Some 2,500 hotel rooms to be built on Delhi airport land by the winter of 2010 by a GMR Infrastructure Ltd-led consortium is likely to be a casualty of a deal between the Centre and the airport developer to shelve a plan to finance construction through deposits against lease rights.
The civil aviation ministry has informed cabinet secretary K.M. Chandrasekhar, who also heads the committee of secretaries overseeing the Commonwealth Games, planned for November 2010, that the airport operator may not have the hotels ready in time as envisaged earlier.
In May, Delhi International Airport Ltd (DIAL), the GMR-led firm, had sought to raise about Rs2,835 crore from hotel developers by leasing out nearly 39 acres of the 5,050- acre airport land.
But the proposal ran into opposition within government circles as it was seen as an effort to circumvent the revenue obligations between the firm and the government, under a privatization agreement signed between the airport operator and state-owned Airports Authority of India (AAI) in 2006.
Six months and after several meetings, including legal exchanges in between, the issue was finally resolved at the highest level this week. In a 75-minute-long meeting on Monday attended by civil aviation minister Praful Patel, civil aviation secretary Ashok Chawla, AAI chairman K. Ramalingam, financial adviser Raghu Menon, GMR chairman G.M. Rao and K. Naryana Rao, a DIAL director, the two sides finally agreed to do away with the existing plan, as first reported by The Times of India on Tuesday.
In place of deposits, an equivalent amount of equity will be rised. But the equity amount will be kept as low as possible, instead relying on debt and other instruments. “All the shareholders of DIAL will now give equity to the extent of the refundable deposit,” said an official present at the meeting, who did not wish to be identified.
Hyderabad-based GMR Group owns 50.1% of DIAL and AAI 26%, while the rest is held by Frankfurt airport operator Fraport AG and a unit of Malaysian Airports Holding Bhd. (10% each). Private equity player India Development Fund has a 3.9% stake.
Declining further comment, DIAL spokesperson Arun Arora said that plans are still being “formalized”.
An analyst said that with DIAL likely to miss its hotel rooms build-out targets in time for the Commonwealth Games, the shortfall of hotel rooms in Delhi at the event would worsen. “By not having these, they will give more pressure to the overall shortfall in Delhi,” said Ankur Bhatia, executive director of the Bird Group, a tech solutions provider for travel and tourism industry, estimating a shortfall of some 15,000 three-star and four-star hotel rooms ahead of the Commonwealth Games.