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Andhra regional airport projects scrapped as firms lose interest

Andhra regional airport projects scrapped as firms lose interest
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First Published: Sun, Jul 12 2009. 10 53 PM IST

 Viability concerns: A file photo of the Hyderabad international airport. The state had proposed to develop eight regional airports in Andhra Pradesh but failed to get a single bid for the projects ev
Viability concerns: A file photo of the Hyderabad international airport. The state had proposed to develop eight regional airports in Andhra Pradesh but failed to get a single bid for the projects ev
Updated: Sun, Jul 12 2009. 10 53 PM IST
Hyderabad: Andhra Pradesh has scrapped an ambitious project to develop eight airports in tier IV cities after failing to receive a single bid from infrastructure firms in 18 months, according to a senior official.
Viability concerns: A file photo of the Hyderabad international airport. The state had proposed to develop eight regional airports in Andhra Pradesh but failed to get a single bid for the projects even after 18 months. Bharat Sai / Mint
Infrastructure Corp. of Andhra Pradesh Ltd, or Incap, the nodal agency of state government for promoting infrastructure projects, had floated tenders inviting firms to develop the regional airports in January last year.
The state proposed to develop airports at Nellore, Ongole in Prakasam district, Ramagundam in Karimnagar district, Kothagudem in Khammam district, Kurnool, Tadepalligudem in West Godavari district, Nizamabad, and Badangi in Vijayanagaram district.
Incap, along with the district officials concerned, had identified 300-500 acres of land for each of these airports. Each airport was to have up to 2,500m of runway to accommodate small aircraft and needed an investment of around Rs100 crore.
Big infrastructure and construction companies that obtained bid forms for these airports included Caparo Group of the UK, GMR Infrastructure Ltd, Lanco Infratech Ltd, IVRCL Infrastructures and Projects Ltd, Maytas Infra Ltd, Reliance Industries Ltd, Reliance-Anil Dhirubhai Ambani Group firm Reliance Airport Developers Pvt. Ltd, Unitech Ltd and Hindustan Construction Co. Ltd.
Among the firms that had responded to the expression of interest (EoI) called for by the government included Navayuga Engineering Co. Ltd, Ramky Infra Ltd, Gayatri Projects Ltd, Soma Enterprises Ltd, Indu Projects Ltd, Progressive Construction Ltd, MSK Projects (India) Ltd and Marg Ltd.
Development of regional airports was aimed at triggering economic growth in tier IV cities, Manmohan Singh, the state’s principal secretary (infrastructure and investment) had told Mint in March 2008.
“The idea of developing airports in these cities was mooted keeping in view the potential for passenger and cargo traffic owing to growing IT (information technology) and ITeS (information technology-enabled services) sectors and various special economic zones coming up in and around these locations,” he had said.
Singh said on Saturday that the unexpected downturn in the economy in general and real estate sector in particular seems to have resulted in all the 37 infrastructure firms losing interest in the regional airports programme that the state initiated.
According to him, the state government was aware of the fact that small airports cannot survive on poor air traffic in such locations but thought the city-side development opportunity to the developers would enable them to have sustained revenues.
India has 80 fully functional airports equipped to handle scheduled commercial, charter and defence services flights, according to a report by Centre for Asia Pacific Aviation (Capa).
However, of these, 24 big airports together account for 94% of air traffic, while the balance air traffic is shared by smaller or regional airports.
The government plans to take a decision on the regional airports shortly, which includes inviting fresh bids for development of these regional airports, he said. “The file was forwarded to the chief minister’s office and we expect a decision in the next one week or so,” Singh added.
Interestingly, GVK Power and Infrastructure Ltd, which currently operates the Mumbai international airport, did not participate in the bids for the eight regional airport projects. The company had once partnered with Deccan Aviation Ltd to build low-cost airports in small towns. However, it pulled out of the consortium after Kingfisher Airlines Ltd acquired Deccan Aviation.
Lanco Infratech, one of the infrastructure firms that had showed interest in the regional airports, found them unviable in the changed market scenario, said its managing director G. Venkatesh Babu. “We were keen on as many regional airport projects as possible then, when the real estate market was in boom. But now at a time when major airport projects themselves were finding it difficult to see growth in non-aeronautical revenues, these small airport projects make no sense for us.”
Navayuga Engineering, an infrastructure firm which owns a deepwater seaport at Krishnapatnam, and which had picked up a bid form and responded to EoI called for these airport projects, said it found them unviable.
“We had conducted a feasibility study early last year and found that none of these eight regional airport projects were viable even through their real estate component as these project sites were far away from the respective cities,” said its chairman Chinta Visweswar Rao.
The chairman of IVRCL Infrastructure and Projects, E. Sudhir Reddy, said the existing small airports were finding it difficult to generate revenues through aviation services that make the airports sustainable. “We, at IVRCL, think the smaller airport projects proposed by AP (the state) government were unviable in the absence of sizeable revenue streams from real estate component of these projects and hence did not bid for these projects.”
T. Sandeep Reddy, managing director of infrastructure company Gayatri Projects, said his company did not show interest in these regional airports since its study found them unviable and return on investment was a problem.
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First Published: Sun, Jul 12 2009. 10 53 PM IST