Sunday, August 28, 2005

Left seeks review of Bangalore Airport model

Airport: Basu trashes Bangalore model
Deccan Herald

The parliamentary standing committee on transport, culture and tourism in its report tabled in Parliament recently, has criticised the award of contracts to the promoters of the Bangalore International Airport Limited (BIAL) and called for an inquiry into the entire affair by an independent agency.

Excerpts from an interview with committee chairman Nilotpal Basu:

Deccan Herald: Your committee has sought an inquiry into the Bangalore international airport project contracts issue. Is it not a bit late in the day to talk of probe considering that the contracts were signed several years ago?

Nilotpal Basu: Yes, it is because of the inherent weakness of the system. The purpose of the committee is to hold the government to account. We are hamstrung on two counts — one, the committee has only persuasive powers and second, not always can the committee’s recommendations be actually timed to avoid any irregularities which might have taken place in the process of the government’s decision-making. For example, we had taken up the study of the airport sector quite sometime back but in between it had to remain seized with the task of preparing reports on demand for grants of budget and to deal with some of the urgent bills pertaining to other ministries which come under the purview of this committee.

We first took up the issue on November 8, 2004 and the civil aviation ministry implicitly contended on that day that transparency and integrity in awarding contracts will be followed. But when a detailed written response came on June 28, 2005, the committee was informed that engineering procurement contracts (EPCs) were awarded to shareholders without any tendering. Therefore, the committee had very little to do in stopping something which it thinks was patently unfair.

Although we don’t have investigative powers and we have to depend on the submissions of the government, it is well within the powers of the public at large and media in particular to pursue as to how this has happened.

DH: Why should there be tendering for EPC in a project of this model? Why should not the promoters of the project get the contract? After all, they became the promoters because they were the lowest bidders.

NB: The question of building an infrastructure is linked with the question of building that at the best possible price and the committee has no problem with that. However, the committee has a problem with awarding contracts without bidding. We have no problem with how Larsen & Toubro or Siemens bagged the contract through global competition bidding route. There are umpteen number of examples both in India and abroad, where contracts awarded on a nomination basis produce opacity if not outright irregularity. In fact, transparency is one of the major planks of any reform process. Because, if there is no bidding, there is no way to ensure, even less to claim, that the contracts have gone for the lowest possible bid.

The question, therefore, inherently poses the issue of conflict of interest which is inimical to a democratic and transparent regime. Promoters’ duty in a project is to create the infrastructure on the basis of best possible condition. You cannot wear a double hat. Is your objective of being the promoter of an airport is to claim the contract for work? It is a clear conflict of interest.

If they are so good, why are they not prepared to face a bidding process? It would have been acceptable.This case becomes doubly doubtful without any bidding process. Look at their contract: L&T, with Rs 55 crore equity, gets contract worth Rs 550 crore. Anybody can question saying you have padded up your contract size. It may put both the Union and Karnataka governments in embarrassing position. How did they allow such a contract?

DH: You must have gone into the MoU of the project. Should not these issues be clarified before, at the stage of MoU with the promoters?

NB: Definitely, but the Union government has not clarified. Both the governments have some explaining to do.

DH: With you questioning the deal, will it not delay the already lingering project?

NB: This is a question of making people accountable and not making them provide a justification for wrong doing. After all, both the governments are sinking in public money. It is a basic principle of the government and they should be accountable if there is any wrong doing. They are trustees of public money. Incidentally, our committee was unanimous when we made recommendations.

DH: If you are not happy with the Bangalore model for the airport project, what kind of a model will you suggest? The Hyderabad model, where GMR, which is the operator, has floated tenders for works contract?

NB: The government should prepare a proper project report before going for a global bidding given the tremendous growth in civil aviation in the country. Airport construction business today is a good business. Whichever company wins the bid should include all costs in their business model.

The two governments should think whether the Bangalore model is in the best interest of the country. In my opinion, whatever new model you have in airport construction, it should not be based on the Bangalore model.

As for Hyderabad, there is no conflict of interest there. However, we are opposed to the closing down of the Begumpet airport in favour of the proposed international airport at Shamshabad.


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