BIAL: Travails of a partner

Bangalore airport project : Travails of a partner

<> The Hindu Business Line

AFTER 60 visits in five years, a suspenseful delay of 26 months and bills that now stand at $10-12 million, there is still not much headway made on the country's premier greenfield airport project.

As southern States admitted at the just-concluded CII summit here that private sector investors were crucial to their infrastructure plans, Mr Herbert Meier's account brought out the travails of an international investor in one such PPP (public-private partnership): the Bangalore International Airport Project.

Mr Meier's company, Unique Zurich Airport, is a 17 per cent partner in the Rs 1,300-crore BIAP. Looking at the way the project has been dogged by delays, his company is seriously rethinking its presence in the project. Faced with major problems back home, it may wait for a year at the most for the financial closure - or call it quits, Mr Meier, Vice-President, International Business Development, Zurich Airport, and member of the board of Bangalore International Airport Ltd, told Business Line. Yet, that is just a possibility and "We are still hopeful" of going ahead with the project, he said. BIAP has also made the procedures easier for projects like the Hyderabad international airport project, which began late but has caught up with it.

Unique Zurich is a member of the Siemens Project Ventures-led consortium, along with domestic partner L&T. The Karnataka Government and the Airports Authority of India each are to pick 13 per cent stake.

Mr Meier said Unique Zurich, which owns and operates the bustling Zurich airport, entered the Bangalore scene in 1998-99 as India is the place to be in and Bangalore the city of the future.

For the BIAP, "We have made grand plans and set ambitious timescales," Mr Meier said. By original reckoning, the airport should be ready in 2005 but is nowhere near start: key ignitions like State support agreement are yet to be struck, though the concession agreement of 2002 was finally signed with the Union Government after two years of negotiations. The EPC is 20 months old and "It is very difficult to keep the prices." The project has still a long way to go.

"We have run out of patience. We are on the verge of rethinking the BIAL project," Mr Meier confessed. "If in a year, there is no financial closure, it (the project) will have to be without the Zurich Airport."

All this, he said, was thanks to a delaying bureaucratic system. This was also partly reason why Unique Zurich did not bid for Mumbai and Delhi airport modernisation projects.

In recent times, Zurich airport has had trouble on hand: The post-9/11 down trend in revenue due to halving of air traffic to the airport and the collapse of the Swiss carrier airline. "The interest to invest elsewhere is not so strong now as before," he said.

Mr Meier's tip on PPP: frame stable, dependable parameters; don't change the rules during the game; and don't renege on promises. Protectionism for government airlines halves international traffic and can kill the business model of a private sector-funded project, he says.

The BIA, when it happens, can have "fantastic upsides," with a forecast of 4 million in the take-off year - now expected to be 2007 and a potential to grow to 20-30 million by 2040. Still, this would be no patch on the Zurich traffic, which is now around 23 million and was 4 million in 1965.

In contrast is the Swiss lesson in PPPs: The Zurich Airport is slated to open its expansion project in a couple of weeks' time. The project was built in over four years "dead on time" at 7 per cent less cost.

The good news for BIAP is that the Dharam Singh government has promised to finalise and sign the two Karnataka-level papers: on State support of Rs 350 crore and land lease. Its stand is to transfer land to the company, enable financial closure and works to begin around November this year.