Modernizing Mumbai’s airport may cost a further Rs 350-400 crore in addition to the earlier estimated Rs 9,800 crore, two officials familiar with the matter said.
“The increase is likely to be because of road construction, a new air traffic control (ATC) tower, which has to be relocated, and work on the Mithi river, which the state government wants,” a government official said, requesting anonymity. “These were not foreseen.”
Unforeseen circumstances: A file photo of the Mumbai airport. Work on a relocated air traffic control tower, a new road and the Mithi river are adding to costs, say government officials. Prasad Gori/Mint
This could mean passengers paying more for travel as a significant part of such costs at airports have been passed on to them as development charges in the past two years.
The latest escalation in costs would be the third for the airport since it was privatized in 2006. The facility is operated by Mumbai International Airport Pvt. Ltd (Mial), a GVK Infrastructure and Power Ltd-led consortium.
It’s not clear if there will be any more cost increases owing to the modernization, said the official cited above. The development was confirmed by a second government official.
Mial denied there would be any escalation. “The project cost, as of now, is Rs 9,800 crore,” said a Mial spokesperson. “If there is a change, we will report it to the board.”
The cost increase has come to light following an aviation ministry directive that asked private airport operators to report any escalation immediately, as was reported by Mint on 3 June last year.
The order was issued to avoid surprise cost escalations such as that for Delhi International Airport Ltd (DIAL), that jumped from an estimated Rs 5,800 crore project cost to Rs 12,700 crore in March last year.
Soon after that, DIAL sought an extension of the passenger levy beyond 1 March 2012, the current date till which the airport regulator has allowed it to charge such fees.
Passengers are being charged to help the developer recover Rs 1,827 crore, or 20% of the earlier project estimate of Rs 8,975 crore. They have to pay Rs 200 for local travel and Rs 1,300 for flying overseas.
Passengers are paying Rs 1,543 crore of the Mumbai airport’s modernization cost by shelling out an airport development fee on fares since 2009. The airport charges Rs 100 per domestic passenger and Rs 600 for international travel.
“Escalations are for many reasons,” said Amrit Pandurangi, senior director at consulting firm Deloitte Touche Tohmatsu Pvt. Ltd. “At least in the road projects the cost overruns are much less for private players compared with government projects. It’s difficult to make comparisons in the airport sector because there are not enough examples.”
The expansion programme is scheduled to end in 2012. Meanwhile, the Navi Mumbai airport project, which has just received environmental clearance, is set for a 2016 start, according to the Maharashtra state government. The new facility is being set up as the current Mumbai airport can’t be expanded beyond a 40 million annual passenger capacity. The airport has had a freeze on new flight slots since last year.