Use excess land to fund expansion of T1,Finance department tells BIAL

Rejecting a plea by the Bangalore International Airport Limited (BIAL) for increased state equity,the Karnataka finance department has suggested that BIAL must look at financing its Rs 1,479-crore Terminal 1 expansion project through utilisation of excess land available to it for commercial use instead of increasing User Development Fee on passengers. The suggestion based on […]

Written by: Express News Service

3 min readBangaloreOct 11, 2013 05:48 AM IST First published on: Oct 11, 2013 at 05:48 AM IST

Rejecting a plea by the Bangalore International Airport Limited (BIAL) for increased state equity,the Karnataka finance department has suggested that BIAL must look at financing its Rs 1,479-crore Terminal 1 expansion project through utilisation of excess land available to it for commercial use instead of increasing User Development Fee on passengers.

The suggestion based on a consultation paper put out by the Airport Economic Regulatory Authority in June this year was placed before the state Cabinet in August.

The state Cabinet on August 23 however decided on a compromise formula to allow BIAL to increase UDF to bring it at par with the Hyderabad Airport by raising it to Rs 430 from Rs 231 for domestic passengers and to Rs 1,700 from Rs 952 for international travellers.

The BIAL had sought an additional equity of Rs 150 crore from the state government to finance the T1 expansion plan which is about a year behind schedule.

Relying on an AERA consultation paper of June 26,2013 on increasing tariffs at the Bangalore Airport the state finance department has emphasised that BIAL had failed to exploit commercial land available to it despite original agreements stating that the excess land provided for the project must be used to finance airport plans.

The Karnataka government has so far extended Rs 350 crores as state support for the Rs 1930 crore first phase of the PPP project and has also provided 4008 acres of land value at approximately Rs. 175 crores for the project. Over 100 acres of land is in excess of airport requirements.

BIAL designed the initial phase projecting 11.4 million passengers per annum and is currently expanding T1 to meet an expected 17.2 million traffic flow in 2015 and until T2 is operational

The AERA earlier this year in its consultation paper noted that “BIAL appears to have in mind to use the income from commercial exploitation of these land for the viability and bankability of the Project,but as of now,has not given any concrete proposal to do so,nor has it indicated the quantum of finances that would be available from such a proposal to make the airport viable’’.

AERA also said “any receipts from the commercial exploitation of land outside the terminal building should also go to reduce the incidence of passenger charges namely UDF’’.

AERA noted that “around 45 acres were commercially exploited for the purposes of financing of phase-I of Delhi airport yielding Rs. 1471 crore’’ and the Mumbai International Airport “exploited around 28-30 acres of land to generate Rs 1000 crore’’.

Based on the AERA paper Karnataka government authorities had placed a cabinet note suggesting that BIAL must exploit the commercial land available to it to finance airport expansion instead of relying on government equity or increase in UDF.

“The cabinet however decided that a middle path must be taken and has allowed BIAL to increase UDF on par with the HIAL,’’ government sources said.

Under the airport’s current share-holding pattern 74 per cent is held by private partners — GVK Group (43 per cent),Siemens (26 per cent) and Zurich Airport (5 per cent) — while the Airports Authority of India (AAI) and Karnataka State Industrial and Infrastructure Corporation (KSIIDC) hold a stake of 13 per cent each.