Friday, 25 May 2012

GMR agreement sets government interest at naught


The Comptroller and Auditor-General has found that the GMR-owned Delhi International Airport Limited (DIAL), which runs the Indira Gandhi International Airport here, has a potential to earn Rs.1,63,557 crore over a 60-year period from the land given to it on a lease rent of Rs.100 a year, hurting the interests of the government.
A draft report of the audit says the contents of a Cabinet note approved in 2003 were “omitted” by the government in April 2006 when the Operation Management Development Agreement (OMDA) for Delhi's T3 terminal was signed to suit the interests of DIAL.
Moreover, the State Support Agreement (SSA) allows the company the Right of First Refusal with regard to a second airport planned within a 150-km radius of the airport. The second airport will be decided through a competitive bidding process, in which DIAL can participate. In the event of DIAL being unsuccessful, it will be allowed to match its bid with the most competitive bid, if it is within 10 per cent of the most competitive bid. This condition will be applicable for the first 30 years. The SAA does not elaborate on the competitive bidding process or the model that will be followed. This provision thwarts competition and provides DIAL with natural advantage on the second airport, says the report.
Government interest the casualty
The report is also critical of levying user charges on passengers, which was not part of the original agreement when the land was given to the company. “Whenever DIAL had raised an issue regarding revenue to accrue to it or expenditure to be debited to the government in contravention of the agreement, the Civil Aviation Ministry and AAI have always ruled in favour of operators and against the interest of the government.”
The report refers to the leasing of 4,608 acres for development of the airport, with an additional 190 acres leased to DIAL. The land and the premises were leased out at Rs.100 annually. For the additional 190 acres, a one-time fee of Rs.6.19 crore was levied on DIAL.
The original agreement permitted DIAL to utilise five per cent of the total area of 4,799 acres for commercial exploitation, which would work out to 240 acres. The projected earning capacity of this land in terms of licence fee over the concession period of 58 years was indicated by DIAL itself as Rs.681.63 crore per year per acre. “Thus, for the entire area of 239.95 acres, the potential earning from the land, according to the calculations worked out by DIAL itself, amounts to Rs.1,63,557 crore,” the report states. It said Merrill Lynch made a current valuation of land at Rs.100 crore an acre.
Thus, even in terms of this conservative estimate, the current value of the land available to DIAL for commercial exploitation will amount to approximately Rs. 24,000 crore. Against these calculations, the Ministry allowed DIAL to use 239.5 acres for commercial exploitation for a one-time payment of Rs.31 lakh and an annual payment of a mere Rs.100, the report notes.

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