Active Stocks
Tue Mar 19 2024 11:50:47
  1. Tata Consultancy Services share price
  2. 4,018.90 -3.04%
  1. Tata Steel share price
  2. 148.10 -1.00%
  1. Bharti Airtel share price
  2. 1,232.60 0.62%
  1. Power Grid Corporation Of India share price
  2. 261.00 -1.51%
  1. ITC share price
  2. 409.75 -1.83%
Business News/ Companies / A low point for PPPs: GVK seeks Bangalore airport chairman’s exit
BackBack

A low point for PPPs: GVK seeks Bangalore airport chairman’s exit

GVK Power and Infrastructure claims government-nominated chairman is coming in way of firm's functioning

A file photo of Bangalore airport. Bangalore was one of the first two PPP airports in the country. Photo: BloombergPremium
A file photo of Bangalore airport. Bangalore was one of the first two PPP airports in the country. Photo: Bloomberg

New Delhi: GVK Power and Infrastructure Ltd has sought removal of the government-nominated chairman of Bangalore airport who, it claims, is coming in the way of the private firm’s functioning.

The move marks a low point in the relatively short but troubled history of public-private partnerships, or PPPs, where private companies build public projects in return for a concession to charge toll or user charges or tap other sources of revenue related to the project for a fixed period of time.

Several such projects have run aground after developers were accused of gold plating, or the government couldn’t fulfil its end of the bargain in terms of acquiring land or clearances.

GVK, which also runs the Mumbai airport, holds a majority 43% stake in Bangalore International Airport Ltd, or BIAL, which operates Bangalore airport; Siemens Project Ventures GmbH holds 26%; Flughafen Zurich AG, 5%; and state-owned entities Airport Authority of India (AAI) and Karnataka’s government’s Karnataka State Industrial Investment and Development Corp. Ltd (KSIIDC) hold 13% each.

Bangalore was one of the first two PPP airports in the country; the other was Hyderabad.

In 2010, GVK took a controlling stake in BIAL.

GVK group chairman G.V.K. Reddy has now written to the civil aviation ministry that the group wants BIAL’s chairman removed, according to two people familiar with the matter who asked not to be identified

BIAL, which was once headed by Infosys Ltd non-executive chairman N.R. Narayana Murthy, is now led by chief secretary of Karnataka, Kaushik Mukherjee.

GVK says that because it is the largest shareholder in the venture, its nominees should be appointed the chairman; because the chief secretary of the state is the chairman, it argues, every matter before the board ends up being deliberated and approved by the state government, which has only a 13% stake in BIAL.

The state government has turned down requests to change the chairman, according to one of the people cited above.

Mukherjee said the state government has declined to make any changes at the top.

“We are not agreeing to it. It is very clear in the shareholder agreement," Mukherjee said. “The government of Karnataka has a much broader role—the road to the airport is made by us, there are plans for further investment for metro, we have a much wider interest. The role of Karnataka cannot be decimated."

Mukherjee said the matter to change the chairman had come to the board but was “nullified".

“It is between the government of Karnataka and the government of India only," he said.

“The decision to appoint chairman is taken by the board of directors, thus we do not wish to comment or speculate," a GVK spokesman said in response to a query from Mint.

The PPP agreement has a clause that says the chairman of BIAL will be a nominee of the state government, according to the first official. Mint has not seen a copy of the agreement.

In an effort to get around this, Reddy has written to the aviation ministry asking it to push AAI to appoint its nominee as chairman and offered to support this move, according to the two people mentioned in the first instance.

In its 2014 report on Mumbai airport, the government auditor had emphasized the cosy relationship between the ministry and the Mumbai airport operator.

The Comptroller and Auditor General (CAG) has alleged that “undue benefit" to the tune of at least 5,887 crore was granted to the Mumbai airport and said “the civil aviation ministry and Airports Authority of India failed to monitor the project effectively leading to undue benefit to the private concessionaire while the project kept getting delayed".

Mint first reported on the draft CAG report on 12th December. The final report was tabled in the Parliament on 18 July.

K. Jairaj, a former additional chief secretary of Karnataka who initially oversaw the Bangalore airport project, disagreed with GVK’s request.

“There is a strategic reason for having the chief secretary," said Jairaj. “At that time, it was the first PPP airport and there was a huge suspicion that the government was selling off the family jewels. So we had the chief secretary who represented the government of Karnataka to safeguard public interest despite allowing the airport 74% private ownership."

Nearly 5,000 acres were given to the Bangalore airport, of which 2,000 acres were for the airport and the rest for commercial and aerospace development. BIAL also received several other grants from the state, needing government supervision, Jairaj added.

Like other privately run airports, the Bangalore airport has been criticized for levying new fees to cover the cost of development on users, including passengers.

Bangalore airport charges domestic passengers 342 while international passengers pay 1,368.

T.V. Mohandas Pai, a former Infosys board member and chairman of Manipal Global Education, said the airport cannot be simply handed over.

“I think the PPP (developer) should stick to the agreement. Since the government of Karnataka has given so many sops, its nominee has to be the chairman to protect public interest. The key concern for users is the very high proposed cost of the expansion," Pai said.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Corporate news and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
More Less
Published: 29 Aug 2014, 12:06 AM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App

Chat with MintGenie