BIAL runs into more trouble

Storm brews over airport deals
Business Standard

Govt open to probe into Bangalore airport contracts to L&T, Siemens.

The government is willing to probe contracts awarded by Bangalore International Airports Limited (BIAL) to its shareholders for building a new international airport near the city.

This follows a report by a parliamentary standing committee on transport and tourism headed by CPI (M) MP Nilotpal Basu.

The committee has demanded a probe into the BIAL contracts awarded by an independent agency.

Civil Aviation Minister Praful Patel said in Mumbai today the resignation of Infosys Chief Mentor NR Narayana Murthy as BIAL chairman would not affect the airport project.

The project would be completed on time, he said. He also said no bidders had dropped out of the Mumbai and Delhi airport modernisation programme.

The technical evaluation of the bids will be over by October end, while the final bids will be opened by November end.

“The standing committee wanted an enquiry into the contracts. We are examining this and are willing to look into the deals if required,” said a civil aviation ministry official today. “Since the BIAL equity holders are themselves the service providers, there can be a case for conflict of interests in the company,” the standing committee has observed.

Under the scanner are construction and electric system contracts worth Rs 884 crore BIAL has awarded to L&T and Siemens, which have stakes in the company. Siemens of Germany has been awarded a contract worth Rs 159 crore and Siemens India has bagged a Rs 175-crore contract. L&T has been awarded a Rs 550-crore contract. BIAL executives could not be contacted for comments.

In BIAL, Siemens holds a 40 per cent stake, while Unique Zurich and L&T hold 17 per cent each.

The government of Karnataka, through Karnataka State Industrial Investment Development Corporation, and Airports Authority of India, hold the remaining 26 per cent in BIAL.

Ministry officials also said the government had kept provisions in the shareholders agreements, empowering itself to intervene in the running of BIAL.

According to government sources, the shareholders agreement also enunciates the “arms-length” pricing principle for transactions and awarding of contracts to any promoter of BIAL or its affiliates. The government has also appointed independent consulting engineers to ensure that contracts are awarded on competitive commercial terms.

The officials also said the government would take similar steps while awarding contracts for modernising the Delhi and Mumbai airports.