Race on between B’lore, H’bad airports

Race on between B’lore, H’bad airports
Deccan Herald

Both projects are scheduled to be completed by early 2008 and there will be prestige attached to finishing first.

It is official. The race is on. The proposed international airports at Bangalore and Hyderabad will from now on be locked in a battle to finish first — and start the business of breaking even.

While work on the much-delayed Bangalore airport began early July, work at Hyderabad will take off on September 1. With just two months’ difference between the two, the question will now be: Who will reach the post first? As for deadlines, the Bangalore project is scheduled to be completed by April 2008, the airport at Hyderabad, which achieved financial closure last week, has a similar time-frame, “the first quarter of 2008”.

There is pride involved too. To finish first will mean bagging the tag of the first greenfield airport in the country to be completed with a majority (74 per cent) stake held by private consortium.

Different models

The two airports have followed different business models. In the Bangalore project, three major partners (Siemens, Zurich Airport Authority and Larsen & Toubro) were selected. They will build the airport and operate it (with the state and Union governments also having a stake).

In Hyderabad, GMR Infrastructure Limited (63 per cent stake) and Malaysia Airport Holdings Berhad (11 per cent) along with the state and Central governments have formed the operating company. This company selected through global bidding firms for the airside and landside work (ALS) and the passenger terminal building (PTB). The Rs 495 crore ALS work was bagged by L&T while the Rs 615 crore PTB work was awarded to China State Construction Engineering (Hong Kong) Ltd.

In the Bangalore project, Siemens holds 40 per cent of the 74 per cent private sector holding while Zurich and L&T have 17 per cent each.

The Bangalore model of awarding construction to the promoters came under fire as a Parliamentary Standing Committee described it as not transparent and called for a probe by an independent agency. The state coughed up Rs 350 crore while the land was given free. The engineering, procurement and construction work has been given to L&T for Rs 550 crore, Siemens India for Rs 175 crore and Siemens Germany for Rs 159 crore.

As regards financial structure of the Rs 1,411 crore Bangalore project, Rs 735 crore comes as debt from lenders, Rs 326 crore from equity (including Rs 85 crore from the state and Centre and Rs 240 crore from private partners) and the rest from the State. The financial structure of the Rs 1,663 crore Hyderabad (Shamshabad) airport (with an additional contingency of Rs 97 crore) is: debt Rs 960 crore, equity Rs 378 crore, interest free loan from state Rs 315 crore and state support as grant Rs 107 crore. While ICICI is the lead bank for the Bangalore project, IDFC is the lead lender of the consortium in Hyderabad.

Difficult path

The two consortiums treaded different routes before things reached this stage. The Government of Karnataka first took up the Bangalore project way back in 1992-93 while the Hyderabad project took shape around 1998.

It had been a difficult path all the way for the Bangalore airport, what with political interference and bureaucratic indifference — especially at the Centre — taking 12 long years to begin construction. Troubled by the two factors, the first private sector partner, the Tatas, left the scene and a new global tender had to be floated in which the Siemens-led consortium secured the contract. Then began a gruelling journey for approvals, clearances and permissions, which itself almost became a never-ending story.

Unlike the Bangalore project, the Hyderabad airport did not wait that long for clearances. That Andhra Pradesh had an aggressive chief minister in Chandrababu Naidu, and that his TDP was a major ally of the then NDA government at the Centre, ensured that the files moved fast. It also had the benefit of the Centre having a clear idea of the concept of private airports and the amended Aircraft Act, thanks to the Bangalore airport experience.