Mumbai: While Mumbai has been one of key focus cities for Maharashtra’s infrastructure development, its sister city, Navi Mumbai, has been in the eye of an environment and socio-economic storm due to a long-delayed international airport that has been in the planning stage for over 12 years. City and Industrial Development Corporation (CIDCO) is the apex agency to make this happen, and the airport is easily its biggest project ever, with an estimated cost of ₹9,500 crore.
CIDCO Vice-Chairman and Managing Director, Bhushan Gagrani, has no choice, then, but to live by a professional timeline, not only for the airport, but also the 11.7 km Navi Mumbai Metro, whose trials are expected to begin by the end of this year.
Mr. Gagrani has a bigger challenge at hand; that of rehabilitating and vocationally empowering project affected persons (PAPs), roughly 10,000 villagers from 10 gaothans who currently live at the core construction site of the Navi Mumbai International Airport.
He says he is confident of making this happen. “There will always be issues in such large-scale projects, but we have made progress in resolving them,” he said in an interview to The Hindu . Excerpts…
The most heated discussion around the proposed Navi Mumbai International Airport revolves around Project Affected Persons (PAPs) and their rehabilitation. How will you ensure their issues are addressed and the rehabilitation is executed smoothly.
The project construction site involves 10 villages (gaothans) where 3,000 families (around 10,000 people) currently live. These are in the core area of the airport construction site and have to be relocated. There are other villages on the site’s periphery, but those need not be relocated. The PAPs issue is not sorted out yet, but we have made reasonable progress in resolving many of their problems.
Has the State government empowered you in taking this project to fruition?
The airport project is CIDCO’s baby, including the entire capital contribution. Whether it was in the form of land or cash, it was totally CIDCO’s responsibility. But CIDCO is part of the Maharashtra government (the Chief Minister is also the chairman) and needs support on various fronts. When there is no political will, no infrastructure project can be launched or completed. There is also a need for integration between different government agencies such as the collector’s office, the police, the survey and settlement department, power ministry, and the environment department, both at Union and State levels. Thirdly, certain statutory amendments were required. For example, all project affected persons have been given a 22.5% plot of developed land in lieu of their agricultural property. This was executed with their consent. This is a major departure from the existing State government policy.
How will non-agricultural plots help the dispossessed farmers?
We have established vocational training centres for the youth to make them employable in the non-agricultural sector. CIDCO offers them a compensation package that includes an effective and sustainable source of livelihood. For this purpose, the distinct vocational training courses being offered by Maharashtra government would be helpful to those who are desirous of harnessing the value of the plots. They are being encouraged to start their own businesses. Given the airport itself will boost and impact regional business dynamics, it is imperative that the project affected persons are keen on starting their own ventures.
Are these rehabilitation schemes clearly spelled out? How will a PAP know what he or she can do?
The training and vocational opportunities are explained in detail to the PAPs. We cannot quantify the value, but it will help PAPs transform their lifestyles.
One of the concerns about the airport was that major bidders were unable to or could not participate since the first right of refusal rested with GVK, a company that eventually bagged the project.
The qualification and the bidding process was drawn out over a two-year period. We shortlisted four companies. We had stipulated several conditions, not only for the construction of the airport, but also for operations for the next 40 years. We wanted bidders or operators who had prior experience in running large airports, and such operators could form an engineering or financial consortium. CIDCO had hoped that international players would take part in the bidding process. However, only four consortia did: GVK, GMR, MIA Infrastructure (a joint venture between Tata Realty and Vinci Airport Concessions), and Hiranandani Developers (jointly with the Zurich Airport operator). Though these four were shortlisted, only two filed the financial bids. This was disappointing.
What about mechanisms like the French Clause to prevent cost escalations meet milestones and penalise delays? (Editor’s note: A French Clause is where, if a contractor seeks cost escalations after bagging the contract, CIDCO may offer the project to other private players that are willing to underbid the original contractor on the escalated amount)
We do not have the French clause. But we have placed riders as part of the contractual obligations. We have in place a risk and cost method as per which a bank guarantee is taken from the developer. Performance milestones have to be adhered to, otherwise heavy penalties are imposed. Similarly, our contract is clear about the time and operational date of the new airport. Hence, we have sought a single entity as the concessionaire for the construction as well as operating the airport project. This was done to incentivise the construction phase. Only when the construction is completed on time can the developer start generating revenue from the fully operational airport.
What are these incentives?
We have decided that the year of concession will begin, not from the date of the award of the contract, but from the date of the start of commercial operations. It is in the interest of the developer, therefore, to complete the project construction milestone as per stipulated timelines. No financial incentives were needed to sweeten the deal further. There is a joint responsibility between CIDCO and the successful concessionaire. There is 26% equity participation by CIDCO in the form of land and a soft loan. CIDCO’s pre-development work, estimated to be around ₹3,000 crore, will be converted into a soft loan subsequently and CIDCO will enjoy 26 per cent equity in the entire project.
Is the State government trying to capitalise infrastructure projects through land monetisation?
The CIDCO model works effectively through land monetisation; close to 90% of CIDCO’s capital revenue comes from this source. For instance, in the Mankhurd-Belapur Railway project, government bonds were raised from the private sector. The ₹2,000 crore Navi Mumbai Metro project is going to be an Engineering Project Contract (EPC) project. There is no external funding or bonds being raised or any other means of financing. CIDCO will raise the money through monetisaton of land banks. But these land banks are also dwindling. CIDCO will now have to explore the possibility of other sources or by raising finances externally.
Can you share details of the Navi Mumbai Metro and Smart City projects?
I won’t comment on the Smart City project as it comes under the purview of the two municipal corporations in Navi Mumbai (Navi Mumbai and Panvel). For the Metro, CIDCO has planned a 11.7 km track joining Belapur and Pendhar, located close to Taloja. It is in the final phase of construction. The viaduct work is completed. The stations are at the final stages of completion. As I see it, we will begin trials by December 2017 or January 2018. Commercial operations will begin in about 14 months from now.
