Posted by- Neelam Mathews
Aug 10, 2012
The note below was sent out by DIAL clarifying issues pointed out in the media.
Allegation: ... DIAL got the airport modernization project for 60 years with an earning potential of Rs. 1,63,557 Crores
DIAL says-
Also, it is unrealistic to assume that the entire area for commercial usage can be monetized in a short-term. In fact, as per estimates it may take 20-25 years to completely develop this land – thereby the calculation of Rs. 1,63,557 Crore is erroneous
• As a result, AAI receives 45.99% share of all Gross Revenues and 26% of all dividends from DIAL• The right to use 5% of airport land for commercial purpose was defined in the bid and known to all bidders (through the draft OMDA – Article 2.2.4).
• The same was factored in by all bidders while quoting their bid value – for both Delhi and Mumbai airports; in fact this was one the reasons why the bidders quoted a revenue share as high as 45.99% for Delhi and 38.7% for Mumbai airports
• In fact one of the bidders had challenged the bidding process and results. While giving this verdict in Nov 2006, the Honorable Supreme Court had duly noted and considered all points related to the bid conditions and the bid process and had upheld the entire process as valid and correct
Allegation: Unilateral right to extend Concession Period by 30 years without renegotiation was an
Aug 10, 2012
The note below was sent out by DIAL clarifying issues pointed out in the media.
Allegation: ... DIAL got the airport modernization project for 60 years with an earning potential of Rs. 1,63,557 Crores
DIAL says-
• The number of Rs. 681.63 Crore per acre indicated by DIAL was
the sum total of the lease rental that could be generated
through license fee over a period of 58 years and 45.99% of these
earnings were to be passed on to AAI
‒ (Rs. 681.63 Crore per acre is calculated by taking the sum total
of lease rental over 58 years @ Rs. 1.58 Crore per acre p.a., and an
average escalation of 5.8% p.a.)
Also, it is unrealistic to assume that the entire area for commercial usage can be monetized in a short-term. In fact, as per estimates it may take 20-25 years to completely develop this land – thereby the calculation of Rs. 1,63,557 Crore is erroneous
• Notwithstanding the above points, the allocation of 5% land for
commercial purposes was a bid condition and the same was priced in by all
bidders
• Moreover, all Aeronautical and airport assets created by DIAL
will be transferred back to AAI – free of cost – at the end of concession
period
• Also, AAI receives 45.99% share of all Gross Revenues (including
all revenue receipts from all Commercial usage of land) and 26% of
dividends from DIAL
Allegation: Entire area of Delhi
Allegation: AAI has permitted usage of 5% of land for
commercial purposes
DIAL says-
• As per the bid structure, the airport land has not been given to
DIAL on a rental basis. The primary purpose is to grant a concession for
the operations & development of the airport and
associated infrastructure. Rs. 100 is just a part of lease rentals and the
rest of the consideration being recovered through concession fees, which
is called as Revenue Share (includes revenue from Commercial usage
of land), to be determined through International competitive bidding
process. (as per the draft agreement made available to all the bidders)
• As a result, AAI receives 45.99% share of all Gross Revenues and 26% of all dividends from DIAL• The right to use 5% of airport land for commercial purpose was defined in the bid and known to all bidders (through the draft OMDA – Article 2.2.4).
• The same was factored in by all bidders while quoting their bid value – for both Delhi and Mumbai airports; in fact this was one the reasons why the bidders quoted a revenue share as high as 45.99% for Delhi and 38.7% for Mumbai airports
• In fact one of the bidders had challenged the bidding process and results. While giving this verdict in Nov 2006, the Honorable Supreme Court had duly noted and considered all points related to the bid conditions and the bid process and had upheld the entire process as valid and correct
Allegation: Unilateral right to extend Concession Period by 30 years without renegotiation was an
undue benefit to DIAL
DIAL says-
The concession period of 30 + 30 years (extension at the option of
JVC), mentioned in Article 18.1(b) in the draft Concession Agreement
(OMDA) was released to all the bidders during the bid process in 2005
‒ This condition was for revenue share maximization to the
government
‒ As this was made available to all the bidders, it created a
level playing field with no preference to any single bidder – and was
factored in by all the bidders
‒ In fact, the same terms & conditions were made available
to the bidders of Mumbai airport as well and not just for the bidders of Delhi
As a result, the Government
was able to get a revenue share as high as 45.99% from the winning bidders for Delhi
Hence, there is no undue
benefit to DIAL
It is quite common to have
long concession periods for infrastructure projects globally ‒ There are
many examples – both in India (Bangalore and Hyderabad airport, Hyderabad
Metro, many Port projects) and globally (Mexico airports, Australia
airports, Road & Rail in US, Spain, Brazil etc.) which have
concession period in excess of 50 years.
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