Ministry to consult AG on Delhi airport’s subsidiaries

Ministry to consult AG on Delhi airport’s subsidiaries

New Delhi: The civil aviation ministry plans to seek the opinion of the attorney general (AG) on the company running the Delhi airport using subsidiaries, according to the government auditor, to reduce the amount of money it pays to state-owned Airports Authority of India (AAI).

The Comptroller and Auditor General of India (CAG) said in its report submitted in Parliament last month that the joint ventures set up by Delhi International Airport Pvt. Ltd (DIAL) “resulted in substantial reduction in annual fee receivable by AAI".

The ministry is now looking at the subject afresh, said two officials on condition of anonymity.

The possible loss of revenue had also been brought to the attention of the ministry by the Airports Economic Regulatory Authority (Aera) earlier this year. The ministry is yet to reply to the airport regulator over its stand on the subsidiaries.

“There is no thought process that we have. It is for the AAI board to decide," said one of the civil aviation ministry officials cited above. “We are seeking the opinion of the attorney general on the clauses of the OMDA (operations, management and development agreement) on subsidiaries. There is nobody higher than that. After this we will reply to the CAG."

A second ministry official confirmed the move, adding that Mumbai International Airport Pvt. Ltd will also be asked whether it plans to form similar subsidiaries.

OMDA governs the 2006 privatization agreement between AAI and DIAL.

GMR Infrastructure Ltd leads the DIAL consortium, which has been running the Indira Gandhi International Airport in Delhi since 2006 and is required to share 46% of its revenue with AAI.

DIAL has set up 11 joint ventures for almost all of its non-aeronautical revenue streams, including cargo, food and beverage, duty-free shops, and ground handling, Mint reported on 22 July. Its stake in the ventures ranges from 26% to 50%. The subsidiaries pay DIAL a share in revenue of 15-25%.

Citing the advertising subsidiary as an example, Aera had told the ministry in its communication earlier this year that for every 100 earned by the joint venture, DIAL gets 22 in revenue and dividend. Forty-six per cent of this translates into 10.12. Without the joint venture, AAI would have got the entire 46.

DIAL rejected the auditor’s conclusions.

“The contention in the CAG report that there has been loss to AAI due to defective revenue sharing by DIAL with joint ventures is not correct and has overlooked some of the key factors which have been the basis of privatization of Delhi airport," a DIAL spokesperson said in an email.

The company said it was adhering strictly to the terms of OMDA.

“DIAL is in full compliance of OMDA with reference to activities of sub-concession and participation in the joint ventures," the spokesperson said. “DIAL has taken legal opinion as regards its rights and responsibilities under OMDA at each stage starting with prior to implementation of OMDA (when the same was shared as pre-bid document) and also post implementation of OMDA."

The regulator is awaiting the reply of the ministry, an Aera official said. Aera is set to decide on new tariffs for DIAL for the $3 billion (around 13,800 crore today) project and if subsidiaries are permitted in the current format, passengers may have to pay more than they do currently in order to maintain the payments to AAI at the current levels, according to the Aera official.

CAG had said in its report that “audit observed that while DIAL was required to pay to AAI an annual fee at the rate of 45.99% of its gross revenue, DIAL’s agreement with the joint ventures (on cargo and airport parking) provided for sharing of gross revenue on the contracted-out services". This “resulted in substantial reduction in annual fee receivable by AAI", CAG observed, adding the agreements with the joint ventures “were not in consonance with the said clause of OMDA relating to annual fee. AAI should have ensured that 45.99% of the gross revenue as stipulated was received".

The 11 DIAL joint ventures are Delhi Duty Free Services Pvt. Ltd, Devyani Food Street Pvt. Ltd, Travel Food Services (Delhi T3) Pvt. Ltd, Delhi Select Service Hospitality Pvt. Ltd, TIM Delhi Airport Advertising Pvt. Ltd, Delhi Airport Parking Services Pvt. Ltd, Delhi Aviation Fuel Facility Pvt. Ltd, Çelebi Delhi Cargo Terminal Management India Pvt. Ltd, Delhi Cargo Service Center India Pvt. Ltd, Wipro Airport IT Services Ltd and Delhi Aviation Services Pvt. Ltd.

PTI contributed to this story.