The Hindu : High on hope

Online edition of India's National Newspaper
Sunday, Jan 12, 2003

Opinion

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High on hope

The Greenfield airport projects begun with much fanfare by Andhra Pradesh and Karnataka are now hanging fire. T.S. Shankar reports.

THE TWO airport projects — at Shamshabad near Hyderabad and at Devanhalli near Bangalore — first floated in 1999 were part of the strategy to develop eco-friendly airports. The two Greenfield projects begun with much fanfare by Andhra Pradesh and Karnataka are now hanging fire.

The Shamshabad project was to be implemented through a joint venture arrangement, with the State Government and the Airports Authority of India together holding a 26 per cent equity on the one hand, and the strategic joint venture partner coming up with the remaining 74 per cent. Through a global bidding process that concluded in December 2000, a consortium led by GMR Infrastructure, with Malaysian Airport Holding Berhard (MAHB) as the other member, was identified as the preferred bidder.

A Memorandum of Understanding (MoU) was signed between the AAI and the State Government in November 2000, envisaging the formation of a steering committee. In September 2001, the consortium submitted a detailed scrutiny of the project proposal to optimise the project cost.

Based on further discussions held in November and December 2001 between the preferred bidder and the AAI's technical team, the former submitted a modified project cost proposal in December 2001. Some of the areas optimised by the preferred bidder related to the land development cost, size and unit rate for terminal building, cargo complex, and other allied structures including airfield pavements, furniture's, fixtures, interior decoration, cost of Air Traffic Management equipment, power supply and air-conditioning systems. A formal response from the State Government to the modified cost proposal was received by the AAI in May 2002 and the final project cost submitted by the preferred bidder is now being examined by the AAI's Engineering and Planning Wing.

The Devanahalli airport project was conceived on a Build-Own-and-Operate (BOO) basis with public-private participation. The Government, through its State Investment and Industries Development Corporation and the AAI, will together hold a 26 per cent equity and the strategic joint venture partner the remaining. After an MoU was put in place in May 1999, a global bidding process was held and a consortium led by Siemens of Germany, with Unique Zurich, Switzerland and Larsen and Toubro, India, as other members was chosen as the strategic joint venture partner. Subsequently, Karnataka issued the Letter of Intent to the consortium in January 2002. A negotiating team constituted by the Karnataka Government with an AAI representative among others concluded negotiations with the consortium pegging the maximum guaranteed price at Rs.1,150 crores. To make the project economically viable, the State's support to the extent of $95 million was demanded in the project proposal of the preferred bidder.

With the AAI's input for optimising the project cost, the State support element was brought down from $95 million to $80 million. The SHA drawn up after protracted negotiations with the strategic partner was formally signed with the joint venture partner on January 2002. An amount of Rs.1,175 crores towards 13 per cent shareholding in BIAL was remitted by the AAI as on October 2002.

The project is expected to be completed by 2006.

The two Greenfield airport projects are now languishing for two main reasons — a positive response from the Centre and a Central subsidy of over Rs. 250 crores.

The aviation scenario down south, especially in Thiruvananthapuram, Kozhikode and Kochi airports, has also come in for sharp focus. Both the national carriers and some UAE-based airlines have made Kozhikode and Kochi airports their big forte to cater to the large volume of NRI traffic. In spite of a new terminal in Kochi, the Thiruvananthapuram airport is still an important gateway as it caters not only the Kerala-belt but the Tirunelveli and Nagercoil business community in Tamil Nadu as well.

Against this backdrop, it remains to be seen whether the "privatisation proposal" which has run into rough weather will be put on the "fast track mode" as claimed by the Civil Aviation Ministry.

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