The Hindu Business Line : Task Force files finance plan

The civil aviation sector is seeing a flurry of activity in the wake of the growing economy. To take advantage of this emerging scenario, a merger was under consideration between Indian (the erstwhile Indian Airlines) and Air India. Though both airlines had separately firmed up expansion plans it was only earlier this month that Indian's first A-319 aircraft from Airbus landed, signalling the national carrier's determination to take competition head-on. The Group of Ministers, set up by the Civil Aviation Minister and headed by Mr Pranab Mukherjee has its task cut out — that of finalising the merger plan of the two carriers before the year ends.

According to Mr Gajendra Haldea, Adviser to the Planning Commission Deputy Chairman, an investment of Rs 40,000 crore is projected for the development of airports between 2006-07 and 2013-14, of which roughly Rs 31,000 crore is to come from Public-Private Partnerships (PPPs).

Task force recommendations

The Committee on Infrastructure (CoI), headed by the Prime Minister, Dr Manmohan Singh, had set up a Task Force chaired by Mr Anwarul Hoda, a member of the Plan panel. The Task Force report was approved by the CoI in June and its major recommendations were made available at a one-day Infrastructure Conference held in the Capital on earlier this month.

The Task Force has recommended the development of metro and greenfield airports primarily through the PPP route. For non-metro airports, the Task Force favours that city-side development be undertaken through PPPs while the terminal and airside development be assigned to the Airport Authority of India, keeping open the possibility of PPPs in select airports. Alongside, the possibility of developing select non-metro airports through wholly-owned AAI subsidiaries could also be explored.

Development plans

While the development plans for the Delhi and Mumbai airports envisage an investment of Rs 5,270 crore and Rs 6,130 crore respectively (totaling Rs 11,400 crore) from 2006-07 to 2013-14, the expenditure on the Kolkata and Chennai airports would be half that — Rs 5,700 crore, between 2008-09 and 2013-14. For the seven greenfield airports at Bangalore, Hyderabad, Goa, Navi Mumbai, Pune, Greater Noida and Kannur, the capital expenditure would be Rs 8,500 crore. The capital expenditure for development of airports by the AAI can be prioritised thus:

First phase, CNS-ATM and other equipment. Second, 10 non-metro airports — Ahmedabad, Amritsar, Guwahati, Jaipur, Udaipur, Thiruvanthapuram, Lucknow, Goa, Madurai and Mangalore. Third, the North-East airports. Fourth, 15-non-metro airports — Agati, Aurangabad, Khajuraho, Rajkot, Vadodara, Bhopal, Indore, Nagpur, Visakhapatnam, Tiruchi, Bhubaneswar, Coimbatore, Patna, Port Blair, Varanasi. Fifth, 10 non-metro airports — Agra, Chandigarh, Dimapur, Jammu, Pune, Agartala, Dehra Dun, Imphal, Ranchi and Raipur.

The Task Force said that subject to its capability to manage financing and construction, the AAI would go ahead with construction work on all the 35 non-metro airports and the progress would be reviewed in 18-24 months.

Relax IRR

Where projects are economically desirable on grounds of regional development, tourism and strategic importance but with low financial viability, the Task Force has said that the extant PIB norm of 12 per cent of internal rate of return (IRR) should be relaxed to eight per cent and to zero in the case of the North-East States.

0If the AAI is called upon to take up projects with IRR below the specified level, the respective State governments may be asked to bridge the gap. Projects with low IRR could also use the Viability Gap Funding route. In view of the opinion of the Attorney General on land use, the Task Force has said that the plans for city-side development would be restricted to the purposes covered under the AAI Act; the likely investment in PPPs on city-side development is estimated at Rs 1,500 crore. The proposed commercial exploitation could include cargo complexes, hotels, flight kitchens and parking.

Hiring consultants

The Task Force has asked the Ministry to examine the possibility of the AAI hiring supervising consultants in project management and quality assurance to ensure on-time and on-cost delivery of projects. With the Task Force spelling out the pattern of financing for infrastructure and modernisation and expansion of existing airports, expectations are high that the authorities will complete the task on hand on schedule.

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