Comptroller and Auditor General of India report on PPP at Delhi Airport

In a report titled "Implementation of Public Private Partnership, Indira Gandhi International Airport, Delhi" the Comptroller and Auditor General of India (CAG) has found faults in almost every step of implementation of the Public Private Partnership (PPP) model in the brownfield privatisation of New Delhi's Indira Gandhi International Airport (IGIA).

While acknowledging the PPP was the correct method to follow and praising the airport operating company Delhi International Airport Ltd., (DIAL) owned by a consortium headed by GMR Group,

It is acknowledged in this report that there have been significant improvements in services at the airport for the travelling public. The new terminal T3 was completed within time for the Commonwealth Games. The airport has been adjudged as the second best in the world in the category of 25-40 million passengers per annum by Airports Council International.

the report is probably the most damning indictment of former civil aviation minister Praful Patel and the ministry he led during the period of the airport privatisation.

Many observations in the present report would indicate that whenever DIAL raised an issue regarding revenue to accrue to it or expenditure to be debited to Government in contravention of the provisions of OMDA, the Ministry and AAI interpreted the provisions always in favour of the operators and against the interest of the Government.

The report accuses the Ministry of Civil Aviation, headed by Mr. Patel, of violating laws, and providing post contractual benefits to DIAL, to the detriment of the government as well as the travelling public.

Ministry of Civil Aviation and later AERA allowed DIAL to collect Development Fees amounting to Rs. 3415.35 crore. The order of Ministry in February 2009 allowing that was in contravention of the OMDA, AAI Act and the AERA Act.

Contrary to the provisions of OMDA, DIAL was allowed to use the amount collected as Development Fees to meet the project costs. In fact, only 19 per cent of the project cost came from equity, approximately 42 per cent came from debt. The remaining project costs were met from security deposits and Development Fees.

The report also highlights where DIAL was given benefits significantly over and above Government departments

It was noted that the concept of upfront fee was used to lease out an additional land of 190.19 acres for a paltry one time payment of Rs. 6.19 crore. Other Government offices like Director General of Civil Aviation and Bureau of Aviation Security were given a much harsher treatment when 7.60 acres of land was leased out to them at a license fee of Rs. 2.41 crore per annum.

The report highlights how by omitting the phrase “mutual agreement and negotiation of terms” which was present in the note approved by the Union Cabinet, but removed in the concession agreement OMDA, DIAL has unilateral rights to extend the concession period for an additional 30 years at the original already grossly under-rated terms of the OMDA.

The decision to adopt the joint venture route was taken based on the Cabinet Note of September 2003. While seeking approval for restructuring of the Delhi and Mumbai Airports, this Cabinet Note specifically envisaged an initial concession period of 30 years which could be extended by another 30 years subject to "mutual agreement and negotiation of terms". However, in the draft OMDA which formed part of the bid documents, the important condition "subject to mutual agreement and negotiation of terms" was omitted. The OMDA, which was signed in April 2006, did not contain any provision of mutual agreement and fresh negotiations before extension of the concession period. This is not only a violation of the commitment in the Cabinet Note but is also a unilateral and unfair advantage given to DIAL which is detrimental to Government interest as it does not provide the Government any scope for review of any of the conditions.

The report also highlights the liberal manner of how the OMDA is written to favour DIAL.

The possibility of any JVC event default in the small window of 5 years between 20th and 25th year is remote. Such a sweeping provision, without any scope of review at any time during the currency of the concession period, has effectively granted DIAL the sole right to operate the airport for a period of sixty years with the terms and conditions frozen in the OMDA.

Editor's note: The relaxation of requirements or confining performance to an extremely narrow window is a common thread found in virtually every India PPP airport concession agreement, all of which were signed during the tenure of Mr. Patel as civil aviation minister.

The report alleges the virtual give-away of land to DIAL, accusing the Ministry of giving DIAL land worth more than Rs. 24,000 Crore for a sum of Rs. 31 lakhs, and an annual payment of Rs. 100 only.

The projected earning capacity of this land in terms of license fee over the concession period of 58 years was indicated by DIAL itself as Rs. 681.63 crore per acre in a letter to the Joint Secretary, MOCA. Thus for the entire area of 239.95 acres, the potential earning from the land, according to the calculations worked out by DIAL itself, amounts to Rs. 1,63,557 crore. Audit would like to draw attention to the fact that this area is part of the entire area of land that has been handed over to DIAL at the lease rent of Rs. 100 per annum.

It has been ascertained from AERA [Airport Economic Regulatory Authority] that the current valuation of the land made by M/S Merrill Lynch in the report of 26th August, 2011 has been worked out at the rate of Rs. 100 crore per acre. Thus even in terms of this conservative estimate, the total current value of the land available to DIAL for commercial exploitation, would amount to approximately Rs. 24,000 crore.

Audit is constrained to observe that against the aforementioned calculations, MoCA [Ministry of Civil Aviation] allowed DIAL to use 239.95 acres of land for commercial exploitation at a consideration for one time payment of Rs. 31 lakh (5 percent of Rs. 6.19 crore) and an annual payment of Rs. One hundred only.

Both DIAL and the Ministry of Civil Aviation have refuted the observations of the CAG. In a release DIAL said

The Comptroller and Auditor General (CAG) has tabled a report on the Implementation of Public-Private Partnership at Indira Gandhi International Airport before the august Houses of the Parliament.

This report pertains to an audit conducted by the CAG on the performance of the AAI with particular reference to the privatization process of Indira Gandhi International Airport (IGIA). Therefore, the appropriate and competent authority for redressal of all queries on this issue is the Airport Authority of India (AAI) or the Ministry of Civil Aviation (MOCA).

Even though many of these issues have already been discussed between the ministry and auditors and were responded to in detail, they have not been reflected in the final report. Even the former Secretary Civil Aviation had expressed this view in a separate letter to the Audit Authority.

Hence, we feel sad that a showcase airport created with dedicated efforts and a well-thought-out policy of the national government has come in for adverse remarks. We have also noted with concern that the reputation of this company has been questioned regularly in the media based on incomplete and inaccurate facts. Hence, purely in order to put the records straight, we would like to state the following without prejudice to our rights:

1. Delhi International Airport Private Limited (DIAL) has NOT received any undue benefits from the government before, during or after the bidding process. The entire process of the privatization and selection of Joint Venture was based on a transparent, international, competitive bidding which was guided and presided over by competent bodies and has been upheld as such by the Hon’ble Supreme Court in 2006.

2. It is alleged that with the airport modernization project DIAL was effectively handed over land valued at Rs. 1,63,557 Crore for only Rs. 100 per year.

a. The purpose of leasing the airport land by AAI to DIAL was neither sale of land nor earning of a rental income from it.

b. The basis of providing the concession to operate the airport was the revenue share quoted by the bidders to AAI.

c. The entire commercial land available with DIAL neither has any immediate commercial value nor can be put to use and therefore cannot be monetized immediately. Thus, just using value of one acre and extrapolating the same for the entire land parcel is at best an arithmetic exercise and not practical.

d. In fact, using the same method of calculation, AAI will receive Rs. 3 to 4 Lakh Crore from DIAL as revenue share over the 54 years.

3. The allegation that Airport Development Fee (ADF) was an afterthought and done only to benefit DIAL is absolutely untrue:

a. ADF is allowed as per section 22 A of AAI Act 1994 as amended in 2003 – long before the bidding process – and hence was known to all bidders

b. AAI Act is the primary governing legislation for the concession as provided in the transaction documents

c. The levy of ADF was upheld by the Hon’ble Supreme Court vide its order dated 26th April 2011

4. The concession period of 30 years with 30 years extension being an unfair advantage to DIAL is also not true:

a. Such long concession periods are quite normal in infrastructure projects where the investment is large and gestation period is long

b. Moreover, as this was a bid condition known to all bidders, they had already considered this condition while quoting the bids

The Indira Gandhi International Airport (IGIA), Delhi is a shining example of the success of PPP model of infrastructure development in India. IGIA is currently rated as the second best airport in the world in the 25-40 million passengers per year category. The current Airport Service Quality (ASQ) rating of IGIA stand at 4.73/5.00 which far exceeds that stipulated in the concession agreement - at 3.75/5.00. It is currently the largest airport in India - catering to 36 million passengers per annum (mppa), handling 600,000 tonnes of cargo and managing over 300,000 aircraft movements every year. According to NCAER, IGIA contributes 0.45 per cent to the national GDP and 13.53 per cent to state GDP of Delhi. It has also created 15,78,000 jobs which is 25.9 per cent of Delhi’s total employment and 0.34 per cent of national total employment.

The Ministry said

Ministry of Civil Aviation has gone through the report of the CAG on Indira Gandhi International Airport, Delhi as tabled in Parliament today and strongly refutes the loss figures and other allegations as made in the report.

The calculation of presumptive gain from the commercial use of land at the Delhi Airport is totally erroneous and misleading as it simply adds the nominal value of the projected revenue, without taking the net present value. In fact the net present value of the figure quoted by CAG is Rs 13795 crores only. CAG has further failed to appreciate that 46% of this amount would be payable to AAI as revenue share.

It is also pointed out that the levy of Development Fee is under Section 22 (A) of AAI Act, 1994 and was in the knowledge of all the bidders prior to the bidding process. Hence, contrary to what the CAG has said, the levy of Development Fee by DIAL was not a post contractual benefit provided to DIAL at the cost of passengers. Further, the levy of the Development Fee has been upheld by the Supreme Court, which has already examined and rejected all the issues now being raised by CAG in its report.

On the issue of lease of Airport land, it is clarified that the land has not been given to DIAL on rental basis. Rs100 is just a token amount for the purpose of the Conveyance Deed. The determining factor for grant of concession to the bidder was the Gross Revenue share quoted by the bidders. As a result, Airports Authority of India (AAI) now receives 45.99% share of Gross Revenues of DIAL and 26% of all Dividends. Benefit to AAI is likely to be more than Rs 3 lakh crores in this process during the entire Concession period. AAI has already got its revenue share of Rs.2936 crores in the last 6 years and likely to get Rs. 1770 crores in the year 2012-13 and Rs. 2287 crores in the year 2013-14. The AAI share of revenue from DIAL is further going to constantly rise every year in the balance concession period.

It may also be noted that the right to use 5% of Airport land for commercial purpose was also defined in the bid and known to all bidders.

The decision to restructure and modernize Delhi and Mumbai Airports was a policy decision of the highest body i.e., the Cabinet following the broad policy formulations of Policy on Airport Infrastructure, 1997. The modalities of modernization/ restructuring were as per the Cabinet decision and were frozen in the Transaction Documents finalized and approved by the Empowered Group of Ministers (EGoM), based on which the bidding process was completed. The issues now being highlighted in the CAG report, viz. Concession Period, Right of First Refusal (ROFR), Upfront Fee, Commercial exploitation of land, and Lease rental of land were part of these documents and were symmetrically known to all bidders before bidding and during the bidding process. These documents were later converted into different agreements, like Operation Management and Development Agreement (OMDA), State Support Agreement (SSA), Shareholders Agreement (SHA), Lease Deed Agreement, CNS-ATM Agreement, and State Government Support Agreement (SGSA), and there has been no change in these documents ever since.

All decisions including the entire bidding process and the approval of the OMDA was monitored by EGoM and subsequently approved by the Union Cabinet. The bidding process has also been upheld by the Supreme Court.

All Aeronautical and Airport assets created by DIAL will be transferred back to AAI as per agreement at the end of the concession period.

It is further stated that the views of Ministry of Civil Aviation and AAI have not been incorporated in the final report of the CAG and there are aspects mentioned in the final report which were neither included in the draft audit report nor were discussed with the Ministry of Civil Aviation at any point in time.

It is pertinent to mention that CAG in its report has itself acknowledged the significant improvement in the services for travelling public, new terminal T-III being completed within the time frame for Common Wealth Games and Delhi Airport being adjudged the second best in the world in the category of 25 to 40 million passengers per annum by the Airports Council International.

India has few world class Airports achieved in a very short span of time. Reports like these would damage the process of PPP and stunt infrastructure development in the country.

The brief parawise comments to the CAG report on IGI Airport are attached as Annexure and are also available on the website of Ministry of Civil Aviation.

Click here to see Annexure

You can download the entire CAG report on DIAL here. Do read it, and share your thoughts.

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Kingfisher Airlines "bomb" planter caught, BIAL security vindicated

Eight days ago, on Sunday 21st March, a so-called bomb was discovered on board a Kingfisher Airlines aircraft at Bengaluru International Airport (BIA) early morning.

As usual, TimesNow TV tried to make a huge mountain out of a molehill claiming that a "bomb" was discovered and defused.

In reality about a teaspoon full of black powder, the type used in fire-crackers, was found wrapped in a Malayalam (the state language of Kerala) newspaper during the early morning checks of the aircraft before it began its day with a flight to Kochi, the commercial capital of Kerala state.

The five layer in-line security at BIA has been rated at par with the best European airports, and video recording of all baggage scans are archived. The recordings of checked-in baggage screening showed nothing extraordinary. The CISF which checks hand-baggage also found nothing unusual in their screening process.

Given the wrapping of a Kerala newspaper, it was surmised that the black powder package may have been placed in the inbound flight from Thiruvanathapuram (Trivandrum), the state capital of Kerala, and the last flight aircraft made before its night halt in Bangalore. It is possible that the security of Kingfisher Airlines may have missed this minuscule package during their anti-sabotage checks in the dark of the night.

It is but natural that this hot potato was bounced between the airline, CISF at both Bangalore and Trivandrum, and AAI Trivandrum and BIAL in Bangalore over the last week, with no one wanting it to land in their laps.

The newspaper wrapping proved to be the downfall of the mischief monger. Trivandrum police discovered that the paper was of an edition distributed in one particular village, about 25 km south of the capital, and yesterday, arrested Rajasekaran who turns out to be an ex-CISF cadre, now working for a private company providing handling services to Kingfisher Airlines at Trivandrum. Investigations are on-going as to his motive, but mischief appears to be the likely cause.

The last few days prior to this incident had seen a heightened security alert at Bangalore, and after the "bomb" discovery, security at BIA went in to hyper-drive.

I was travelling to Malaysia on 21st night and was carrying a bag full of some electronic test components. I was given the full once over by BIA security who stripped my bag down, even opening up the lining for a complete inspection. This is despite the BIAL terminal operations officials accompanying me to the security check-point to vouch for me.

Not that I mind, in fact I welcome such vigilant security and I want to report to the readers of Bangalore Aviation the stringency of the security at Bengaluru International Airport and that no exceptions are made, even to known persons.

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JetLite flight forced to make three landing attempts due to faulty ILS at Delhi airport

A Jetlite Boeing 737-800, registration VT-SJH performing flight S2-320 from Kolkata to New Delhi with 140 persons on board, was forced to make three landing attempts due to weather and a fault Instrument Landing System at New Delhi's Indira Gandhi International Airport.

The flight was on approach to New Delhi's runway 29, when a thunderstorm went into its final approach and landing path. The crew aborted the landing and requested for a different runway.

Air Traffic Control (ATC) vectored the aircraft for an ILS approach to runway 11 (the opposite side of runway 29). However, when the crew attempted to intercept the ILS localizer on runway 11, the ILS was found to be malfunctioning.

Air Traffic Control then instructed the pilots to swing over to runway 10. However, while the airplane manoeuvred to align with runway 10, Air Traffic Control reported that the ILS on runway 11 was now working.

The airplane finally landed on runway 11 on the third approach 20 minutes after the first approach attempt.

JetLite refused to answer my queries if they have lodged any complaint or protest about the malfunctions with either the Airports Authority of India (AAI) whose controllers operate the ATC or with the airport operator Delhi International Airport Limited (DIAL). They issued me this statement

"Due to weather detected on the aircraft weather radar S2 320 requested a runway change from R/W 29 to R/W 11. While the aircraft was being vectored for an approach to R/W 11, non-availability of the ILS (Instrument Landing System) of R/W 11 necessitated the change of the approach to R/W10. However, during the approach to R/W 10 a downgrade of the R/W10 ILS and subsequent availability of R/W 11 ILS resulted in the approach and landing being made on R/W 11. The changes in the approaches did not result in any go-arounds."

METARS:
VIDP 291300Z 00000KT 3500 HZ SCT035 FEW040CB BKN090 23/19 Q1010 TEMPO TSRA
VIDP 291230Z 18005KT 3500 HZ SCT035 FEW040CB BKN100 23/19 Q1009 TEMPO TSRA
VIDP 291200Z 18006KT 3500 -DZ SCT035 FEW040CB BKN100 23/18 Q1009 TEMPO TSRA
VIDP 291100Z 18005KT 3500 HZ SCT035 FEW040CB BKN100 26/17 Q1009 NOSIG
VIDP 291030Z 20005KT 3500 HZ SCT035 FEW040CB BKN100 26/17 Q1009 NOSIG
VIDP 290930Z 31005KT 2800 TS SCT035 FEW040CB BKN100 27/17 Q1010 BECMG 3000
VIDP 290900Z 28003KT 2800 HZ SCT035 FEW040CB BKN100 28/17 Q1010 NOSIG
VIDP 290830Z 01005KT 2600 HZ FEW035 FEW040CB BKN100 28/17 Q1010 NOSIG
VIDP 290730Z 32005KT 2800 HZ FEW035 FEW040CB BKN100 27/18 Q1010 BECMG 3000
VIDP 290700Z 34005KT 2800 HZ FEW035 FEW040CB BKN100 27/18 Q1011 NOSIG

Thanks to Simon Hradecky at Aviation Herald for the tip.

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Getting Mumbai, Delhi, and Bangalore, off the world's most delayed airports list

My post The world's most delayed and most punctual airports, seems to have ignited a media frenzy within India.

Times of India carried snippets from the article Sunday 11th January, which became a national story, and was picked up later that morning by the TV networks.

A lot of Bangalore Aviation readers have been asking me questions relating to the article.

Why are Mumbai and Delhi airports at the top of the list of delayed flight arrivals?

It is actually very simple. At both airports the number of flights arriving per hour exceeds the capacity of the runways. At Mumbai, there are two runways, but they cross each other in an X shape. There are also limitations of taxiways, but, I will not go into such a high level of detail.

Bottom line, the capacity of Mumbai airport is 30 landings per hour, but with a little juggling and using the crossing runway, the Mumbai Air Traffic Control (ATC) is able to push the number up to 36 per hour. But the demand is even higher.

It's a similar situation with Delhi airport, which inaugurated a new third runway, plagued with problems. Drainage, non-functional aeronautical aids, and to top it off, some faceless bureaucrat, probably encouraged by a narcissist politician, allowed a 40 feet (4 storey) tall statue of Lord Shiva along the path of the runway. Now the new runway cannot be used by the Airbus A380, the very aircraft it was specifically built for, till that statue is removed. And we all know, how very impossible that is, in a religiously charged India.

Add to this excess demand and weather. Fog in Delhi, and rains in Mumbai. The system is so over-capacity that it provides the ATC absolutely no room to manoeuvre during bad weather, and flights get even more delayed.

If Mumbai and Delhi are at the top of the list for delayed arrivals, why are they not at the top of the list for delayed departures?

The clock gets reset to the revised departure time, due to the late arrival of the incoming aircraft. The departure time is measured when the airplane doors are closed. Airlines get their passengers on board, close the doors, and then wait for taxi clearance. Due to the traffic jam in the skies, you will find that your aircraft will taxi, and then wait in line, for a long time, to take-off.

Why is Bengaluru International Airport (BIA) at rank 4 in the Top 5 list of most delayed arrivals? Is it not an efficient airport?

BIA is an efficient airport, no doubt. I suspect three reasons. One is thrust on to BIA, one is temporary, and one needs to be addressed.

One, and this is the biggest reason, as the airport spokesperson said, Bangalore's dependence on trunk routes. i.e. Bangalore-Mumbai, Bangalore-Delhi, and more especially after the increase in fares, which dropped the bottom out of regional flights. Flights from Mumbai and Delhi, may leave their gate/stand on time, but get delayed in take-off. So the blame lands up on Bangalore's door-step for the late arrival. It is unfair.

Two, last year, when the new airport opened, there was massive disruption for about a month. I suspect this brought down the overall performance of Bangalore. On the positive side, everyone at BIA have been working very hard, and the kinks have been solved. I suspect Bangalore will be off the list in 2009.

Third, and I have highlighted it in my original post, is weather. Bangalore suffers from fog, between 15th November to 15th February, typically between 3AM and 8:30AM. 6AM to 10AM is peak period, and the fog impacts the performance of arriving and departing aircraft. While fog is limited to a short period in the year, the disruptions are significant enough, to lower the overall annual performance.

The Instrument Landing System at BIA, has been installed incorrectly. Despite being CAT-II capable, which will permit operations in poorer visibility conditions, the equipment is forced to function at CAT-I level. (For a better understanding of CAT levels please read this Wikipedia article).

How, the Airports Authority of India (AAI), which is responsible for the equipment, and has installed over a hundred ILS systems, managed this blunder, is beyond me. Repairs of the installation were to have been carried out during the first six months of operations, i.e. by end November 2008, but given the delays this winter season, they obviously have not.

What is the solution?

We all want to fly during the peak hours of 6AM and 10AM and 5PM and 7PM.

While domestic traffic has declined, the demand during peak hours is sharper. Now that the economy is in the tank, we want to reduce our costs and try and complete all our work in a day trip, or at least not waste the working hours, flying.

Mumbai and Delhi are still way too overloaded, especially during the peak period.

With overall reduction in air traffic and shrinking incomes, there is pressure from the private airport operators MIAL and DIAL, on the ATC to accommodate more flights, as they scramble to earn more income. I cannot fault them. They are in business for profit, not charity, but this adds to the problem.

This economic connection, is the single path to solutions.

The first part of the solution lies with the Directorate General for Civil Aviation (DGCA). It is time they woke up from their slumber, audit the airports, and allocate the maximum number of flights per hour. Any airport scheduling more flights than capacity pays a hefty fine, and is open to punitive law suits from delayed passengers for permitting flights greater than capacity.

To help the airports demand the needed reductions from the airlines, the second part of the solution lies in changing the system of flight slot allocations. India follows a system of "historic rights", i.e. once an airline gets a slot, then they continue to get that slot, till such time they revoke it. Which no airline ever does. Move to system of performance based allocation :

• If a flight gets delayed, they loose their place in the queue. Similar to an appointment at the doctor, wait for the next appointment to open up, rather than delaying everyone in the queue behind you.
• Mr. Airline you want a premium landing or take-off slot, pay a premium for it. Hey, but that is unfair to the low cost airlines ? Sorry, but life is not fair.

The airlines can recover the premiums they pay for the slot, from the passengers as a higher fare. They used to charge Rs. 150 ~ Rs. 300 "congestion surcharge", in any case. We passengers who are flying during peak hours, are already paying for them benefit.

Third, and this is partly under way, optimise the air traffic control system. Implement Gagan and the GBAS systems fast. Encourage airlines to use Performance Based Navigation (PBN), and reward those who do.

In the mean time, force the air traffic controllers and pilots to perform efficiently. Right now, the system calls for a two minute separation or 5 nautical miles (10km). World over airports function with a 90 second separation, some even at 60 seconds. A 25 per cent reduction in separation from 120 seconds to 90 seconds at the major airports, will result in a 50 per cent increase in capacity from 30 movements to 45 movements.

Pilots don't react fast enough in the sky, SPIN 'EM. They can land nice and easy sometime before the day is out. Foreign pilots cannot speak English fluently, DE-CERTIFY 'EM. They can fly in less congestion countries. Controllers cannot cope, TRANSFER 'EM. Let them go to nice and easy Jabalpur, Guwahati, or one of the smaller airports in India.

We risk a future similar to La Guardia airport, where the US Department of Transportation is forcing slot reductions, since the system cannot cope any more.

It is time for some radical solutions to this creaking system.

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