CAG slams development fee, concessional land to GMR-led DIAL

Government auditor CAG on Friday slammed the government for giving out Delhi airport and its land with a potential earning capacity of Rs 1,63,557 crore to private-led operator DIAL which made a total equity contribution of only Rs 2,450 crore.

New Delhi: Government auditor CAG on Friday slammed the government for giving out Delhi airport and its land with a potential earning capacity of Rs 1,63,557 crore to private-led operator DIAL which made a total equity contribution of only Rs 2,450 crore.

With an equity contribution of Rs 2,450 crore of which the private GMR-led consortium's share was Rs 1,813 crore, the Delhi International Airport Limited (DIAL) got a brownfield airport for 60 years, the report of the Comptroller and Auditor General (CAG) said. A brownfield airport is one which is already in existence.

The CAG report on the 'Implementation of Public private partnership Indira Gandhi International Airport, Delhi', tabled in Parliament, claimed that the commercial rights of land was valued at Rs 24,000 crore with a potential earning capacity according to its own estimates of Rs 1,63,557 crore.

Criticising the levy of Development Fee (DF) on passengers using Delhi Airport, the CAG also charged the Civil Aviation Ministry with violating the bid conditions for the benefit of DIAL to the tune of over Rs 3,415 crore and pressed for fixing of responsibility.

Currently, the DF is charged from both outgoing and incoming domestic and international passengers at the Delhi airport. The fee, levied in terms of distances, ranges from Rs 220 to Rs 520 for domestic passengers and Rs 490 to Rs 1200 for international ones.

Allowing DIAL to levy DF "vitiated the sanctity of bidding process" and led to undue benefit of Rs 3,415.35 crore to the private firm GMR, the CAG said. GMR Infrastructure holds 54 percent stake in DIAL.

"It was noticed that Ministry of Civil Aviation and Airports Authority of India, on some occasions, violated the provisions of the transaction documents in the interest of the concessionaire," the official auditor said.

The CAG said the decision to levy DF after the effective date has vitiated the sanctity of the bidding process as the draft Operation, Maintenance and Development Agreement (OMDA), which was part of the bid documents, "does not mention about funding of the project cost of the airport through levy of development fees."

In case the joint venture was to have been permitted to levy Airport Development Fund to finance the project after signing OMDA, this important condition should have been known upfront to all the bidders at the time of bidding, it said.

DIAL is a joint venture consortium led by the GMR Group which was mandated by the Government to modernise Delhi airport. The other members of the consortium include Frankfurt Airport, Airports Authority of India (AAI) and Malaysian Airports.

The report said the OMDA allowed DIAL to use five percent of the demised land for commercial exploitation. The current value of 9.50 acres as per AERA amounted to Rs 950 crore. The earning potential for 58 years from 9.50 acres based on DIAL's own projections was Rs 6,457 crore, it said.

Noting that DIAL carried out construction on 553,887 sq mt of land as against the area of 470,179 sq mt indicated in the Major Development Plan (MDP), CAG said this led to an increase in the project cost by 43.25 percent.

It also noted that of the 15 mandated capital projects to be completed by April 3, 2008, 11 were delayed for period ranging from 87 days to 236 days.

The report said that based on the State Support Agreement, DIAL was not entitled for any incentive in support of base airport charges. "The Ministry, however, approved in February 2010, 10 percent increase in aeronautical charges, including landing, parking, passenger service fee among others as incentive to DIAL," it added.

CAG said contrary to provision of the airport concession agreement, DIAL was allowed to use the amount collected as Development Fees to meet the project costs.

"In face, only 19 percent of the project cost came from equity, approximately 42 percent came from debt. The remaining project costs were met from security deposits and Development Fees," it said.

"Whenever DIAL raised an issue regarding revenue to accrue to it or expenditure to be debited to government in contravention to the provisions of Operation Management Development Agreement (OMDA), the Ministry and AAI interpreted the provisions always in favour of the operators and against the interest of the government," it claimed.

CAG asked Government to investigate all cases of post bid concessions and fix responsibility.

It recommended that all public private arrangements must be linked to certain basis triggers like traffic volume, tariff, return on investment, break-even point.

"A long concession period without any trigger may lead to undue financial benefit to the concessionaire," it said.


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