Tags:
Journalism of Courage
Indira Gandhi International Airport, circa 2008
A new parallel runway has doubled the number of flights since 2006. High-speed exit taxiways have cut the runway occupancy time of aircraft from 60-90 seconds to 20-50 seconds. A new road connecting the international and domestic terminals has reduced transfer time. The international terminal has a new elevated approach for departures and a front-road approach at the ground level for arrivals. There are new duty-free shops and shopping malls in the airport.
That8217;s not wishful thinking, but commitments given to the government by GMR-Fraport, which recently bagged the mandate to modernise the Delhi airport, for 2008. GVK-Airports Company South Africa, which will be sprucing up the Mumbai airport, also has a similar task list and deadline. Against many odds and after several aborted starts, the much-awaited modernisation of Indian airports is finally underway.
But years of centralised control have led to selective focus on a few busy airports, while the rest of the infrastructure gradually deteriorated. Even the two busiest airports of the country, Delhi and Mumbai, suffered from lack of attention and their expansion has been delayed by over a decade. As a result, the two airports were bursting at their seams by the late 1990s and the problem only accentuated with the increase in number of flights and airlines. Various governments from the early 90s till the turn of the century experimented with different models for allowing private players to run these two airports. However, neither of these measures led to any concrete results.
The principal problem was in the AAI Act, which did not allow passing on any kind of control to private players barring, of course, the sub-contracting of some airport-related services. It was not until 2003 that the government moved to amend this Act; on July 1, 2004, these changes were finally notified. But the process of inviting bids from private consortia for the Delhi and Mumbai airports was initiated in 2003 itself by the NDA government.
The bids were to be opened immediately after the UPA government took charge. But with mounting pressure from the Left, the ministry of civil aviation had to make three important modifications in the document seeking request for express of interest from bidders. These were:
8226; Reduction of the FDI foreign direct investment limit from 74 per cent to 49 per cent and a corresponding increase in the share of Indian entities. The balance 26 per cent will be held by AAI.
8226; The joint venture JV formed will have to retain existing AAI employees at these two airports for at least three years; plus, it will have to absorb 40 per cent of the existing employees.
8226; Any of the scheduled airlines and their group entities can pick up to 10 per cent stake in the JV.
Subsequent to this, 10 bidders expressed interest, of which, nine were qualified to compete. One consortium, however, dropped out midway, leaving eight competitors who submitted their detailed proposal for development of the two airports.
After a long-winding process filled with twists and turns that saw the technical evaluation being repeated, the two JV partners were finally selected earlier in the year: GMR-Fraport for Delhi, GVK-ACSA for Mumbai. Both players have a set of mandated tasks to be completed in the first two years. In Delhi, the emphasis is on improving the airport considerably ahead of the 2010 Commonwealth Games.
According to modifications in the AAI Act, the ATC and security of airports will remain with the government. This means that bulk of the aeronautical revenues collected by the AAI will continue to accrue to the government. So, the private consortia will have to generate money through non-aeronautical commercial ventures. The idea is to get them to invest maximum in duty-free shops, malls, restaurants and such like ventures.
With the AAI not having to play a big role in restructuring of Delhi and Mumbai airports, the government has directed it to concentrate on modernising 35 non-metro airports.
According to a broad estimate, the likely investment into airports will be to the tune of Rs 40,000 crore.
The AAI will take up the modernisation drive in a phased manner. In the first phase, 10 airports have been identified: Ahmedabad, Amritsar, Goa, Guwahati, Jaipur, Lucknow, Madurai, Mangalore, Thiruvananthapuram and Udaipur. A global technical advisor is also being appointed to specifically advise on the architecture and design aspects of the project.
But a separate plan will be drawn up for commercial development of the airport premises at these places and independent JV will be set up, with the AAI holding 26 per cent equity. What is under evaluation is whether a cluster of airports can be taken together or should each one float a dedicated JV.
Besides this, the finalisation of all agreements and beginning of construction of the first two greenfield airports at Bangalore and Hyderabad has had a cascading effect, with state governments of Goa, Maharashtra and Punjab now chasing the ministry of civil aviation for approval of similar projects.
Such greenfield projects involve construction of a new airport at any location of the state government8217;s choice, subject to technical approval of the site by the Centre. In this, 74 per cent equity is held by a private consortium, while the remaining 26 per cent is split evenly between the state government and the Centre.
For its part, the state is responsible to provide an encumbrance-free site to the private consortium for construction besides a range of other tax concessions. Ludhiana, Mopa Goa, Pune and Navi Mumbai are the sites under consideration by the ministry. The impediment that most of these locations face is their proximity to defence locations, which makes airspace control a problem.
While these are projects to be handled in the long run, many short-term projects have been undertaken to construct new parking bays in Delhi and Mumbai to cater to the rush of flights. Minister of civil aviation Praful Patel says this is his priority area now, as the emergence of world-class airports is a must for the boom in the sector to be sustained. The ministry and the Planning Commission have been in close touch with each other on the subject and have kept 2010 as the deadline to show results. And that8217;s only the first of many dates to watch out for.
8216;We may go for an IPO8217;
On operations. There are improvements we have to do within three months, six months, 12 months. By 2010, before the Commonwealth Games, we hope to have a new building, based on international standards, in place.
On investments. We plan to spend Rs 3,200 crore in Phase 1 and service 20-25 million passengers. By the next 15-20 years, we would have invested about Rs 20,000 crore and the airport will be ready to service 100 million. In Phase 1, we have to bring Rs 550-600 crore; around Rs 200 crore is already in the bank.
On financing. Most of our financing will be internally generated. At some stage, we may go for an IPO. Besides, we have unconditional debt commitments and sanction letters from ICICI Bank Rs 3,150 crore and Punjab National Bank Rs 750 crore. We8217;re also looking at private equity.
On choosing Delhi. Mumbai is a very difficult airport 8212; there are slums around it and a cross runway, among other things. Delhi is the future. The potential is huge 8212; Commonwealth Games, better infrastructure. We hope to turn Delhi into a transit hub.
