SPOTLIGHT A 400 crore legal battle may mar standing of these airports as showpieces of PPP model. The privately run Delhi, Mumbai and Hyderabad airports and the civil aviation ministry are locked in a legal battle over the payment of at least Rs.400 crore by the three airports that some say may mar their standing as showpieces of public private partnership (PPP), the model India has adopted to get private companies to build public infrastructure.
The money was collected by the GMR Infrastructure Ltd-run Delhi International Airport Ltd, the GVK Power and Infrastructure Ltd-run Mumbai International Airport Ltd and the GMR Hyderabad International Airport Ltd as part of a so-called passenger service fee that was meant to go towards covering the cost of airport security.
The ministry claims the companies used the money for something else. It wants the money to be given to it so that it can pay the Central Industrial Security Force (CISF) that manages security at the country’s airports.
The issue has spoiled the relationship between the companies and the ministry, said a government official who asked not to be named.
It was a relationship that was alleged to be a cosy one not too long ago by the government’s auditor.
In a report tabled in Parliament in 2012, the Comptroller and Auditor General said the civil aviation ministry allowed Delhi International Airport Ltd “post-contractual benefits (that) violated the tendering process by which the joint venture partner was selected.”
It also claimed the Mumbai International Airport had received “undue benefits” to the tune of Rs.5,887 crore, as reported by Mint on 12 December.
Both GMR and GVK claim the ministry’s February directive on the passenger service fee is unfair.
A GMR spokesperson said in an e-mail that it spent the money on “security related assets...” based on “ministry directives” and that this was “regularly audited” by the government’s auditor.
A GVK spokesperson said the ministry’s order has “retrospective effect” and involves money already spent by the airport operators on the basis of the ministry’s own guidelines, and that this has been audited by the government auditor.
The ministry’s directive asking that the money be paid to it has been stayed by the courts.
Most airport operators have diversified business interests in other infrastructure projects and are loaded with debt and strapped for cash.
This isn’t the only issue that has soured the relationship between the ministry and the private airport operators.
GMR has also challenged the passenger-friendly order of airport regulator Airports Economic Regulatory Authority of India (AERA) scrapping the user development fee at Rajiv Gandhi International Airport in Hyderabad by filing a writ petition in the Andhra Pradesh high court, arguing that the move would impair its operational performance.
On 24 February, AERA scrapped the fee at the Hyderabad airport with effect from 1 April (and until 31 March 2016) making airfares cheaper.
The court is yet to stay the order.
The government official quoted above said the airports should have first gone to the appellate tribunal if they were unhappy with AERA’s decision.
In the past, the airports were allowed to increase their tariffs.
Delhi airport was allowed to increase tariffs by 346%, effective May 2012. Mumbai Airport, which had not completed its modernization fully by January 2013, was allowed to increase prices by 154%. These hiked tariffs are still being paid by the passengers as development fee on their airfares and by airlines.
High airfares are, in part, responsible for air traffic in the country slowing. India’s domestic air traffic rose just 4% in 2013 and fell by 2.1% in 2012. This compares with the double digit growth that started with the launch of Air Deccan in 2003 and lasted till 2008.
“Airports are becoming greedy,” Sudhakar Reddy, national president of the Chennai-based Air Passengers Association of India (APAI), said. He said the development fee was to help airport developers tide over a financing gap. Since all airport services—and revenue streams—are up and running, it is unfair that passengers must keep paying.
“I personally feel they have no case at all,” he said.
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