A project in peril

Bangalore, the electronics capital of India, does not have an international airport of its own. The present airport, owned by the Hindustan Aeronautics Limited (HAL) is essentially for test-flightsand has all along been treated as a makeshift airport for civilian flights.

The project was conceived to be taken up on BOO (build-operate-and-own) basis when Azad gave clearance on the grounds that the Centre had no funds to spare for a new airport. A memorandum of understanding (MoU) was signed between the consortium and the State Government.

When the project was about to take off, Azad’s successor Ibrahim put his foot down and said the Centre would not allow the airport to come up on BOO basis. Since aviation was a Central subject, the new airport would have to be transferred to the Centre at a later stage. He insisted that the project should be taken up on BOOT (build-own-operate-and-transfer) basis.

After a series of meetings, the Tata-led consortium accepted the condition and the MoU was modified accordingly. At this point, many other issues, including sharing of flights between the present HAL airport and the proposed airport, were also sorted out and a government order (GO) issued, pending finalclearance by the Centre.

After Ananta Kumar took over as civil aviation minister, the ministry raised fresh issues. Though Anantha Kumar has openly favoured the construction of new airport, he said that the present HAL airport too would be upgraded to international standards. He also sanctioned additional funds for this purpose. He also managed to obtain a letter from the Defence Ministry saying that it had no objection to international flight operations at HAL-airport, a total reversal in the stand of the Defence Ministry. Since it did not find the minister’s idea of two airports sharing the revenue viable, the Tata-led consortium lost interest in the project.

A brief history of the project reveals how things went wrong with it.

In the ’50s, DGCA got a small piece of land known as `Civil Enclave’ in the HAL Airport for building a civil airport terminal. The terminal was designed and built for handling peak-hour traffic of 300 passengers.

By 1991, peak-hour traffic increased to 1,800 passengers. Therewas no expansion, renovation or modernisation of the airport terminal, leading to acute congestion.

In early 1989, Dr Valluri, former Director of National Aeronautical Laboratories (NAL) had prepared a study of the Bangalore Airport and recommended four alternatives.

The National Airports Authority (NAA) did not favour construction of a new airport due to paucity of funds. The second alternative was also rejected as the land and airport belonged to the HAL. The third alternative was not found feasible as the land on the other side of the runway was a low-lying area prone to flooding.

Hence the NAA considered the fourth alternative of renovating and expanding the existing terminal building. It also initiated a proposal to acquire land adjacent to theairport. But the required area of land sought was not available.

In the early ’90s, the Federation of Karnataka Chamber of Commerce and Industry (FKCCI) wrote to the then Union civil aviation secretary A.V. Ganesan requesting immediate action for development of the Bangalore airport. Ganesan visited Bangalore and held discussions with Karnataka Government officials, the HAL chairman and FKCCI. He was told that increased civil operations at the HAL airport may pose problems for testing of fighter aircraft. HAL wanted the Centre and the NAA to examine the possibility of selecting a new site for a civil airport. The Ministry of Defence (Department of Defence Production) also suggested shifting of civil aviation activity.

Based on a detailed report by Ganesan, the civil aviation ministry set up a committee under the chairmanship of S. Ramanathan, former Secretary to Government of India and Chairman of International Airport Authority of India (IAAI) to examine alternative sites for construction of a modern andfuturistic civil airport of international standards. The committee submitted its report to the Centre in June 1992.

The Karnataka Government began exploring possibilities of involving the private sector and named the Karnataka State Industrial and Investment Development Corporation (KSIIDC) as the nodal agency.

The civil aviation ministry was on April 8, 1994 informed that due to financial crunch, the international airport would have to be built on the BOO principle and the modalities of setting up an international airport should be laid down by the IAAI.

In June 1994, the civil aviation ministry informed the State Government that it had secured clearances for construction of an airport at a site south of Devanahalli, identified by the Ramanathan Committee.

The State Government floated tenders which was when the status of the HAL airport began to be questioned. Private parties felt that there would be no scope, at least in the near future, for existence of two competing airports in Bangalore.

TheState Government sought clarifications from the Centre and the NAA (vide letter dated December 7, 1994). The NAA said that once the new international airport came up, it would withdraw all its infrastructure from the HAL airport. In a subsequent letter dated May 1, 1995, the Centre said all commercial operations of national and foreign carriers and cargo activities would be shifted to the new airport.

However, HAL would be listed as standby airfield for diversion.

The State Government then constituted a committee under the chairmanship of the Chief Secretary to scrutinise the offers received. The committee shortlisted seven parties and after detailed presentation by them selected the Tata-led consortium. It was later approved by the State Government on January 16, 1995.

After clarifications from the consortium on financing infrastructural facilities like water, road and railway linkages, power etc, the Government issued another GO on February 23, 1995 accepting the Tata’s proposal and issued a letter ofintent to the Tatas on March 1, 1995. An MoU was signed by KSIIDC and the consortium on December 29, 1995.

The Consortium submitted a detailed techno-economic feasibility report (TEFR) in July 1996. KSIIDC evaluated the TEFR with the assistance of the Airports Authority of India (AAI) and the TEFR was approved with certain modifications.

That was when the problems began.

The Centre in a letter dated December 16, 1996 said earlier communications exchanged between the Centre and the State were before the feasibility study was undertaken and, therefore, their implications were not fully known.

The State Government furnished detailed clarifications in a letter dated January 24, 1997 on the preliminary comments made by the Centre.

A joint meeting was held on February 20, 1997 under the chairmanship of Union Minister for Civil Aviation. It decided to constitute a committee to examine various aspects of the project and submit a report. Accordingly a committee under the chairmanship of Joint Secretary(Civil Aviation) representing the Central and State governments and the Tata-led consortium was set up which was to examine the implications of BOO versus BOOT models as also the legal ramifications of a switchover from BOO to BOOT.

The committee was also asked to examine the exclusivity of the new airport vis-a-vis the existing airports at Bangalore HAL, Yelahanka and Jakkur. It had four meetings in March 1997 before it submitted its report. Two more meetings were held in August and November 1997 and an agreement reached on all major issues.

The location was to be south of Devanahalli. It would be BOO-cum-Joint Venture basis with equity participation from Government of India (AAI) and Government of Karnataka (KSIIDC).

The HAL Airport was to continue and to be made available to smaller aircraft (up to 52-seat capacity), for short haul operations (excluding state capitals and international airports), training, emergency, VIP flights etc.

The Air Traffic Control (ATC) operating responsibility andequipment were to continue to rest with the AAI. The committee wanted the TRS consortium to submit a report on the project concept and cost/traffic revenue/aeronautical charges/non-aeronautical charges, keeping in view the amendments/modifications (pegging aeronautical charges at 25-per cent higher than the charges that are likely to be levied by the AAI in future, increasing non-aeronautical charges at a level of 65 per cent in the fourth year).

The consortium in its report made three points:
a. There is no perceptible change in project cost.
b. The project cannot be pruned down as it would affect quality of services.
c. It will be difficult to make the project viable pegging aeronautical charges at 25 per cent of the AAI’s future charges.

The economic unsuitability of the project made the Tatas announce a few months ago that they had pulled out of the project. Yet again this week Ratan Tata met Chief Minister JH Patel over the same issue.

The Tatas are expected to re-examine its economicviability. Though the project stands at a point where no one knows whether it’s going to take off or not, the inordinate delay will result in a steep cost escalation which ultimately would have to be borne by the tax payer.