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AAI reduces scope of private participation

AAI reduces scope of private participation
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First Published: Mon, Jan 19 2009. 06 10 AM IST

 New terms: Civil aviation minister Praful Patel has approved the fresh proposal that excludes control of terminal buildings. Ramesh Pathania / Mint
New terms: Civil aviation minister Praful Patel has approved the fresh proposal that excludes control of terminal buildings. Ramesh Pathania / Mint
Updated: Fri, Mar 06 2009. 08 19 PM IST
New Delhi: Private airport developers planning to participate in the development of the country’s 35 non-metro airports, being modernized by the state-run Airports Authority of India, or AAI, will not be given control of the airport’s terminal buildings, reducing the scope of their business.
New terms: Civil aviation minister Praful Patel has approved the fresh proposal that excludes control of terminal buildings. Ramesh Pathania / Mint
The civil aviation ministry’s decision could hurt expected private and public investment of some $800 million (Rs3,904 crore) in such airports across the country. More immediately, it would require fresh bids to be sought for the Udaipur and Amritsar airports based on new parameters.
AAI had sought private participation for these two non-metro airports in late 2007 and announced five bidders each in April 2008 from among the nearly two dozen firms that had shown interest in the projects that promised prime land parcels for development.
That plan ran into trouble with AAI objecting to the ministry’s view that control of airport terminal buildings be given to the selected private operators to maximize “commercial exploitation”. In addition, opposition from the Left parties, allies of the Congress-led coalition government at the Centre until early July, caused the selection of a private operator for the Udaipur and Amritsar airports coming to a halt, according to a ministry official who asked not to be named.
Nearly $400 million of private investment was expected in the 35 non-metro airports with AAI spending an equal amount to modernize them. The authority planned to attract private partners at 24 airports first.
According to the new proposal approved by civil aviation minister Praful Patel, clarified in a letter that Mint reviewed, development at such airports now will be limited to “commercial development of property on city side, car park, cargo operations” and excludes control of the terminal buildings at any of the 35 non-metro airports.
The scope of private participation in the initial so-called request for qualification at the Udaipur and Amritsar airports had included commercial operations, maintenance of the airport’s terminal building, and cargo operations as also developing the city side land (land outside the airport’s terminal building).
The ministry’s decision comes on the heels of the accounting fraud at tech vendor Satyam Computers Services Ltd. Maytas Infra Ltd, controlled by the family of Satyam founder B. Ramalinga Raju, was one of the five shortlisted bidders for Udaipur airport. It was not clear if the decision was related to the Satyam scandal.
Others shortlisted for the Udaipur airport included a Tata-Changi Airport consortium, the Reliance-Anil Dhirubhai Ambani Group, or R-Adag, GMR Infrastructure Ltd, and Larsen and Toubro Ltd, or L&T. At Amritsar, shortlisted bidders included Tata-Changi, R-Adag, L&T, Fraport AG, Lanco Infratech Ltd and Genting International (Singapore) Pte Ltd. Tata-Changi is a partnership between the Tata group and the operator of Singapore’s Changi Airport.
In the earlier bid, AAI was to give part operational control and most of the maintenance work on a 30-year contract on the lines of the lease contracts at the Mumbai and Delhi airports, retaining overall management control.
Terms of the new bids are still not clear. An expert said the new terms will cause private bidders to reassess non-metro airports they want to participate in, given that several of the airports are making losses. “The private sector will reassess the entire scenario before it will participate and this becomes even more important when the terminal building is also withdrawn,” said Gurcharan Bhatura, secretary general of New Delhi aviation and tourism consultancy Foundation for Aviation and Sustainable Tourism.
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First Published: Mon, Jan 19 2009. 06 10 AM IST