Govt refutes loss claims over Delhi airport

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SME Times News Bureau | 18 Aug, 2012
The government Friday dismissed the claims of the Comptroller and Auditor General of India (CAG) on losses to the exchequer by allowing a private operator to commercially exploit 240 acres of land and collect a levy from passengers to finish the development work at the IGI airport.

The CAG report, tabled in Parliament Friday, said the government has allowed Delhi International Airport Limited (DIAL) which runs the IGI airport to commercially exploit 240 acres worth Rs.24,000 crore against a lease fee for 56 years for only Rs.2,450 crore.

"The potential revenue from this land in licence fee for 58 years was calculated by DIAL at Rs.163,557 crore, out of which DIAL's share would be Rs.88,337 crore," said the report.

The government defended its privatisation decision stating that CAG failed to establish the fact that 46 percent of the revenue generated by the commercial use of land will be paid to state-run Airports Authority of India (AAI) under the revenue share agreement signed between the government and DIAL.

"Benefit to AAI is likely to be more than Rs.3 lakh crore in this process during the entire concession period. AAI has already got its revenue share of Rs.2,936 crore in the last six years," the civil aviation ministry said in a statement.

DIAL on its part said that the 250 acres of land in question has no current commercial usage, as it has not been fully developed till now.

"Just using value of one acre and extrapolating the same for the entire land parcel is at best an arithmetic exercise and not practical," DIAL said in a statement.

The CAG also rapped the government for allowing the private operator to collect a levy from passengers to finish the development work at the airport.

The report termed the decision of the ministry to allow DIAL to collect the development fee as a "post-contractual benefit" which violated the tendering process by which the company was selected and called for fixing responsibility.

In 2009, the government had allowed DIAL to collect development fees worth Rs.3,415.35 crore from passengers. DIAL only invested 19 percent for the funds required for development work. The remaining project costs have come from debt, security deposits and development fees.

The ministry refuted the claims of a "post-contractual benefit", stating that the provision for charging development fee existed prior to the privatisation process and was incorporated under the AAI Act, 1994.

The CAG also criticised the contractual agreement which allows DIAL to extend the initial 30-year concession period by another 30 years.

According to the auditor, a cabinet note issued in 2003 specifically envisaged an initial concession period of 30 years which could be extended by another 30 years subject to "mutual agreement and negotiation of terms".

The condition envisaged in cabinet note was omitted from operation management development agreement (OMDA) which was signed in April 2006.

"This is not only a violation of the commitment in the cabinet note but is also a unilateral and unfair advantage given to DIAL which is detrimental to government interest as it does not provide the government any scope for review of any of the conditions," the auditor said in its report.

However, the government said the time frame like the one given to DIAL was the norm in the infrastructure sector for being capital-intensive and slow revenue-generating.

The government cited the example of Hyderabad Metro Rail project which is of 35 years with an extension of another 25 years.

"Rail and road projects in Brazil, Spain and Chile have above 40-50 years (concession) period."