Move to shut Hyderabad airport kicks up a row

During the chief ministership of Chandrababu Naidu, Rs 100 crore was spent on upgradation of the Begumpet airport; the Union ministry of civil aviation says the
profit-making airport can handle traffic for another 10 years. What then is the rationale behind shutting it down and favouring a private consortium?

By Shahid Faridi

The report of the Parliamentary Standing Committee on transport, tourism and culture, headed by Communist Party of India (Marxist) Rajya Sabha member Nilotpal Basu, has triggered a fresh debate on the decision by the United Progressive Alliance regime to close down the airport at Hyderabad, which is one of the 11 profit-making airports among the country's 124 airports.

"The committee is distressed to note that the ministry of civil aviation has decided to shut down the existing airport at Hyderabad for commercial operations," says the report. "The committee fails to understand as to why such kind of concessional agreement was signed (with private promoters) when the ministry (of civil aviation) itself was of the opinion that the present terminals could be utilised at least for one more decade. The committee is opposed to this move…and urges the government to reconsider this decision."

The decision to close down the airport was taken so that traffic could be diverted to the new airport being built at Shamshabad near Hyderabad under a 74:26 joint venture — the Hyderabad International Airport Ltd (HIAL) — between the private and the public sector, respectively. The public sector stake is split equally between the state government and the Airports Authority of India (AAI). The total cost of the project stands today at Rs 1,400 crore.

While recommending the closure, certain concessions were offered to a private sector consortium, headed by GMR Infrastructure Ltd with Malaysian Airport Holding Berhard (MAHB). Not only has the Andhra Pradesh government given the consortium 5,000 acres of land at nominal rent, it has also offered Rs 315 crore as state support and Rs 107 crore as grant to it.

With all the government concessions in its pocket, this private sector consortium has started sidelining the other equity holders - the government of Andhra Pradesh and the AAI. The consortium has already, in fact, changed the name of the new joint venture company from Hyderabad International Airport (HIA) to GMR International Airport. (GMR, incidentally, is the name of the chairperson of the private consortium in question and is an acronym for G Mallikarjun Rao.)

The meeting in which the name of the JV company was changed was not attended by the AAI representative. So, a joint secretary from the ministry of civil aviation approved the name change on behalf of the AAI. This joint secretary has now gone on a plum foreign posting. So much for the autonomy of public sector units.

Disputes have erupted between GMR Infrastructure Ltd and the representatives of the AAI and the Andhra Pradesh government on a number of issues, including modalities for the handing out of construction contracts. The tussle between GMR, the Airports Authority of India and the state government over revising the cost of project after awarding contract to China State Construction Company, is a case in point.

The AAI and state government representatives wanted fresh bidding following the massive upward revision of the cost of the project. The regulations allow the absorption of an escalation of 10 per cent above the original cost in any contract. Any escalation, a smidgen above that, requires fresh tenders. But representatives of GMR Infrastructure, with a majority on the board, ignored the reservations expressed by the government nominees and revised the cost of project awarded to China State Construction Company.

The AAI and state government representatives have come round to the view that holding 13 per cent equity each is of no particular virtue — their voices carry no weight during the board meetings. This realisation has given rise to murmurs of discontent in government circles against 74:26 joint ventures.

This is one of the reasons why the observations of the Parliamentary Standing Committee on the closure of the existing Hyderabad airport have received widespread support.

Meanwhile, the controversy notwithstanding, construction of the Shamshabad airport has started in the right earnest. For the concrete-pouring ceremony, GMR Infrstructure flew down civil aviation secretary Ajay Prasad from Hyderabad airport to the site in a chartered helicopter, and then got a chartered aircraft to drop him to Bangalore, where his son is working.