COD i.e.
31.10.2020. We also hereby quash and set aside the
decision of AERA at Annexure A-1 for non-aeronautical
revenue wherein AERA has held that non-aeronautical
revenue of FY 2019-20 will be assumed also for FY
2022- 23 as traffic is expected to reach Pre-COVID
period. We also hereby quash and set aside AERA’s
decision to increase non-aeronautical revenue by 5%
Page 166 of 283

Year-on-Year basis for remaining tariff for First Control
Period. We also quash and set aside the decision of
AERA of additional increase of 5% to non-aeronautical
revenue for FY 2023-24 on account of expansion of
existing terminal building area in FY 2022-23 and we
hereby direct AERA to take into consideration the
actual non-aeronautical revenue received by airport
operator from Master Service Provider in pursuance of
a contract between airport operator and Master Service
Provider which is Adani Airport Holding Limited (AAHL),
and necessary true up shall be carried out by AERA.”

248. AERA has no statutory power to prescribe a minimum Non-
Aeronautical Revenue. Section 13(1) of the AERA Act confers
jurisdiction upon AERA to determine tariff for aeronautical
services. Non-Aeronautical Revenue enters the tariff
determination exclusively for the limited purpose of
computing the cross-subsidy 'S' Factor under the hybrid-till
mechanism in Schedule 1 of the SSA. Clause 12.2 of the
OMDA expressly grants the Appellant the freedom to fix
charges for non-aeronautical services subject only to
applicable law.
249. It is apparent that there is no provision in the AERA Act,
OMDA, or SSA authorising AERA to prescribe a minimum
Page 167 of 283

revenue floor for non-aeronautical activities. The imposition
of a minimum of Rs. 12,504.15 Crores is, in substance, an
exercise of jurisdiction over non-aeronautical pricing that
Parliament has not vested in AERA.
250. The definition of 'S' Factor in Schedule 1 of the SSA i.e. '30%
of the gross revenue generated by the JVC from the
Revenue Share Assets. The costs in relation to such revenue
shall not be included while calculating Aeronautical Charges”
uses the operative word 'generated', meaning revenue
actually earned during the control period.
251. There is no provision in the SSA for a 'minimum' or 'floor' for
the S-Factor computation. The phrase 'generated' admits of
no notional or hypothetical minimum. AERA's substitution of
a notional minimum for actual generation is a unilateral
rewriting of an agreed contractual formula.
252. It ought to be kept in mind that Non-Aeronautical Revenue
at a major international airport is an inherently variable
commercial quantity driven by passenger volumes,
consumer spending patterns, the composition of airline
services, and global macroeconomic conditions, none of
which are within the control of the Airport Operator.
Page 168 of 283

253. If MIAL is required to achieve a minimum of Rs. 12,504.15
Crores, it can only do so by setting non-aeronautical service
charges at levels sufficient to generate that minimum. This
is precisely the form of non-aeronautical price regulation
that Parliament chose not to vest in AERA. The regulatory
boundary between aeronautical tariff determination (within
AERA's jurisdiction) and non-aeronautical pricing (outside
AERA's jurisdiction) must be maintained.
254. In view of the aforesaid decision, minimum amount of non-
aeronautical revenue cannot be fixed by AERA, no such
powers have been vested in AERA under the AERA Act, 2008
nor there is any such provision for fixing minimum amount
of non-aeronautical revenues under OMDA and SSA. AERA,
while passing the impugned order ( Annexure A-1 ) and by
fixing the minimum amount of non-aeronautical revenue has
exceeded its jurisdiction and we therefore, quash and set
aside the decision of AERA whereby AERA has fixed the
minimum amount of non-aeronautical revenues at
Rs.12,504.15 Crores. True-up must be given by AERA of
actual non-aeronautical revenues collected by appellant
th
during 4 Control Period.
Page 169 of 283

255. It has been held by this Tribunal in AERA Appeal No.1 of
2024 in case of GMR Goa International Airport Limited Vs.
AERA judgment dated 11.09.2025, in paragraphs 221, 223,
227, 228, 229 and 230 which reads as under:
“ 221. These types of observations are not required for
determination of minimum non-aeronautical
revenue otherwise there will be no end for AERA
for micro planning of the non-aeronautical
revenue. AERA cannot decide that there must be a
minimum particular amount of non-aeronautical
revenue, to be earned by an Airport. …
223. It ought to be kept in mind by AERA that such type
of arbitrary or speculative determination of
minimum threshold of non-aeronautical revenue,
below which, it will be forced to bear the burden of
under recovery, by the airport operator, will have
an adverse effect on economic and viable
operations of the airport. …
227. In view of the aforesaid calculation, determination
of tariff shall be done by AERA which is subject to
true-up in Second Control Period based on actual
non-aeronautical revenue. The concept of
minimum threshold of non-aeronautical revenue in
the impugned order dated 07-12-2023 at Annexure
A-1 to the memo of this appeal is hereby quashed
and set aside.
Page 170 of 283

228. For the aforesaid reasons and looking to the
provisions of the AERA Act, 2008 to be read with
AERA Tariff Guidelines, 2011 to be read with
Concession Agreement (Annexure A-3), we hereby
quash and set aside decision of AERA for
determination of Rs.509.47 Crores for minimum
threshold for non-aeronautical revenue for First
Control Period.
229. We also quash and set aside the decision of AERA
to undertake true-up based on actual in Second
Control Period only if the revenue exceeds the
minimum threshold.
230. We hereby direct AERA the true-up exercise for the
next Control Period shall be based upon actual non-
aeronautical revenue irrespective of the fact that
whether it exceeds or not, the minimum threshold
of Rs.509.47 Crores, as fixed by AERA towards
non-aeronautical revenue.”
256. In view of the aforesaid decision, AERA cannot decide the
minimum threshold of non-aeronautical revenues to be
earned by the Airport Operator-Appellant.
257. If the minimum threshold for non-aeronautical revenues at
Rs.12,504.15 Crores is allowed then it will tantamount to
that AERA is in fact, indirectly regulating the pricing of non-
aeronautical services which is contrary to the contractual
Page 171 of 283

framework envisaged under OMDA, SSA and AERA Act,
2008.
258. As per Clause 12.2 of OMDA, appellant shall be free to fix

the charges for non-aeronautical services. For ready
reference, Clause 12.2 of OMDA ( ANNEXURE A-4 ) reads
as under:
“12.2 Subject to Applicable Law, the JVC shall be
free to fix the charges for Non-Aeronautical
Services, subject to the provisions of the existing
contracts and other agreements.”
259. It ought to be kept in mind by AERA that AERA may fix the
estimated amount of non-aeronautical revenues but true-up
must be given by AERA in the next Control Period on the
basis of collection of actual non-aeronautical revenue. Here,
AERA has fixed the minimum threshold of non-aeronautical
revenue at Rs.12,504.15 Crores and, therefore, we are
quashing and setting aside this decision. AERA could have
fixed any figure as an estimated non-aeronautical revenue
based upon data provided or collected, but , AERA has no
power, jurisdiction and authority to put a condition that true-
up shall be given only if the actual non-aeronautical
revenue exceeds the minimum amount of non-aeronautical
Page 172 of 283

revenue estimated by AERA. This is not permissible under
the AERA Act, 2008 to be read with provisions of OMDA and
SSA. It is one thing to estimate the non-aeronautical
revenues and it is altogether another thing to fix the
minimum threshold of non-aeronautical revenues. We
hereby quash and set aside the fixation of minimum amount
of non-aeronautical revenue by AERA.
260. The distinction between a provisional estimate and a
mandatory minimum is fundamental. AERA may, for present
tariff-setting purposes, adopt an estimated figure on the
basis of available material. But once the tariff order provides
that true-up shall be undertaken only if actual revenue
exceeds that estimate, the estimate ceases to be provisional
and operates as an irrebuttable floor. Such a one-sided
mechanism is inconsistent with the concept of true-up itself,
which is intended to correct both over-estimation and under-
estimation on the basis of actuals.
261. The Respondent has contended that the Appellant projects
only the amount receivable from the Master Service Provider
and not the gross revenue generated from Revenue Share
Page 173 of 283

Assets, and that such an approach may understate the base
for computation of the ‘S’ Factor. T
262. The approach adopted by AERA in notionally considering

non-aeronautical revenue at INR 12,504.15 Crores as
against INR 11,382.29 Crores projected by the Appellant and
in deciding to undertake true-up only if actual revenue
exceeds such notional figure, is contrary to the statutory
framework and cannot be sustained.
263. Section 13(1)(a)(v) of the AERA Act, 2008 requires AERA,
while determining tariff to take into consideration the
“ revenue received from services other than the
aeronautical services ”, which necessarily means the
revenue actually received and not a hypothetical or assumed
amount. This Tribunal in GMR Goa International Airport Ltd.
Vs AERA decided on 11.09.2025, has expressly held that
whenever actual figures are available for any expenditure or
revenue, AERA must accept the actual figures instead of
hypothetical figures and further held that the AERA cannot
prescribe a minimum threshold of non-aeronautical revenue
and then restrict true-up only to cases where actuals exceed
that threshold.
Page 174 of 283

264. The Tribunal has further made it clear that AERA may
scrutinize projections, benchmark them or assess whether
opportunities are being under-exploited for the purpose of
forecasting, but it must ultimately consider the
revenues “received” in accordance with Section
13(1)(a)(v) of the AERA Act, 2008.
265. In view of the aforesaid judgment dated 11.09.2025 in
AA no.1 of 2024 of GMR Goa International Airport Ltd
Vs AERA, it has been specifically held that benchmarking
may assist projection, but, cannot be converted into
mandatory revenue floor that the Airport Operator must
achieve the same. On that basis, this Tribunal has quashed
and set aside AERA’s fixation of a minimum non-aeronautical
revenue threshold of INR 509.47 Crores for Goa airport and
it was directed by this Tribunal that the next Control Period
true-up must be based on actual non-aeronautical revenue
irrespective of whether it exceeds the threshold.
266. The aforesaid reasoning given in AA no. 1 of 2024 judgment
dated 11.09.2025 squarely applies here, because AERA’s
present methodology likewise replaces actual or projected
Page 175 of 283

contractual revenue with a higher notional amount and
allows correction only in one direction.
267. The impugned methodology innovated by AERA is also

inconsistent with the contractual and regulatory framework
governing revenue-share assets, where the governing
agreements contemplate sharing of actual revenue
generated from such assets and do not prescribe any
minimum guaranteed threshold of non-aeronautical revenue
for tariff purposes, AERA cannot read such a floor into the
arrangement through the tariff process.
268. If this newly innovated methodology of AERA is allowed by
this Tribunal it will tantamount to rewriting of the
contracting between the parties and will also tantamount to
superimposing a contractual standard which does not exist,
neither in SSA nor in OMDA.
269. It ought to be kept in mind by AERA that neither the AERA
Act, nor the Tariff Guidelines nor the Concession Agreement
confers any power to AERA to determine a minimum
threshold of non-aeronautical revenue or to make true-up,
conditional upon actuals crossing such threshold.
Page 176 of 283

270. The one-sided true-up mechanism adopted by AERA is
arbitrary because it protects against underestimation
only where non-aeronautical revenue is higher than
AERA’s notional figure, but, gives no corresponding
relief where actual revenue is lower . A true-up
mechanism, by its very nature, is intended to correct
both, over-recovery and under-recovery on the basis of
actuals .
271. This Tribunal has recognised that “ truing-up projections
based on actuals ” is an essential regulatory practice and
has also noted that such methodology has generally been
followed by AERA for airports, except where it’s sought to
impose the impermissible threshold in Goa. AERA’s present
approach departs from that settled regulatory discipline and
therefore, it fails the test of consistency and fairness.
272. The newly innovated approach followed by AERA also
undermines the requirement of economic and viable airport
operations under Section 13(1)(a)(iv) of the AERA Act, 2008.
If the Airport Operator is compelled to absolve the short fall
whenever non-aeronautical revenue falls below AERA’s
assumed figures, the tariff determination ceases to be cost-
Page 177 of 283

reflective and becomes distorted by a speculative revenue
assumption.
273. Speculative determination of a minimum non-aeronautical

revenue has an adverse effect on economic and viable
operation of airport. Herein the facts of the present case,
the impugned tariff order decided by AERA artificially inflates
non-aeronautical revenue for computation of the “S” Factor
and thereby depresses allowable aeronautical tariff on the
basis of revenue that may never actually be realised.
274. The true and correct legal position under the AERA Act,
2008, is that AERA may use projections at the tariff-setting
stage, but, the final true-up must be carried out on the basis
of actual non-aeronautical revenue received during the
Control Period, without imposing any floor, minimum
threshold or one-sided condition that the true-up will be
available only if actuals exceed a notional benchmark.
275. This interpretation of the power of AERA is consistent with
Section 13(1)(a)(v) of the AERA Act, 2008 and therefore
AERA cannot decide that there must be a minimum amount
of non-aeronautical revenue which must be earned by the
Airport Operator.
Page 178 of 283

276. Accordingly, the non-aeronautical revenue for the Fourth
Control Period ought to be considered and true-up on
“ actual basis ” and the notional adoption of INR 12,504.15
Crores together with the condition that true-up shall occur
only if actual revenue exceeds that figure, is liable to be
quashed and set aside. We hereby hold that the true-
up exercise for the next Control Period shall be done
on the basis of actual non-aeronautical revenue
received irrespective of the fact whether such
actuals are higher or lower than the
projections/figures adopted by AERA.
277. The approach adopted by AERA in notionally fixing non-
aeronautical revenue and restricting true-up only in cases
where actual revenue exceeds such notional figure is
contrary to the settled principles laid down by Hon’ble the
Supreme Court of India governing regulatory tariff
determination. Hon’ble the Supreme Court of India has
consistently held that tariff determination must be cost-
reflective and based on actual economic realities and
that regulatory authorities cannot artificially suppress or
Page 179 of 283

distort revenue or cost-components through notional
assumptions.
278. In BSES Rajdhani Power Ltd Vs. Union of India

reported in 2025 SCC OnLine SC 1637/2025 INSC 937 ,
it has been observed by Hon’ble the Supreme Court of India
that tariffs must be cost reflective as first principle
and that under-recovery of legitimate costs cannot
be perpetuated through regulatory mechanisms, as
such practices distort financial viability and
ultimately burden stakeholders , reference ought to be
made to Paragraph No. 43 & 71.(i) of the judgement.
279. Applying these principles, the notional adoption of non-
aeronautical revenue by AERA, coupled with a one-sided
true-up mechanism that operates only when actual revenue
exceeds the assumed figure, is manifestly arbitrary. Such an
approach has no rational nexus with the statutory
requirement under Section 13 of the AERA Act, 2008, which
mandates consideration of “ revenue received ” and
instead substitutes actual revenue with a hypothetical
construct. The regulatory authority- AERA must act
consistently, transparently and in alignment with statutory
Page 180 of 283

objectives and cannot impose artificial financial constructs
that distort tariff determination.
280. AERA must strike a balance between consumer interest

and sectoral sustainability and suppression of
legitimate revenue or cost elements in the name of
consumer protection is neither sustainable nor
legally permissible . By inflicting non-aeronautical revenue
on a notional basis, AERA has effectively reduced allowable
aeronautical revenue and thereby has created an artificial
revenue gap which the Airport Operator is forced to absorb.
281. This is precisely the kind of distortion that is
deprecated as it is inconsistent with cost-reflective
tariff principles .
282. In view of the aforesaid facts and reasons,
regulatory determination must be anchored in actual
revenue realisation and not hypothetical projections .
Any mechanism which allows correction only in one direction
(i.e. when actuals exceed projections but not vice versa) is
inherently arbitrary and unjustified.
283. There is substance in the submission to the limited extent that
the true-up exercise must ultimately proceed on the basis of
Page 181 of 283

actual gross non-aeronautical revenue generated ,
and not on revenue net of costs or contractor margins.
However, that contention does not justify the fixation of a
minimum threshold by AERA. The proper regulatory remedy
for any apprehended understatement is verification of actual
gross revenue at the stage of true-up, and not imposition of
a restrictive deemed floor in advance.
284. We therefore quash and set aside the methodology
adopted by AERA in the impugned order as the same
is contrary to law.
285. Accordingly, while AERA may adopt the Appellant’s
projected figure of Rs.11,382.29 Crores as the
provisional non-aeronautical revenue for the Fourth
Control Period, the true-up in the Fifth Control Period
shall be carried out on the basis of actual gross non-
aeronautical revenue generated from Revenue Share
Assets, which are verified from audited accounts,
irrespective of whether such actual revenue is higher
or lower than the provisional estimate . To that extent,
the impugned condition imposed by AERA is contrary to law
and is set aside.
Page 182 of 283

XIII. Cost of Equity for Fourth Control Period
286. By the impugned order dated 07.05.2025 ( Annexure A-1 ),
AERA has determined the Cost of Equity for the present
th
appellant for 4 Control Period at 15.13% as against
18.30% proposed by the appellant.
287. As per AERA Guidelines, 2011, especially as per Clause
5.1.3, the Cost of Equity should be decided on the basis of
Capital Asset Pricing Model (CAPM), for each Airport
Operator. For ready reference, Clause 5.1.3 of AERA
Guidelines, 2011 reads as under:
“5.1.3 Cost of Equity Cost of Equity – The Authority
shall estimate the cost of equity, for a Control
Period, by using the Capital Asset Pricing Model
(CAPM) for each Airport Operator, subject to the
consideration of such factors as the Authority may
deem fit.”
288. Looking to the impugned order (Annexure A-1) and AERA
Guidelines, 2011, it appears that AERA has not estimated
Cost of Equity by using CAPM for MIAL.
289. This Appellant has submitted that PwC was engaged by
Ahmedabad International Ltd. to carry out this study on
evaluating the applicable cost of equity. This study was
Page 183 of 283

carried out in March 2021. It is further submitted that
Pricewaterhouse Cooper Service Ltd.’s Report (PwC Report)
wherein all the data has been supplied by Appellant through
the aforesaid report as required under Clause A5.5.2.3 of
AERA Guidelines, 2011 especially about-
i. the risk-free rate,
ii. ii. the equity market risk premium, and
iii. equity beta.
290. As per Pricewaterhouse Cooper Service Ltd.’s Report, the
range of Cost of Equity is 17.32% to 23.68%.
291. The Pricewaterhouse Cooper Service Ltd.’s Report is based
upon Capital Asset Pricing Model ( CAPM ) which is already
submitted by the Appellant along with MYTP. AERA cannot
ignore the Pricewaterhouse Cooper Service Ltd.’s Report
submitted by this Appellant on the ground that it is not an
independent study. It is a requirement of AERA Guidelines,
2011 and, therefore, Pricewaterhouse Cooper Service Ltd.
was engaged which is a reputed company and carried out a
detailed study on calculation of Cost of Equity ( CoE ). The
report cannot be brushed aside on the ground that it is not
Page 184 of 283

an independent study. If such a report is to be rejected
without reading, without appreciating and without
considering the same, then there is no need of such a
provision in AERA Tariff Guidelines, 2011. It is a requirement
of AERA Guidelines that appellant is obliged to provide a
report for calculation of Cost of Equity for three major
factors as pointed out in Clause A 5.5.2.3 of AERA
Guidelines, 2011 which are:
i. the risk-free rate,
ii. the equity market risk premium, and

iii. equity beta.
292. This report is to be supplied by the appellant as per AERA
Guidelines must be based upon Capital Asset Pricing Model
( CAPM ). If every report is to be rejected, then it is not an
independent study then there is no such requirement under
the AERA Guidelines to supply the report. Hence, the
reasons given by AERA that Pricewaterhouse Cooper Service
Ltd.’s Report is not an independent study is not accepted by
this Tribunal. If AERA wants to reject the PwC Report, then
cogent and convincing reasons must have been given by
AERA. No such cogent and convincing reasons have been
supplied by AERA in the impugned order for not accepting
Page 185 of 283

Pricewaterhouse Cooper Service Ltd.’s Report and hence
also, the determination of Cost of Equity at 15.13% by AERA
is hereby quashed and set aside.
293. AERA has relied upon IIM-Bangalore study/report for
determining Cost of Equity. The said study/report is based
upon the study of 12 airports which are as under:
S. No. Airport
1. Sydney
2. Melbourne
3. Amsterdam
4. Changi
5. Gatwick
6. Auckland
7. Heathrow
8. Johannesburg
9. MAHB
10. AoT
11. Dublin
12. Incheon
294. None of the aforesaid listed airports have traffic of 2-3
million passengers per annum. None of the aforesaid airports
are comparable with Chhatrapati Shivaji Maharaj International
Airport (CSMIA). The IIM-Bangalore study/report for arriving at
Cost of Equity is not operationally comparable to CSMIA.
Page 186 of 283

Moreover, IIM-Bangalore study was made for the developed
market which are exposed to different risks as compared to
developing market like India.
295. The principal error in the impugned order lies in the manner in
which AERA has treated the earlier IIM-Bangalore study as
determinative for the present Control Period without undertaking
a fresh airport-specific exercise. Once the governing
methodology is accepted to be CAPM , the determination of Cost
of Equity cannot be reduced to mere repetition of a figure
adopted in a previous tariff period. Cost of Equity is a regulatory
estimate of return commensurate with the risk profile of the
airport operator for the relevant Control Period. Therefore, when
the Appellant specifically questioned the continued use of the
earlier beta and placed before AERA a fresh CAPM-based study,
it was incumbent upon AERA to deal with that material by a
reasoned analysis and not by simple reiteration of the earlier
determination.
296. We are unable to accept the submission of the Respondent that
the Appellant is foreclosed from raising the present challenge
because the figure of 15.13% had been accepted in the Third
Control Period. In tariff jurisprudence, there can be no estoppel
against a fresh determination required by the regulatory
Page 187 of 283

framework itself. Acceptance in an earlier Control Period does not
sanctify continued adoption in a subsequent period if the
regulated entity demonstrates that the underlying assumptions,
comparables, or risk inputs require reconsideration.
297. AERA has invoked the decision of this Tribunal in the GHIAL TCP
Judgment (AERA Appeal No. 04/2021, 14.02.2024, paragraphs
528-534) as authority for the proposition that an independently
commissioned IIM-B study is to be preferred over a privately
obtained report, since the latter carries an inherent element of
conflict of interest.
298. AERA has also invoked the Supreme Court's observations in Delhi
International Airport Limited v. AERA, (2024) 1 SCC 716,
paragraphs 80, 86 and 88, to the effect that expert reports
commissioned by airport operators at their own behest are 'self-
serving.' We accept these propositions as statements of general
regulatory principle, but they do not carry the weight AERA seeks
to give them in the present context, and for the following distinct
reasons.
299. It must be noted that the GHIAL TCP Judgment was decided in
a context where AERA had commissioned the IIM-B study for the
relevant airport for the relevant control period. The question in
that case was whether an operator's privately obtained Jacobs
Page 188 of 283

Consultancy Report could displace the study that AERA had
specifically commissioned. The answer that the private report
could not displace the independent study is correct in that
context.
300. However, the position in the present case is the inverse: AERA
has not commissioned any study for MIAL for the Fourth Control
Period. AERA has sought to recycle the 2019 study. The question
is therefore not 'which study displaces the other', it is 'whether
AERA may discharge its obligation to estimate Cost of Equity for
the Fourth Control Period by reference to a study commissioned
for the Third Control Period.' The answer is plainly in the
negative. The principle that a privately obtained report cannot
displace an independent study has no application where no
independent study has in fact been conducted for the period in
question.
301. In view of the aforesaid facts and reasons, we hereby
quash and set aside the decision of AERA of
th
determination of Cost of Equity for the appellant for 4
Control Period at 15.13% and we hereby direct
Respondent No.1-AERA that Cost of Equity shall be
estimated using CAPM by conducting a fresh study for
MIAL, to that extent this issue is remanded back to AERA.
Page 189 of 283

th
XIV. Cost of Debt For 4 Control Period
th
302. Looking to the impugned order dated 07.05.2025 for 4
Control Period (01.04.2024 to 31.03.2029), AERA has
decided to consider the Cost of Debt at 10.15%.
303. This issue has been decided by this Tribunal in AERA Appeal
No.2 of 2021 and AERA Appeal No.9 of 2016 vide judgment
dated 06.10.2023 in case of MIAL Vs. AERA and it has been
observed in paragraphs 313, 320, and 321 as under:
“313. This contention of respondent no.1 is not accepted
by this Tribunal mainly for the reason that there
cannot be a fixed cost of debt for the entire 3rd
Control Period of five years which is from 2019-
2024. The cost of debt which is actually incurred
by the appellant should have been considered by
AERA. The cost of debt depends upon marginal
cost of funds based lending rate and the time
period within which the loan is to be repaid.
Inflation is one of the most important factor for
determination of market forces for further
determination of MCLR rates. Moreover, the spread
for the time within which loan is to be repaid
depends upon the credit profile of the entity.
…
Page 190 of 283

320. In view of this, actual cost of debt shall be allowed
by AERA for 3rd Control Period especially looking
to the provisions of Section 13(1)(a)(i) of the AERA
Act, 2008. For the ready reference, Section 13(1)
of AERA Act, 2008 reads as under: -
13. Functions of Authority. - (1) The Authority shall
perform the following functions in respect of
major airports, namely: -
(a) to determine the tariff for the aeronautical
services taking into consideration-
(i) the capital expenditure incurred and timely
investment in improvement of airport facilities;
(ii) the service provided, its quality and other
relevant factors;
(iii) the cost for improving efficiency;
(iv) economic and viable operation of major airports;
(v) revenue received from services other than the
aeronautical services;
(vi) the concession offered by the Central
Government in any agreement or memorandum
of understanding or otherwise; 38
(vii) any other factor which may be relevant for the
purposes of this Act: Provided that different
tariff structures may be determined for
different airports having regard to all or any of
the above considerations specified at sub-
clauses (i) to (vii);
Page 191 of 283

(b) to determine the amount of the development
fees in respect of major airports;
(c) to determine the amount of the passengers
service fee levied under rule 88 of the Aircraft
Rules, 1937 made under the Aircraft Act, 1934
(22 of 1934);
(d) to monitor the set performance standards
relating to quality, continuity and reliability of
service as may be specified by the Central
Government or any authority authorised by it in
this behalf;
(e) to call for such information as may be necessary
to determine the tariff under clause (a);
(f) to perform such other functions relating to tariff,
as may be entrusted to it by the Central
Government or as may be necessary to carry
out the provisions of this Act.


321. In view of the aforesaid provision, AERA ought to
have allowed actual cost of debt incurred by the
appellant especially looking to the fact that debt
availed by this appellant is from reputed lenders.
Putting a cap upon cost of debt is uncalled for, as
AERA has in fact, allowed actual interest rate for
First Control Period and Second Control Period and
therefore the same methodology should be applied
for Third Control Period as well. We therefore direct
Page 192 of 283

AERA to consider actual cost of debt and necessary
true up shall be done accordingly. Further, this
action of AERA is also in violation of provisions of
AERA Act, 2008 especially Sec. 13 thereof because
the expenditure incurred ought to be allowed to be
recovered as per formula of Target Revenue given
in SSA.”
304. Moreover, as per decision rendered by this Tribunal in case
of GMR Hyderabad International Airport Limited Vs. AERA in
AERA Appeal No. 4 of 2021 judgment dated 14.02.2024, it
has been held by this Tribunal that AERA must consider the
Cost of Debt actually incurred by the Airport Operator,
paragraph 466 thereof which reads as under:
“466. In view of this judgment, AERA must consider Cost
of Debt actually incurred by the airport operator.
These aspects of the matter have not been
properly appreciated by AERA while passing the
impugned order especially in the correction of Cost
of Debt especially in FY 2018 and has wrongly
considered the cost of Debt at 7.94% instead of
9.28%. We, therefore, direct AERA to consider
9.28 for Cost of Debt for FY 2018 as stated in table
number 40 of the impugned order.”
Page 193 of 283

305. It has been held by this Tribunal in AERA Appeal No.1 of
2023 in case of Mangaluru International Airport Limited Vs.
AERA judgment dated 11.09.2025 and in other connected
appeals that AERA shall allow actual Cost of Debt incurred
by the Airport Operator, paragraph 130 thereof reads as
under:
“ 130. In view of the aforesaid facts, reasons and judicial
pronouncements, we hereby quash and set
aside the decision of AERA whereby AERA has
considered CoD at 9% p.a. for computation of
Fair Rate of Return (FroR). We hereby hold that,
looking to the facts of the present case, simply
because the appellant has availed debt from its
one of the shareholders, the same cannot by
itself disallow the appellant to claim actual Cost
of Debt. This is more so when the entity from
which the appellant has availed debt has in turn,
availed debt from reputed lenders. Thus, AERA
ought to have allowed actual Cost of Debt
incurred by the appellant. Putting a cap upon
Cost of Debt is uncalled for and unwarranted.
We therefore direct AERA to allow actual Cost of
Debt incurred by the appellant and necessary
True Up shall be given for previous Control
Periods accordingly.”
Emphasis Supplied
Page 194 of 283

306. Thus, in view of the aforesaid decisions, capping Cost of
Debt is not permissible, AERA must allow actual Cost of
Debt incurred by the Airport Operator.
307. It has been held by this Tribunal in AERA Appeal No. 1 of
2024 in case of GMR Goa International Airport Limited Vs.
AERA judgment dated 11.09.2025 that actual weighted
average Cost of Debt should be considered by AERA. It has
been held in paragraphs 123, 126, 139, and 140 thereof
which reads as under:
“123. In the facts of the present case, this appellant
has secured debt from Axis Bank led
consortium of banks at the rate of A- MCLR+
2% which is revised annually. The said
Concession Letter is at Annexure A-8 to the
memo of the 40 present appeal. As per this,
appellant has secured the debt with 10.45%
of the CoD whereas AERA has disregarded
the actual CoD and has calculated FRoR
considering 9% of the CoD. This is in
violation of Section 13(1)(a)(i) of the AERA
Act, 2008. As per this section, AERA is
required to determine the tariff in
accordance with actual capital expenditure
incurred.
Page 195 of 283

…
126. Thus, the sanction letter issued by Axis Bank led
consortium of banks at the rate of A-MCLR+2%
of Lending Rate which is dated 18.09.2024
(Annexure A 8). Since MCLR of Axis Bank range
between 8.95% to 9.3%, the appellant could
not have procured CoD at 9% as claimed by
AERA. In fact, the CoD as per Annexure A-8 is A-
MCLR+2% which is an admitted and actual CoD
.
…
139. In view of the aforesaid facts, reasons, and
judicial pronouncements, we, hereby quash and
set aside the decision of AERA to normatively
cap the Cost of Debt at 9% for the First Control
Period and to compute FRoR/ARR on that basis.
140. We hereby direct AERA to consider the actual
weighted average cost of debt at 10.45%,
subject to true-up on an actual basis in the next
control period, and to carry out all consequential
recalculations of FRoR, ARR (including “T”), and
the tariff card.”
308. In view of the aforesaid facts and reasons and also in view
of the reasons given in previous paragraph 104 of this
judgment, AERA ought to have allowed actual Cost of Debt
incurred by the Airport Operator instead of capping the same
th
at 10.15% for 4 Control Period.
Page 196 of 283

XV. Dividend Income from Fuel Farm Joint Venture
309. Looking to the provisions of AERA Act, 2008 especially
Section 13 to be read with other Sections thereof, AERA has
power to determine the tariff for aeronautical services. AERA
does not have power, jurisdiction and authority to take into
consideration the revenues which have no causal connection
with aeronautical services or non- aeronautical services.
310. “Dividend Income” has no causal connection with
aeronautical services nor it has any causal connection with
non-aeronautical services.
311. Looking to the impugned order passed by AERA dated
th
07.05.2025 (Annexure A-1) for 4 Control Period
(01.04.2024 to 31.03.2029), AERA has considered the
Dividend Income from the Fuel Farm Joint Venture as
Aeronautical. This is not permissible looking to the
provisions of AERA Act, 2008 to be read with provisions of
OMDA ( Annexure A-4 ) and SSA ( Annexure A-5 ).
312. This Tribunal has already decided in AERA Appeal No.2 of
2021 and AERA Appeal No.9 of 2016 vide judgment dated
06.10.2023 in case of MIAL Vs. AERA, in paragraph nos.
204, 206, 209, 224, and 226 which reads as under:
Page 197 of 283

“204. The question that arises at this stage is whether:
“dividend income” earned by this appellant on
investments made by it in joint ventures/subsidiary
companies providing aeronautical and non-
aeronautical services at CSMIA, Mumbai; “Interest
income” which is earned by this appellant by
investing surplus funds in treasury instruments
and, “Interest on Delayed Payments” which is
levied by MIAL to ensure timely recovery of
receivables from concessionaires whether it is the
“income” from the Revenue Share Assets or
whether they are the income from the assets which
are required to perform non-aeronautical services
at the Airport as listed in Part I in Schedule-6 or
whether listed in Part II of Schedule-6 as stated
hereinabove.
206. Therefore, upon collective reading of the aforesaid
definition of “S”, definition of “Revenue Share
Assets”, definition of “Non-aeronautical assets”
and definition of “Non-Aeronautical Services” as
defined in Schedule-6 of OMDA and both Part-I and
Part-II thereof, “Other income” is not an income or
revenue obtained by this appellant by performing
any non-aeronautical services, therefore, “other
income” cannot be treated as part of Revenue from
Revenue Share Assets. Moreover, MIAL generates
revenue by performing Non-Aeronautical Services.
Once the revenue is generated, it is upon MIAL to
Page 198 of 283

collect and manage the same and in the process,
MIAL may earn some income in the nature of
interest and dividend. Hence, once the revenue
generated by performing Non-Aeronautical
Services is taken as a part of “S” for the cross-
subsidy as per SSA, further income, if any, arising
out of management of the said revenue cannot be
taken into consideration as part of “S”.
209. Respondent No.1 has raised the contention that the
income of “dividend” and “interest” are in fact from
the income derived by the respondent by
performing aeronautical and non-aeronautical
services and, therefore, “other income” has rightly
been treated as part of revenue, from “Revenue
Share Assets”. It is also contended by the counsels
for respondents that the “dividend income” as a
part of other income is a part of 3rd Control Period
because dividend income is earned by MIAL
through joint ventures set up with other group
entities of MIAL who are carrying non-aeronautical
related services and other non-aeronautical services
provided in OMDA which if carried out by MIAL itself,
would have earned surplus non-aeronautical income.
These contentions are not accepted by this Tribunal
mainly for the reason that “other income” is not
relatable to and generated from the provision of any
service by this Appellant and, therefore, it cannot be
considered for cross subsidization of aeronautical
Page 199 of 283

charges (i.e. as a part of revenue from Revenue
Share Assets).

224. In light of the aforementioned decision of Hon’ble the
Supreme Court of India, once the definition of
“Revenue Share Assets” states “shall mean” meaning
thereby to that, it is an exhaustive definition. This
definition is not extensive. It would cover only those
assets which are defined as Revenue Share Assets.
Thus, addition is not permissible. This aspect has not
been properly appreciated by AERA while treating
“other income” as part of revenue generated from
Revenue Share Assets. We, therefore, quash and set
aside the impugned orders in both the aforesaid
AERA Appeals which are for 2nd and 3rd Control
Periods so far as they are affecting “other income”
as a part of revenue, from revenue share assets and
consequently, true-up has to be given for the earlier
Control Periods also. We, therefore, direct AERA to
give true-up for 2nd and 3rd Control Periods for
“Other Income” as stated hereinabove.
226. In light of the aforesaid, “other income” cannot be a
part of revenue, from revenue share assets and
consequently, in calculation of “S” factor in target
revenue formula which is TR= RB x WACC + OM +
D + T – S. To the aforesaid extent, the impugned
orders which are under challenge in both the
aforesaid AERA Appeals which are at ANNEXURE A-1
in both the aforesaid AERA appeals are hereby
quashed and set aside.”
Page 200 of 283

313. It ought to have been kept in mind by AERA-Respondent
No.1 that “Dividend Income” is not relatable to and
generated from the provision of any service rendered by
this appellant and, therefore, this income-” Dividend
Income” is neither aeronautical nor it is non-aeronautical.
In fact, it is “other income”.
314. AERA has followed a zig-zag approach for the very same
point, one decision is taken for one airport and a
contradictory decision has been taken for another airport.
Even for the very same airport, for different Control
Periods, different approaches have been adopted. Thus,
there is gross inconsistency in the approach of AERA. For
the very same Chhatrapati Shivaji Maharaj International
Airport ( CSMIA ), “Dividend Income” was considered as
non-aeronautical revenue in Second Control Period and
th
now in 4 Control Period, it is considered as aeronautical
revenue thus, there are inconsistencies in the approach of
AERA.
315. AERA has failed to appreciate that in the tariff order for
the Second Control Period for the Delhi Airport, it was
already decided by AERA that assets of joint venture does
Page 201 of 283