New Delhi: The private developer leading modernization of the Capital’s aerodrome, Delhi International Airport Ltd (DIAL), said it will restart a plan to build hotels and malls at the country’s second busiest airport soon, a day after the government’s top legal counsel told the civil aviation ministry the proposal did not contravene rules under which the airport is being privatized.
The ministry, which is opposed to the development of the so-called hospitality district at the airport, said it is still to take a view on the legal advice it had received from the attorney general of India.
Construction of nearly 3,000 hotel rooms for the 2010 Commonwealth Games in about 45 acres of land through private realty developers had been put on the back-burner by DIAL after its differences surfaced with airport regulator Airports Authority of India (AAI) and the civil aviation ministry, which objected to the developer’s plan to finance the modernization by taking deposits against lease contracts in the hospitality district.
DIAL still has nearly 200 acres which can be developed on a similar model, while the Mumbai airport, being developed by Mumbai International Airport Ltd under almost similar contractual terms, could also potentially decide to fund airport modernization through deposits around 2010-11 when the occupied airport land is vacated through an ongoing slum relocation programme.
A civil aviation spokesperson said the ministry has received the views of the attorney general which say that raising deposits was not outside the agreement signed between AAI and DIAL as long as the revenues are not diverted anywhere else. However, the official said, it was too early for it to take a view on “the way forward”.
Another senior government official, asking not to be named, said the government would hold internal discussion soon on the issue. “It is difficult to say (what route will it take). There is the legal side by the government’s highest law officer and then there is the financial side (impact on AAI) that the government needs to consider,” the official said.
DIAL said it has not received any communication so far from the government, but feels it may go ahead now. “There was no communication that we were waiting to receive, we had neither been asked to stop it, but we had put it on hold,” said Madhu Terdal, chief financial officer (corporate strategic finance) of the Hyderabad based-GMR Group. “Now at least we can activate it.”
Several hoteliers have applied for bidding for the proposed hotels after DIAL floated tenders earlier this year and was expecting to process the applications around September. DIAL proposes to secure a lump sum fee (amounting to at least Rs2,835 crore) as a refundable deposit for a period of 28 years, apart from a licensing fee, for leasing out airport land to private developers. It is mandated to develop 5% of the over 5,000 acre airport land for commercial activity.
The civil aviation ministry had sought the attorney general’s views if raising of money through deposits for the hotels as proposed by the airport operator was within the purview of the 30-year agreement that the operator has signed with the government to modernize and run the airport.
Taking cue from the differing views emerging an year into airport privatization at New Delhi and Mumbai, the ministry has decided not to go in for a revenue-share agreement for airports it plans to build under similar public-private partnership.
Instead of sharing revenues generated out of realty development and related activities, as in Mumbai and Delhi, the private consortium for the non-metro airports will be selected based on the annual premium it is willing to pay AAI. The government has invited proposals to develop Amritsar and Udaipur airports, two among 24 airports selected for modernization.