Delhi, Mumbai airport privatisation
Anil Ambani shocks rivals by leading race

The civil aviation ministry's technical advisor has given top ranking to the consortia of Anil Ambani, and GMR group. This has raised eyebrows since Ambani's partner is Mexico Airport, which is ranked 119 in a survey of the world's best-managed airports. Incidentally, Mumbai itself was ranked 120 by the same agency last year. The ministry, under Praful Patel, has been unduly lenient with Ambani, having earlier allowed him to change partner mid-way.

By Shahid Faridi

The flamboyant Anil Ambani seems all set to bag the Mumbai airport privatisation contract without serious competition. Airplan of Australia, which is the government’s global technical adviser for privatisation of both Delhi and Mumbai airports, has evaluated the technical bids of the shortlisted parties.

Highly-placed sources told Realpolitik that the GTA has given top ranking to the consortia of Anil Ambani and the one headed by GMR group for undertaking the upgradation of Delhi and Mumbai airports. The GMR group has already bagged the project for building a new airport at Hyderabad. (Related Story on Page 24)

The ministry of civil aviation reviewed the GTA’s report last week. Civil aviation minister Praful Patel has been maintaining that the GTA’s ranking notwithstanding, the offers of all qualified bidders will be put before the inter-ministerial group, comprising officials from ministries of finance, commerce, law and civil aviation, besides a representative from the Planning Commission. The bids will then go to the empowered group of ministers, comprising ministers for finance, defence, commerce and civil aviation.

But the GTA’s ranking, along with the comments of the ministry of civil aviation, will play a crucial role in identifying the parties which will be allowed to take part in the financial bidding, which will decide as to who will win the bid.

Among those who were shortlisted for technical bidding were Reliance, Bharti, Essel, L&T, GMR Group, GVK Group, Macquire Bank, DLF and DS Construction. But Bharti and L&T dropped out of the race protesting against some of the tender conditions.

Sources said that if the inter-ministerial group and the empowered group of ministers decide to go strictly by the GTA’s report, without examining all the technical bids afresh, there is every likelihood that the consortia headed by Anil Ambani and GMR will be the only two that will qualify for financial bidding.

In this eventuality, the two consortia will take one airport each since the government has decided not to allow any single bidder to take control of both Delhi and Mumbai airports. Ambani and GMR have bid for both the airports; and have qualified for both. Sources said that as Ambani has been keen on getting the Mumbai airport, so he will opt for that airport, and GMR is likely to get Delhi.

The inter-ministerial group is scheduled to meet on December 2 and the empowered group of ministers on December 5 to study the GTA’s findings and the civil aviation ministry’s views thereon. Since the civil aviation minister himself is piloting the entire project, there is no official in his ministry who is ready to come out in the open to question the process.

But officials are privately complaining about not being given enough time to go through the voluminous report of the GTA to understand the grounds on which Anil Ambani’s consortium was ranked above other bidders which had some of the world’s top airports as partners.

Officials in the ministry of civil aviation, planning commission and Airports Authority of India are wondering how the Ambani-headed consortium will build a world-class airport with the help of Mexico airport, which itself is ranked 119 in the latest survey of the best managed airports of the world.

Mumbai, incidentally, was itself ranked at 120 last year by the same rating agency. But it slipped to the 135 position this year since all expansion and upgradation work at the airport was halted by an order of the ministry of civil aviation.

The order from the ministry of civil aviation dated June 29, 2005 to the Airports Authority said: “It has been decided that in view of ongoing process of restructuring of Delhi and Mumbai airports and impending issue of final transaction documents, no process of new capital projects/procurement of capital equipments and other items involving major expenditure except emergent operational and safety-related items be initiated by AAI in respect of Delhi and Mumbai airports and no new contracts be awarded/signed….”

This order has led to further deterioration of conditions at the two airports, especially in the light of increased pressure by new airlines on the limited airport infrastructure.

Sources said that the formal order came in June, but verbally, the AAI was instructed long back not to carry out any work.

The increasing congestion at Delhi and Mumbai airports has put pressure on the ministry of civil aviation as well as the inter-ministerial group and the empowered group of ministers to speed up the process of their privatisation. But questions are being raised over the fairness of the process.

The ministry of civil aviation had earlier tried to give a sweetheart deal to the winners of the airport privatisation bids. But the ministry of finance and the Planning Commission had put a spoke in its works.

The finance ministry and the planning commission had taken strong exception to the civil aviation ministry’s disregard to the issues raised by them for safeguarding public interest. The Planning Commission had, in a letter to civil aviation secretary Ajay Prasad, threatened not to support the privatisation project if the changes suggested by it in the tender document were
not made.

The issues raised by the Planning Commission and the finance ministry included:

• Strong role and stake of foreign airport operators in the project so that the new airports here turn out to be truly world class.
• Change of "real estate orientation" of the project to aeronautical (bidders appeared more interested in developing the city-side with golf course, shopping malls, convention centres, etc than the runway side which is the main reason for privatising)
• Review of provision for allowing the new operators of airport to mortgage public land to raise funds as this land would be given to them at a nominal fee of Rs 1 per year.

Concerns were also raised over tariff issues, bidding parameters and sovereign guarantee to be given by the government of India. Patel's decision to give away the Navi Mumbai airport without any competition to whoever wins the bid for restructuring the existing Mumbai airport was also dropped after it came under attack by the finance ministry and the planning commission. It was finally decided that the winner of Mumbai airport bid will be given only 10 per cent concession, and not the right to first refusal.

In the case of Reliance, the ministry of civil aviation ignored concerns of the inter-ministerial group to ensure that it remained in race. The inter-ministerial group had expressed apprehensions that Reliance's initial partner Winchi was not a world-class airport operator in the sense defined in the pre-qualifying documents.

But the ministry brushed aside the IMG's concern and allowed Reliance to sail through the pre-qualifying round. But Winchi finally dropped out of Anil Ambani’s consortium and it was allowed to pick up Mexico Airport after the pre-qualifying bids.

While the civil aviation ministry was quite lenient with Anil Ambani, it remains to be seen what stand the ministry of finance, which had laid stress on strong role and stake of foreign airport operators in the project so that the new airports here turn out to be truly world class, takes on 119 ranking Mexico airport beating others in the race