Bangalore/Mumbai: A Karnataka state legislative panel has recommended a five-year ban on Larsen and Toubro Ltd (L&T), Siemens Project Ventures and Unique Zurich Airport from any government contract, saying the firms had traded their shares in Bangalore’s new international airport for profit.

It also suggested reopening the old airport in Bangalore.

Centre of controversy: The Bangalore International Airport. The panel has also called for reopening the old airport in Bangalore. Hemant Mishra / Mint

Both the firms earned 10 times their investment in Bial in 2005, valuing the airport at more than $1 billion within 18 months of its opening.

“Considering the poor quality of workmanship executed, the trading of shares for profit without showing an iota of concern for the general public... L&T, Siemens and Zurich should not be considered for entrustment of any work by both the governments or their agencies for a minium period of five years," the panel, led by legislator D. Hemachandra Sagar, said in its report.c

The panel, set up in September 2008 to see if the old airport in Bangalore should be reopened, submitted its report to the Karnataka assembly on Monday. The report will be debated in the legislative assembly and council before its recommendations are acted upon.

D. Morada, a spokesman for L&T, said the firm would not comment on the recommendations as it had not seen the report. Siemens declined comment. A spokesperson for Zurich Airport declined to comment too, but said the firm remains committed to the international airport in the city.

A spokesperson for Bial said the airport operator had not received the report yet but the company will “certainly review the report of the joint legislative committee and implement its recommendations to the extent possible."

The panel suggests that the old airport run by Hindustan Aeronautics Ltd, which has been closed for commercial operations as per a pact between the Centre and the private firms, be reopened for “healthy competition and convenience of the public."

It also recommended a rethink on the automatic renewal of the public-private partnership in the airport after 30 years, saying this would keep the government from reviewing Bial’s functioning.

“The fundamental premises of a public-private partnership is to contemplate a return on investment and option to exit at some point of time," said Jai Mavani, executive director and head of the infrastructure practice at KPMG Advisory Services Pvt. Ltd, but refused to comment specifically on the panel’s report. “At a time when the capital is challenged globally, PPPs have proved helpful in creating infrastructure."

In 2005, the public-private partnership project had an equity of Rs326.7 crore, nearly three-fourths of it held by a private consortium led by Siemens.

Siemens invested Rs130.68 crore for its 40% holding in Bial, while Zurich and L&T invested Rs55.54 crore each for their 17% stake. The state and Centre hold 13% each in the venture.

Siemens needs to stay invested for at least three years before it can dilute up to 14% and for seven years before it can exit the venture. Zurich can sell up to 12% a year after the airport opens, according to a concession agreement between the private consortium and the Centre. L&T did not have a lock-in period.

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