New Delhi: The estimated cost of modernizing Mumbai airport has been revised up by a fifth two years before the completion of its first phase and the eventual price tag may exceed the Rs12,700 crore spent to upgrade Delhi airport. For passengers and airlines using the facility, the revised estimate will likely mean higher usage fees and levies.
GVK Power and Infrastructure Ltd, the main partner in the consortium that runs the Chhatrapati Shivaji International Airport in India’s financial capital through Mumbai International Airport Ltd (Mial), has now estimated the cost of modernizing the facility at about Rs12,300 crore, said two government officials familiar with the matter. That’s an increase from the Rs9,800 crore estimated earlier.
When the project was awarded to Mial in 2006, the cost of modernizing the congested airport was pegged at Rs5,826 crore. Time and cost overruns have resulted in the steep escalation. And at least some of the delay has to do with the Maharashtra government dragging its feet over relocating a statue of Shivaji in the airport out of fear that it would become a political issue in a state where the Maratha warrior-king is venerated.
Mumbai airport. Photo: Bloomberg
One of the officials, who did not want to be identified, said the project’s cost could exceed even the current revised estimate. The second official, who too declined to be identified, confirmed that the new revised estimate is Rs12,300 crore.
Issac George, a director and chief financial officer of GVK, declined comment on the new estimate. He confirmed that there has been an escalation in costs, while declining to specify the extent of the rise.
At current estimates, the cost of modernizing both Delhi and Mumbai airports would surge to Rs25,000 crore, more than double the Rs11,726 crore that had been budgeted when the civil aviation ministry awarded the modernization contracts for the two airports, run until 2006 by state-owned Airports Authority of India. Delhi’s Indira Gandhi International Airport is run by a consortium led by GMR Infrastructure Ltd through the Delhi International Airport Ltd (Dial).
It isn’t clear how the latest escalation in the Mumbai airport modernization cost will be funded. Airport operators have previously fallen back on airport development fees paid by passengers and levies on airlines to recoup their investments.
Mial has been cleared to charge Rs600 and Rs100 from each international and domestic passenger, respectively, contributing a total Rs1,543 crore as airport development fee in 2009-13. Dial has approval to charge Rs1,300 per departing international passenger and Rs200 per departing domestic passenger until 2012, adding up to revenue of Rs1,827 crore. Both airport fees are being reviewed again by the airports regulator, Airports Economic Regulatory Authority.
A top airline official said it was incongruous that India was building expensive and opulent airports at a time when its own domestic market was shifting to a low-cost passenger base.
“We’re building these airports right now in India when 75% of even the domestic flights are in the low-fare, low-cost category,” said Suresh Nair, South Asia head for budget airline AirAsia.
“Does a low-cost airline need the infrastructure that is being built? The answer is no. I can understand a bigger terminal, but rest of the luxuries are being built to satisfy these 25% of fliers,” Nair said.
AirAsia pulled out of Hyderabad airport this year citing high costs.
Nair said the focus should be not on building “white elephants”, but “smart and effective terminals” like in Kuala Lumpur where, for instance, passengers walk out of the aircraft and into the terminal instead of using aerobridges. Such measures help airlines save on high tariffs and customers fly on cheaper fares.