Levy of airport development fee slammed

Despite explanations from the Civil Aviation Ministry and Delhi International Airport Limited (DIAL), the Comptroller and Auditor-General has criticised the charging of development fee on passengers at the Indira Gandhi International Airport, saying the levy has violated the bid conditions and given Rs. 3,415 crore in monetary benefit to the operator.

In its report tabled in Parliament, the CAG has said that whenever the GMR-owned DIAL raised an issue of revenue to go to it or expenditure to be debited to the government, the Ministry and the Airports Authority of India (AAI) had always ruled in favour of the operator and against government interest, in contravention of the Operation, Maintenance, Development Agreement (OMDA).

The report says DIAL can potentially earn Rs. 1,63,557 crore over a 60-year-period from the land leased out to it at Rs. 100 a year, with an equity investment of just Rs. 2,450 crore. GMR Infrastructure holds 54 per cent stake in DIAL, and the AAI has the rest.

The joint venture company, the CAG points out, shall meet all financial requirements through suitable debt and equity contributions to comply with its obligations, including the development of the airport. However, the Ministry, through its February 9, 2009 order, allowed DIAL to levy a development fee for financing the upgrade, expansion or development of the airport. This order violated the provisions of Article 13.1 of the OMDA, the AAI Act and the Airport Economic Regulatory Authority (AERA) Act, as confirmed later by the Delhi High Court.

“This decision to levy development fee, after the effective date, has vitiated the sanctity of the bidding process, as the draft OMDA, part of the bid documents, does not mention funding of the project cost… through levy of development fees. In case the joint venture was to have been permitted to levy development fee to finance the project after signing the OMDA, this important condition should have been known upfront to all the bidders at the time of bidding,” the report notes.

The approval of the Ministry, and later of the AERA, for the levy of development fee (to bridge the funding gap) was a post-contractual benefit given to the DIAL. This was neither envisaged in the request for proposal (RFP), nor included in the provisions of the OMDA or the State Support Agreement. This led to an undue benefit of Rs. 3,415 crore to the DIAL, at the cost of passengers.

The CAG has asked the government to investigate all cases of post-bid concessions and fix responsibility. It has recommended that all public-private arrangements be linked to certain basic triggers such as traffic volume, tariff, return on investment and break-even point.