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BW Businessworld

Signed And Forgotten

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The Airports Authority of India (AAI) has developed two spanking new terminals at Chennai and Kolkata. While the former is ready and awaiting its inauguration by the Prime Minister, the redesigned and modernised terminal in Kolkata is expected to be ready soon. 

Besides, the AAI has proposed a number of new greenfield airports in places such as Navi Mumbai, Goa, Kannur, Chandigarh, Kota and Agra. The airport in Navi Mumbai will be the biggest among these and is expected to cost nearly Rs 15,000 crore over several phases. The total amount required to build these six airports is estimated to be Rs 22,500 crore over the next 3-4 years.

Then, there are at least 35 non-metro airports in the pipeline, several of which are in the process of being upgraded by AAI. The authority has so far spent (till March 2012) Rs 4,565 crore on these facilities. The total cost of upgrading these airports is estimated to be close to Rs 13,000 crore. Additionally, the government has identified 32 airports that are non-operational and in rundown condition. Getting them up and running will again cost a significant amount. The airports authority is yet to work out a cost estimate.

Now, with the fiscal deficit touching sky-high levels, there is a realisation that very little public funds can be spared for all this. The AAI may be able to generate some funds but in all likelihood it will need substantial government support if it has to take care of all this on its own. 

Another question is whether the AAI will be able to run all these airports efficiently and offer a level of service as the private operators do at Delhi, Mumbai, Hyderabad and Bangalore airports. An even more important question is whether the AAI will be able to run these airports profitably and if so will it be able to earn a return that will justify the investment.

On both these counts, government officials are doubtful. One has to only look back a few years and recall the state of Delhi and Mumbai airports under the AAI’s care. 

In view of these issues, a Cabinet note has been readied, suggesting that most of the new airports be developed through public private partnerships (PPP). The note even suggests that Chennai and Kolkata airports could now be managed and operated by the AAI on a revenue share basis.

While few can refute the logic behind taking these things out of the control of the public sector, the recent Comptroller and Auditor General’s (who doesn’t seem able to unearth any scams below Rs 1 lakh crore!) report on DIAL raises concerns (Delhi International Airport Pvt. Ltd, or DIAL, is a joint venture between GMR Group, AAI, Fraport and Malaysia Airports Holdings Berhad). 

Why can’t things be done in a more transparent manner? If DIAL could be allowed to charge an additional development fee (ADF) even though that was not part of the agreement, wouldn’t the other bidders openly ask for similar concessions? Why can’t the bureaucrats or the minister in charge then speak up and defend their actions? Why must everything be so secretive? Ever since the report was tabled in Parliament, DIAL has stepped up its public relations efforts and approached more than one newspaper editor for taking a “soft stance” on the issue.

Second, and this is critical, why is there no way to monitor what the government does? How come it signs contracts with private players and then just forgets about them? A Planning Commission proposal suggesting that there be a stringent mechanism to monitor what the private sector does has been doing the rounds since 2008 but no one wanted to touch it (I understand the Cabinet has cleared it recently but it remains hushed up). 

For airports, for instance, has anyone kept track of what Mumbai International Airport Ltd (MIAL) or DIAL promised at the time of signing the contract and whether they are abiding by it? Can any bureaucrat or minister claim to have actually read the OMDA (operation management and development agreement, a document as intimidating as its name), let alone understood its implications for the private party?

So, if the government is keen or, in its present bankrupt state, has no option but to go the private way, it is high time it started monitoring what it hands out. Most of these are public resources and there is no reason why the public or the nation must be cheated on them. Virtually no one wants the public sector or the government to run businesses. But that doesn’t mean that the private sector can be allowed a free run, and that no public servant can be held accountable. 

(This story was published in Businessworld Issue Dated 03-09-2012)