CAG: Undue favour shown to Delhi International Airport

Land given at a highly concessional lease rent

New Delhi, May 23:

The Comptroller and Auditor General (CAG) has claimed that Delhi International Airport Ltd (DIAL) was given Delhi airport land at a highly concessional lease rent.

With an equity contribution of Rs 2,450 crore, of which the private consortium share was Rs 1,813 crore, DIAL got Delhi airport for 60 years as well as commercial land rights worth Rs 24,000 crore with the potential of earning Rs 1,63,557 crore, according to its own estimates.

DIAL is a joint venture consortium in which the GMR Group holds 54 per cent, Airports Authority of India (AAI) 26 per cent, Frankfurt and Malaysian airports 10 per cent each. GMR is the lead member of the consortium, Frankfurt airport is the airport operator, Malaysia airport is the retail advisor. In January 2006, the consortium was awarded the concession to operate, manage and develop the IGI Airport following an international competitive bidding process.

The draft CAG report says that DIAL was leased 4,799.09 acre by the AAI, of which 239.95 acre was allowed for commercial exploitation for Rs 100 a year.

This despite the airport operator's own estimate that the potential earning from the land amounts to Rs 1,63,557 crore, the report said. This is based on DIAL's assumption of Rs 681.63 crore an acre as licence fee over the 58-year licence period.

The CAG report was to be tabled in the Parliament session which ended on Tuesday but could not be. DIAL was not available for comments.

“The Ministry of Civil Aviation allowed DIAL to use 239.95 acres of land for commercial exploitation at a consideration for one time payment of Rs 31 lakh and an annual payment of Rs 100 only,” the report adds.

The report points out that the decision to levy a development fee after the effective date ``vitiated the sanctity” of the bidding process, as the draft OMDA, which was part of the bid documents, did not mention funding of the project cost of the airport through levy of development fee.

The report stated that in case the joint venture was to have been permitted to levy development fund to finance the project after signing of Operation, Management, Development Agreement (OMDA), this important condition should have been known upfront to all bidders at the time of bidding.

“Approval of the Ministry and later Airports Economic Regulatory Authority (AERA) for levy of DF by DIAL (to bridge the funding gap) was a post contractual benefit provided to DIAL which was neither envisaged in the Request for Proposal nor included under provisions of OMDA or in the State Support Agreement. This led to undue benefits to DIAL at the cost of passengers who were taxed for using Delhi airport through levy of DF amounting to Rs 3415.35 crore,” the report adds.

The report states that 4608.9 acres was leased to the airport company on an `as is where is basis' on a concessional lease rent of Rs 100. If the rate applicable to DGCA and BCAS had been applied, DIAL would have had to pay Rs 1,461 crore, it said.

http://www.thehindubusinessline.com/todays-paper/tp-economy/article3450014.ece