Ministries fight, airport plan stuck

The Government’s pledge to develop Delhi and Mumbai airports to meet international standards is now hostage to a clash between the Mini...

The Government’s pledge to develop Delhi and Mumbai airports to meet international standards is now hostage to a clash between the Ministry of Civil Aviation and the Finance Ministry. Three months after Finance Minister Jaswant Singh announced this in his budget speech, the two ministries are slugging it out on the modalities.

While the Finance Ministry wants both airports to be turned into independent companies which can then undertake the proposed modernisation, the Airports Authority of India (AAI) has written back that such a move is doomed to fail. Instead, the AAI has sought to undertake the task itself with the help of government aid.

PLANS FOR DELHI AIRPORT (Rs 2,031 crore)
• New international terminal with apron layout and car park • Modification of existing international terminal, to be converted later for domestic operations • Parallel runway along with parallel taxi tracks and link taxi tracks • Provision of rapid passenger movement between domestic and international terminals in the form of mono rail Story continues below this ad

Taking it forward from what was mentioned by Singh in his speech, the Finance Ministry had suggested that the two airports be converted into two companies with ‘‘initial equal equity participation by the AAI’’. The companies would be allowed to take joint-venture partners and once the airports had been developed to reach international standards, its management would be leased out.

But having tasted no success in its previous ventures to turn these airports into world-class hubs for international travel — various proposals from joint venture to corporatisation have been initiated by earlier governments — the AAI is adamant to go it alone.

In a four-page note to the Finance Ministry, the AAI has reccommended that the Government should make a grant that can be used for modernising the two airports. The whole project should be undertaken solely by the AAI and once the airports have reached international standards, these could be hived off.

According to the AAI, the projected cost for revamping both airports is about Rs 3,900 crore — Rs 2,031 crore for Delhi and Rs 1,864 crore for Mumbai — which is too high for private investors to cough up. As the note states: ‘‘Considering this high cost of investments, there is doubt whether any private investor would come forward to meet such heavy investments. It is also expected that the revenue would not increase so dramatically so as to offset the heavy expenditure.’’

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PLANS FOR MUMBAI AIRPORT (Rs 1,864 crore)
• Total renovation of the domestic terminal, demolition of one existing terminal. • Construction of a satellite pier with underground connection to gate lounges • A revised apron layout to increase aircraft parking capacity from 22 to 40 aircraft stands • Rapid passenger mover link between domestic and international terminals by underground rail connection

The returns on the heavy investment, the AAI believes, would be ‘‘negative’’ for any private investor to take chances. To ensure that there will be no mid-course obstacles, the AAI has suggested that the ‘‘only way to make these projects feasible would be to receive a government grant’’.

In the same vein, the AAI has gone on to demand that the Government ought to compensate it for the revenue loss it would incur once it hives off Delhi and Mumbai airports. Since these are the principal earning assets for the AAI, officials say, the Government needs to compensate it so that work at other airports does not suffer.

While the Ministry of Civil Aviation has backed these suggestions, the Finance Ministry in its initial meeting on the issue had dumped the idea of extending a grant or subsidy on the grounds that it will be difficult to obtain returns once the airport is converted into a private company. However, AAI officials feel their way is the most pragmatic option for the plan to take off at all.