Will the Bangalore international airport project take off?

By S. K. Ramoo

BANGALORE, JULY 3. A state-of-the-art international airport for Bangalore to be located near Devanahalli is perceived to be ``jinxed'' like the Cogentrix project, as it has failed to take off for one reason or the other, though preliminary work for it began in the early 1990s. The delay was marked by a series of hold-ups and was even politicised at one stage.

The former Prime Minister, Mr. H.D. Deve Gowda, who signed an MoU when he was the Karnataka Chief Minister, reneged on the project when he became the Prime Minister on the ground that it would devour large tracts of precious agriculture land. Now, it is a long road before the actual construction begins.

This is notwithstanding the recent selection of two international consortia as ``preferred bidders'' by the evaluation committee of experts, who notified that Siemens consortium was ranked first followed by Hochtief consortium which will serve as a stand-by. The final selection of one of them as the partner for the execution of the project will be decided shortly. Interestingly, two top ranking officials, the Chief Secretary, Ms. Teresa Bhattacharaya, and the Principal Secretary, Finance Department, Mr. C. Gopal Reddy, have sought clarifications on certain vital issues. Questioning the viability of the project, the Chief Secretary wanted to know the other revenue-earning activities as the airport project will not be initially meeting its operational costs exclusively based on aeronautical charges.

She has sought information on the specific type of support expected from the Government and wanted the Siemens consortium to spell it out with clarity. She has raised a vital question whether higher charges to be imposed on passengers by the new airport, will not affect its traffic volumes, in view of lower tariff levied by the Chennai airport.

Mr. Gopal Reddy, who is also the Additional Chief Secretary, pointed out that cash outflow from the Karnataka Government, including the capital grant and equity, will be Rs. 487.2 crores (this is excluding the land costs and tax concessions). He envisaged additional support from the Government in lieu of revision of aeronautical charges sought by Siemens consortium, not materialising.

The State Government is unable to sustain such a huge cash outflow and he has pointed out that the total financial support from it, inclusive of land costs and tax concessions, will be Rs. 623.6 crores against the total estimated project cost of Rs. 1,331 crores.

He further cautioned that, if investment of this massive scale is committed to the airport project, the Government will be left with very little resources for the 10th Plan and will be forced to effect cuts on other vital sectors.

According to Mr. Reddy, the Siemens consortium has sought a total financial support of Rs. 623.6 crores, which is inclusive of direct grant of Rs. 430 crores, of which Rs. 50 crores is to be refunded after 10 years. The equity contribution of the Karnataka State Industrial Infrastructure Development Corporation (KSIIDC) will amount to Rs. 41 crores, land cost Rs. 151 crores and tax concessions Rs. 52.6 crores.

In addition, the Siemens consortium has suggested a revision of route navigation facility charges at the rate of 10 per cent every three years by taking into consideration the inflation rate prevailing in 2005.

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