Karnataka gives go-ahead for Bangalore airport project

Karnataka gives go-ahead for Bangalore airport project

The Hindu Business Line

THE Karnataka Cabinet on Tuesday gave the green signal for the Bangalore International Airport by clearing two crucial pacts relating to land lease and an interest-free loan for the Rs 1,334-crore project.

The holding company Bangalore International Airport Ltd (BIAL), however, has to formalise three other relatively minor agreements before the work can begin. The agreements are for a 30-year lease of 4,050 acres of land to BIAL, a State support of Rs 275 crore and a contingency grant of Rs 75 crore (repayable after 10 years), the Industry and Infrastructure Minister, Mr P.G.R. Sindhia, announced after the Cabinet meeting. A special officer from Karnataka State Industrial Investment Development Corporation (KSIIDC) will be named to oversee and coordinate the project affairs.

With this, the State Government has given total clearance to the project and taken it closer to the take-off, the Chief Minister, Mr N. Dharam Singh, said. In July this year, his Government signed the mother pact on a concession with the consortium and the Civil Aviation Ministry.

While the project cost stays, the extent of land has been curtailed by 400 acres to 4,050 acres and the prime land at Devanahalli, 40 km from the city, will be retained with the nodal body, KSIIDC. This portion had become surplus after the Airports Authority of India (AAI) asked BIAL two years ago to re-orient the runway, the Principal Secretary, Infrastructure Development, Mr Vinay Kumar, said.

The two agreements cleared on Tuesday were blocking BIAL from going ahead with its financial closure. In a cautious reaction, BIAL's CEO, Mr Albert Brunner, said he was yet to get the official word on the clearance. The company was ready to sign the land lease and State support agreements as soon as possible with the Karnataka Government, he said.

Once these are completed, expected later this month or in January 2005, BIAL will have to ink the remaining pacts before it signs the financial agreement with lead lender ICICI Bank for a debt of Rs 675 crore. These are the communication, navigation systems and air traffic management agreement with AAI; the operations and maintenance services agreement with consortium partner Unique Zurich Airport; and the renewal of the engineering, procurement and construction contract for the third time with equity partners L&T and Siemens. The due diligence for the debt pact has been completed. The equity portion amounts to Rs 315 crore or 25 per cent of the project cost.

The BIA project, conceived in 1994, was awarded in 1999 to a consortium of Siemens, L&T and Unique Zurich Airport as private sector partners with 40:17:17 equity. The KSIIDC and the AAI will each hold 13 per cent equity in the venture.