Siemens threatens to quit Airport project

Till the elections in May, it was the central government which was dilly-dallying on the clearances to the Bangalore International Airport Project, while the state government led by SM Krishna moved heaven and earth to do its part. Once the new governments took-over post elections, the Union Civil Aviation minister Praful Patel worked over time to ensure all the paper work was complete from its side. But the new dispensation in Karnataka which had to sign the subsequent land-lease agreement and the state support agreement has been pussy-footing ever since. What is it that will take this so called Government in Karnataka to get on its feet? Infrastructure, taxation, CET, film moratorium, international airport clearance.... The issues are simply spiralling out of control and the government even refuses to acknowledge that there is a problem. What was that about the ostrich?

Siemens airport ultimatum
Business Standard

Siemens Ltd has said it will rethink on its involvement in the Bangalore International Airport project if a financial closure is not achieved within December, 2004. With patience running out for most of the stakeholders in this project, Siemens hopes that the project will begin on schedule.

“We are hoping that the new government in the state will take the BIAL project forward as per schedule. If the financial closure is not achieved by December this year, our patience will run out. We will have to rethink on whether we should spend more time on this project,” said Juergen Schubert, managing director, Siemens Ltd.

Schubert was speaking to mediapersons on the sidelines of Siemens’ announcement to open its first advanced R&D centre in Bangalore on Monday.

The construction of the Bangalore International Airport must commence by January 1, 2005, failing which there will be a huge delay once again because the Concessional Agreement signed in July 2004, will expire in December 2004.

Since the Concessional Agreement is valid only for six months, it will have to be renegotiated if construction does not begin by January 1, 2005.

Schubert added that the Siemens Consortium, which currently holds a 74 per cent stake in the Bangalore International Airport, has already spent about $17 million (about Rs 78.2 crore) on the project.

As of now, the total cost of the project is Rs 1340 crore. While Rs 315 crore will be the equity portion, Rs 675 crore will come as debt. The state support would constitute the remaining Rs 350 crore. This would be an interest-free loan but it must be paid back within 10 years after the grace period.

The Karnataka State Industrial Investment and Development Corporation and the Airports Authority of India have 13 per cent stake each in the project. The Siemens consortium has 74 per cent stake and is lead by Siemens Project Ventures GmbH of Germany, Unique Zurich Airport and construction major L&T. ICICI Bank is the lender for the project.

The airport is expected to come up in 30-33 months from the time work on it starts. This will be followed by a three-month trial run before the Director General of Civil Aviation licenses the facility for public use.