New Delhi: The government, by not creating sufficient institutional checks and balances in time, has left the project cost of rebuilding the Capital’s Indira Gandhi International Airport open-ended and also permitted private sector consortium Delhi International Airport Ltd (DIAL), which manages the airport, to partially pass on the increase in costs as higher user fees on airport facilities.
These details came to light after Mint requested, and was provided, the relevant information under the Right to Information (RTI) Act. There is no requirement for government approval of project costs, the government said.
In the three years since the contract was awarded, project costs of DIAL have increased by Rs2,975 crore. This is around 50% higher than the so-called “indicative” cost of Rs5,900 crore the government stated in 2006 and could rise even more after another review is completed in August. Part of the cost increase has been mitigated with the aviation ministry on 9 February approving an hike in the airport development fee which will give DIAL Rs1,827 crore from additional user charges. A public interest litigation challenging this was filed in the Delhi high court, the next hearing for which is scheduled for 18 August.
Cement and steel prices rose sharply in 2006 and 2007 and peaked in 2008, before beginning their southward journey. They are just beginning to firm up again. Construction costs are driven largely by the prices of these two commodities.
Increasing expenditure: Development work under way at the Indira Gandhi International Airport, Delhi. Madhu Kapparath/Mint
The situation has been exacerbated because the independent oversight of the contract is vested in the Airports Economic Regulatory Authority (Aera), which is yet to be fully operational. Worse still, the 30-year concession agreement signed between the government and DIAL did not specify a project cost at the time it was awarded.
In fact, Aera was scheduled to do its first review of the project this month, which could have shed some more light on the vexing issue. This is yet to happen, with the regulator’s chairman, Yashwant Bhave, taking charge on 1 August.
If Aera reverses the pass-through approved by the ministry in February, then the cost increase will have to be borne by DIAL. “If there was no approval of the final cost as you say, then they probably have taken a small risk of assuming that they will be able to convince Aera whenever it becomes operational. Because if Aera doesn’t approve, they won’t be able to get tariff increases or pass-through (the costs to users). They will be fairly certain that the risks can be managed. Otherwise, they wouldn’t have incurred the costs,” said Amrit Pandurangi, who heads transport and infrastructure practice for audit and consulting firm PricewaterhouseCoopers. “I think it is fair to assume that the regulator will not be partial only to the investor. That is an assumption and that is a fairly reasonable assumption to make,” he added.