Limit on guarantee for airport projects

This way, the finance ministry is limiting its exposure and is also restricting its liability to the debt funds that promoters lock in during the financial closure of the project.

Sources said under this measure, the promoters of the Delhi, Mumbai airports cannot invoke the central government counter-guarantee to reclaim debt brought in during any other stage of the lease period.

In other words, if a promoter invests Rs 1,000 crore for Delhi airport, of which Rs 700 are loans (debt), the government guarantee would cover only Rs 700 crore.

Under the airport restructuring plans being finalised by both finance and the civil aviation ministry, the lease period for the airports can last up to 60 years (the initial period is 30 years, which can be extended by another 30 years).

During this period, the promoter would time and again approach banks/financial institutions or even the debt market for raising money for various schemes as per their business plans. In that regard, sources said the finance ministry does not want to give a blanket cover for all outstanding debt as these funds would strictly be under the business plans of the individual promoter.

The central government counter-guarantee is a credit enhancement facility to ensure that the lenders to the project (who would have the largest exposure in the project) have surety that their funds would be paid back in the event, say, when the Airport Authority of India (AAI) terminates the project and AAI itself is unable to meet the repayment obligations falling upon them.

Unlike the counter-guarantees given to the fast track power projects in 1998, those for airport projects would be extended to domestic as well as foreign loans, sources said. For the fast track projects, the central counter-guarantee was limited to the outstanding foreign debt alone.