‘A second wave of reforms is required in every sector'

With the ground breaking ceremony for the Ibrahim Nasir International Airport on reclaimed land getting over at Male airport, a visibly relaxed Mr G.M. Rao, the Group Chairman of the GMR Group, removed his dark blue Italian coat and fielded questions from a select group of Indian journalists on the diverse activities that the Group is involved in. Excerpts:

Are you only looking at airports that can handle over 5 million passengers annually?

We are only going for brownfield projects — where there is development, where there is a brownfield airport and where there is cash flow.

What is your position as far as Delhi is concerned? There is a lot of talk of you increasing charges...

It is not that I am looking (to increase charges). In the investment bidding document, an assured return is there. There is a formula in the OMDA agreement. They have to give assured return and assured cash flow on the investment. Whether they give (it through) UDF tariff or landing charge is up to the Airport Regulator. What has happened is that this is the first time for the Regulator and we are its first customer. Besides, Delhi is a big airport. There are many people auditing (like) KPMG and independent auditors. All the auditing is over now. We are waiting for the Regulator's decision.

When will Delhi airport break even?

Once the regulatory process is through.

Is the depreciation of the rupee hurting the three sectors in which your Group is present?

We have a strong risk management department, (besides) we have a separate forex department. The impact is there but we have a lot of coverage. On some things we hedged and took all precautions. Not only for forex; even if the interest rate increases it will not affect us as it will be part of the tariff. It is all built in when we are bidding. There is a very strong process in that.

So your company is insulated...

Insulated not 100 per cent but, say, 70-75 per cent.

So the bottomline is not to going to get affected because of the plunge in the rupee...

For us, the main challenge is if airport side tariff is delayed in Delhi. The delay is the only place where we are losing. In roads we have no challenge except for Ambala-Chandigarh. For projects there is depreciation, but we have a strong cash flow.

Is it difficult to arrange funding for projects in India?

Today, if an infrastructure project is good, there is no problem. The only problem is that sector wise there is a ceiling. In the power sector, they have already reached the ceiling. But now, the RBI and the Ministry of Power (are) revising sector ceilings.

Drop in merchant tariff and the reduced availability of gas have been impacting the sales and profit of the power division. What is GMR's plan to tackle this and look for a permanent solution?

Today, we have only a 200-MW merchant plant; 5 per cent gas has reduced (but) that is not much. Everything is being given to Andhra Pradesh. Except that I do not have any merchant plant. I have shifted the barge mount from Mangalore to Kakinada. For that also we have a long term tie-up.

Are lethargy and lack of Government initiative affecting business sentiment?

Government policy is there (but) a second wave of reforms is required. We have reached a particular economic growth; to reach the next level requires a separate foundation. For that, a second wave of reforms is required in every sector. In the power sector, all the discoms have to be privatised. All the discoms in Mumbai and Delhi are now privatised. In the same way they have do this in other sectors also. In airports they went to four: two greenfield and two brownfield. They can go for further privatisation of airports.

Does the Government have the necessary will to push reforms?

There is a strong will ; it is only a question of time. See how PPP projects are happening now. At the right time they will take a call.

Is the success of PPP in the airport sector in question given the state in Delhi and Hyderabad?

My experience of the last 10 years with the Government is that whatever is there in the agreement (concession agreement) it is honouring. In Hyderabad, there is an agreement which it is honouring. But beyond concession agreement it is not honouring. Not only in airports, even in the power sector some States where these were not honoured, we went to the Regulator. There is a judicial system and we won. We need to have patience and perseverance. You have to work continuously, you cannot lose hope. The Government will take time to understand and put in place the regulatory thing. Now we are making cash profit in Hyderabad—18.33 per cent that they have to give me on my return which they included in the user development fee.

Like some other companies, are you also exploring opportunities abroad as it is easier to do business there?

No. Where is it easy? For every business everywhere there will be some challenge. The challenge has to be met and you need to go forward. In Istanbul, we have different challenges. Here there are different challenges. Indonesia, coal mines, there are different challenges. Now we are accustomed to meeting challenges.

If you had to rate India versus other countries for doing business where would India stand?

There are different challenges in different countries. It is difficult to rate. Take Delhi airport, we had to build it in three years. Normally you take 8-10 years to build a 5 million square feet terminal. To build a house it takes 3 years. And we need to be in touch with three Governments: the State Government, the Union Government and the Lieutenant Governor. It is a question of the attitude of the entrepreneur. Once you have an attitude, a transparent way and convince the bureaucracy and the set up, then there is understanding. Last year, there were more than 200 court cases at Delhi airport. But our intention was very clear. We want to build the best airport and this opportunity has come to GMR.

What are your expectations from the Union Budget 2012?

We are looking for long-term debt fund with a fixed interest rate. This is not available now.

ashphadnis@thehindu.co.in

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