New Delhi: Private shareholders of Mumbai airport, led by GVK Power and Infrastructure Ltd, have informed the aviation ministry that they cannot arrange for more funds to build the airport, defying a ministry circular to bring fresh equity into the project.
Aviation minister Ajit Singh in a 16 October statement had asked the Airports Authority of India (AAI)—a 26% stakeholder in Mumbai International Airport Pvt. Ltd (MIAL)—to bring in more equity into the airport with the objective of abolishing from January the airport development fee charged on passengers.
Government-owned AAI agreed to bring in Rs.288 crore, leaving it to the other shareholders including GVK, Bid Services Division (Mauritius) Ltd and ACSA Global to arrange the balance Rs.864 crore that the ministry sought in additional equity.
MIAL has told the government it wants to continue collecting the fee from passengers for the Rs.12,300 crore facility it is building, placing it in direct conflict with the aviation ministry. MIAL so far has brought in only Rs.1,200 crore equity to build the airport.
“Issue of additional equity beyond Rs.1,200 crore was discussed in GVK and it was felt that no further equity infusion was possible,” GVK president Rajiv Jain said in a 19 November letter to the Airports Economic Regulatory Authority, aviation secretary K.N. Srivastava and AAI chairman V.P. Agarwal. Mint has reviewed a copy of the letter.
Passenger charges in Mumbai are likely to increase in the absence of the equity when the airport regulator finalizes airport tariffs in the next few weeks.
An email sent to a MIAL spokesperson seeking comment remained unanswered. Singh could not be immediately reached for comment.
It was the aviation ministry that a few years ago allowed a total levy of Rs.3,400 crore in airport development fees from passengers under then minister Praful Patel. This was because the government had not placed a project cap on the Delhi and Mumbai airports when they were privatized in 2006 and the airports eventually spent more than Rs.12,000 crore each to modernize—double the initial cost estimate.
But earlier this year, the Comptroller and Auditor General of India, the government’s apex audit body, in a report on Delhi International Airport Pvt. Ltd, criticized the clearance given for the levy of the fee, forcing the ministry to act.
GVK last year increased its stake in MIAL from 37% to 50.5% and now plans to sell some of this holding to private equity firms to raise Rs.3,000 crore to reduce the debt it had taken to buy the additional shares, according to a 9 August report by Mumbai-based brokerage ICICI Direct.
Two aviation experts said the government should stick to its stand of abolishing the airport development fee.
“Everyone has been talking about these high airport charges for airlines and passengers but nothing has happened at all,” said Suresh Nair, India head of Malaysian low-fare airline AirAsia. “Has Rs.1 of these airport charges been reduced at any of these airports so far? The answer is a clear no.”
MIAL should not be allowed to build the Navi Mumbai airport, for which it has a first-right-of-refusal option, said Mohan Ranganathan, a member of the government-appointed Civil Aviation Safety Advisory Council.
“Since they don’t have money for developing this airport, the government should only give the Navi Mumbai airport project to those who have money to build it,” Ranganthan said, adding that the government should stick to the commitment it has made to passengers to abolish the fee. “But as we have seen...the commercial requirement of an operator always take priority over all other aspects of the government.”