People's Democracy

OBSERVATIONS/CONCLUSIONS/RECOMMENDATIONS AT A GLANCE

Modernisation & Restructuring Of Delhi & Mumbai Airports

The Parliamentary Standing Committee on Civil Aviation ministry has in its latest report pulled up the central government on the issue of modernisation and restructuring of Mumbai and Delhi airports. CPI(M) floor leader in Rajya Sabha, Nilotpal Basu is the chairman of this standing committee. Below we give excerpts of report containing observations/conclusions/recommendations of the committee

THE Committee is constrained to note that the proposal regarding modernisation and restructuring of Delhi and Mumbai airports has been lingering on for a fairly long period and still the government has not been able to come up with any concrete plans in this regard. The Ministry of Civil Aviation has also not been able to even firm up the financial requirements for these projects. The government has been quoting different cost estimates at different stages. The Committee also notes that the initial figures of Rs 10,000 crore to Rs 20,000 crore stated by the Secretary of the Ministry were too inflated and also gave the impression that the money was required immediately in one go which infact was actually required in phases spread over 15 to 20 years.

(Para 20)

The Committee feels that the process of modernisation as explained by the Ministry, is very slow and the target to be achieved is also minimal in terms of global standards. The Committee observes that Airports Authority of India at present has already achieved the target with the present rate of investment. The Committee does not agree with the Ministry of Civil Aviation that resource crunch is the main reason for inviting private sector participation for the modernisation and restructuring of Delhi and Mumbai airports. The quantum of investment which is to the tune of Rs 13,786 crore, required for modernisation of Delhi and Mumbai airports is not on the higher side and that too is required in a phased manner over a period of 15 to 20 years. The Committee feels that the government can even mobilise the funds required. This will ensure not only the management control of the proposed operators of the airports in the hands of Indian nationals but also result in protecting the safety, security and sovereignty of the country.

(Para 21)

The Committee notes that the government intends to attract investment worth Rs.5825 crore spread over a period of 15 years for the modernisation and restructuring of Mumbai airport. The Committee has been informed by the Ministry that there is no scope of having a second runway at Mumbai airport which could be helpful in terms of air operations. Further, the passenger traffic movement is also expected to go up from 14 million in 2004 to 52 million in 2024. The Committee also understands that by 2012, Mumbai airport would get absolutely choked. However, the development plans of Ministry of Civil Aviation for Mumbai airport goes beyond 2012 i.e. upto 2019. The Committee fails to understand as to how the huge investment to be made at the airport could be justified when the existing capacity constraints would not permit capacity addition. The Committee is of the opinion that modernisation is not merely about the creation of facilities, expansion of the terminal buildings and putting up fancy malls at the airports. It should rather increase the capacity of the airports to handle more flights, by construction of additional runways, which is certainly not a probability in the case of Mumbai airport. The Committee feels that if international flights have to move around on the skies for half-an-hour to forty-five minutes after having reached the destination, then there could be no commensurate return as far as the investment, increase in the number of aircraft and the number of passengers actually traveling to the airport are concerned. The Committee is of the firm view that investing huge money on modernisation of Mumbai airport would be a waste. The Committee is of the opinion that there are certain inherent technological constraints while reconstructing an existing structure, particularly in the case of Mumbai airport and the option of going in for a new Greenfield airport rather than proposed modernisation of Mumbai airport will be more prudent. However, some investment towards augmenting the capacity will have to be made to address the immediate exigencies of the situation at least till such time a new Greenfield airport comes into operation. The Committee, therefore, recommends that the government should rather go in for construction of a new Greenfield airport with much more capacity at Mumbai which would require much less investment and the efforts in this direction should begin at the earliest. In such case both the Greenfield and the existing airport can compete with each other. The Committee is also of the opinion that given the growth of aviation sector in country, the existing infrastructure at Delhi airport also possesses that inherent lacuna and is therefore, inadequate to handle the growth being projected for the future by the government. The Committee recommends that the government should explore the possibility of having a Greenfield airport in Delhi also.

(Para 26)

The Committee is not convinced with the replies submitted by the Ministry of Civil Aviation with regard to revenue neutrality of Airports Authority of India after modernisation and restructuring of Delhi and Mumbai airports. From the figures furnished by the Ministry of Civil Aviation, it is evident that almost 77 per cent of the profits generated by Airports Authority of India during 2003-04 were from Delhi and Mumbai airports and it is these two airports that the government intends to restructure and modernize through joint venture route. The Committee had commented upon this matter in its 88th Report on Demands for Grants 2005-06 of Ministry of Civil Aviation and had made the following recommendation:-

"The Committee understands that the revenue generated by the government from the profit making airports is used to fulfil the developmental needs as well as day-to-day activities of the other airports. The Committee fails to understand as to how the government would fulfil the developmental needs of the other airports after the management of these airports is passed on the Joint Venture Companies. The sustained existence of such airports would become difficult in such a scenario. The Committee is in favour of modernisation of the Mumbai and Delhi airports, but not at the cost of the other airports in the country maintained by the Airports Authority of India. The Committee, therefore, recommends that the government should re-look at the modernisation process of Delhi and Mumbai airports so that the development and maintenance of the other airports in the country is not compromised."

The Committee recommends that the government may consider its observation enumerated above seriously and review the strategy for modernisation of Delhi and Mumbai airports. Further, the Committee strongly recommends that the revenue sharing arrangements have to remain revenue neutral on a dynamic basis for the Airports Authority of India and the interest of this PSU should be protected even after modernisation of these two airports.

(Para 31)

The Committee observes that the replies of the Ministry of Civil Aviation in the context of award of contracts at Bangalore International Airport Limited are evasive and highly unsatisfactory. The Committee notes that the Ministry of Civil Aviation was aware that as per the provisions of the concession agreement of BIAL, the promoters themselves would be participants in executing contracts. Since the equity holders are themselves the service providers in Bangalore International Airport Limited, there is certainly a case for conflict of interest involved in Bangalore International Airport Limited. The Committee would like to highlight that it had expressed its apprehensions on the issue during the oral evidence of the representatives of Ministry of Civil Aviation held on the November 8, 2004. However, at that time, the Ministry of Civil Aviation had not accepted the observations of the Committee. Ministry of Civil Aviation had, on the other hand, emphasized that there is going to be an open tendering and there will be no conflict of interest reflected in the awarding of the contracts. Now the apprehensions of the Committee have come true. The Committee is of the view that there was complete lack of transparency in the awarding of EPC contracts at Bangalore International Airport Limited and that the role of government of India representatives on the Board of Bangalore International Airport Limited was not above board. The Committee recommends that in view of the facts brought out above, a proper enquiry should be conducted into the entire matter by an independent agency.

(Para 43)

The Committee had also taken up this issue in its 88th Report on Demands for Grants 2005-06 of Ministry of Civil Aviation. In this context, the Committee would like to reiterate its recommendation made in the report in respect of which the Action Taken Report from the Ministry is awaited:-

"The Committee also recommends that in case of Hyderabad Airport, the Ministry of Civil Aviation should clearly fix the ratio of share holding amongst the State governments, private players and the Airports Authority of India. The Committee further recommends that the Ministry should structure a financial model for these airports detailing the total project cost in terms of debt and equity and the ratio in financing."

(Para 46)

In this context, the Committee would like to invite the attention of the government towards the recommendation made in its 88th Report and hopes that the details of the action taken by the government would be furnished to the Committee at the earliest. The recommendation is reproduced below:-

"The Committee is distressed to note that the Ministry of Civil Aviation has decided to shut down the existing airport at Hyderabad for commercial operations. The Committee fails to understand as to why such kind of concessional agreement was signed when the Ministry itself was of the opinion that the present terminals could be utilized at least for one more decade. The Committee also expresses its doubt as to how the Ministry is planning to compensate with the losses to be incurred, in case the existing terminal at Hyderabad is closed, by developing shopping complexes, housing etc. on commercial basis. The Committee is opposed to this move of the government for closing the existing airport at Hyderabad for commercial flights once the new Hyderabad International Airport Limited is operational and urges the government to reconsider this decision."