Civil aviation ministry, DIAL face the heat

Slamming the levy of airport development fee (ADF) on passengers, the Comptroller and Auditor General (CAG) on Friday said the civil aviation ministry had violated bid conditions, giving benefits of Rs 3,415 crore to Delhi International Airport Limited (DIAL), in which the GMR Group holds majority equity stake.

The ADF benefit was given to DIAL to bridge the financing gap between the airport’s actual and original project costs. The CAG report said DIAL also secured land valued at Rs 24,000 crore for commercial use at a lease rental of Rs 100 a year, and this could potentially lead to DIAL earning Rs 1.6 lakh crore over 60 years.

“According to the operation management development agreement (OMDA), it was the responsibility of the joint venture company to bring in equity. Levy of development fee is against the OMDA,” A K Patnaik, additional deputy, CAG.

WINGS UNDER FIRE

CAG Land (240 acres) valued at Rs 24,000 crore given to DIAL at Rs 100 lease rental per year for commercial utilisation with an earning potential of Rs 1.6 lakh crore   DIAL got post contractual benefit of Rs 3,400 crore by levying ADF (Airport Development fee) on passengers

DIAL Calculation of Rs 1.6 lakh crore erroneous as 20-25 years required to completely develop the land for commercial usage   AERA allowed the levy of ADF taking into account SC judgment. Levying of ADF cost DIAL Rs 546 crore loss of revenue per year

However, according to the civil aviation ministry, the calculation of presumptive gain from the commercial use of land at the Delhi Airport is totally erroneous and misleading. In fact the net present value of the figure quoted by CAG is Rs 13,795 crore. CAG has further failed to appreciate that 46 per cent of this amount would be payable to AAI as revenue share.

No undue benefit was accrued to DIAL after the agreement, said a DIAL spokesperson. The Airports Economic Regulatory Authority had reviewed and allowed the levy of ADF at Delhi airport after taking into account the Supreme Court’s judgment, he added. “As the Airports Authority of India could not infuse equity in the project, the ADF was imposed. Also, the development fee is utilised strictly for debt repayment. Had AAI infused equity in the project, DIAL would have been getting 16 per cent return on that. The imposition of ADF meant a loss of Rs 546 crore of revenue a year,” the DIAL official added. The right to use five per cent of airport land (240 acres) for commercial purpose was stated in the OMDA between AAI and DIAL. A DIAL official said, “It would take 20-25 years to completely develop the land for commercial usage, and it makes the calculation of Rs 1,63,557 crore erroneous. The allocation of five per cent land for commercial usage was a bid condition.”

The CAG report stated the note to the Cabinet seeking nod for the joint venture envisaged concession for 30 years, which could be extended by another 30 years, subject to a “mutual agreement and negotiation of terms”. But the OMDA didn’t contain any provision of “mutual agreement and fresh negotiations” before extension of the concession period, it added. DIAL officials, however, denied this.