PPP in Indian airports

EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS

1

EMERGING CHALLENGES IN

PUBLIC PRIVATE PARTNERSHIP AIRPORT IN INDIA

A DISSERTATION SUBMITTED TO

Dr. P.C.K.RAVINDERAN and Dr.V. BALAKISTA REDDY IN PARTIAL FULFILMENT OF PGDALATM DEGREE

IN AVIATION LAW AND AIR TRANSPORT MANAGEMENT

SIREESH P. Aerodynamics

Aircraft Research and Design Centre HAL, Bangalore.


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ACKNOWLEDGEMENT

It’s a great pleasure and privilege to be associated with prestigious university

NALSAR. I am very thankful for IAAM for taking the initiative along with

NALSAR to establish Aviation law and air transport management program, first

of its kind in India. I am gratified to Dr. P. C. K. Ravindran and Dr. V. Balakista

Reddy for introducing such a brilliant course.

My sincere gratitude to Prof. S. N. A. Shafi for his help, guidance and

recommendations in preparing this dissertation.

I am grateful to Mr. Chinnarajan my colleague who encouraged me all the way

form the beginning of this program.


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CERTIFICATE

This is to certify that Mr. SIREESH P. Roll No __________ has submitted his

dissertation on “Emerging Challenges in Public Private Partnership”, as partial

fulfilment for the award of PGDALATM degree in Aviation Law and Air

Transport Management to NALSAR University of Law under my supervision. It

is also affirmed that, the dissertation submitted by him is original, bona-fide and

genuine.

Dr. V. Balakista Reddy

Supervisor

Nalsar University of Law, Hyderabad


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Declaration

This dissertation, “Emerging Challenges in Public Private Partnership”, has

been prepared and submitted by the undersigned to NALSAR University of

Law, Hyderabad. As a part of requirement for an award of PGDALATM degree

in Aviation Law and Air Transport Management, under the guidance of

Dr.V.Balakista Reddy. It is to declare that, this dissertation is original, bona-fide

and legitimate work of the undersigned, and has been pursued purely for an

academic interest. This dissertation shall not be used for any political purpose

or connotations or as a testimony against any person or communities or

regime. The views and ideas expressed in this dissertation are exclusively of

the researcher and do not represent any person, organisation or community in

particular.

Signed on: _____________________________________________.

SIREESH P.

Roll No:

Aviation Law and Air Transport Management

NALSAR-IAAM.


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LIST OF ABBREVATIONS PPP- PUBLIC PRIVATE PARTNERSHIP

GDP- GROSS DOMESTIC PRODUCT

AAI- AIRPORT AUTHORITY OF INDIA

NAO- NATIONAL AUDIT OFFICE

PFI- PRIVATE FINANCE INVESTMENT

GHIAL- GMR HYDERABAD INTERNATIONAL AIRPORT LIMITED

ICAO- INTERNATIONAL CIVIL AVIATION ORGANIZATION

AMHS- AERONAUTICAL MESSAGE HANDLING SYSTEM

RFID- RADIO FREQUENCY INDENTIFICATION

BOT- BUILT OPERATE TRANSFER

JVC- JOINT VENTURE COMPANY

VGF- VIABILITY GAP FUNDING

FDI- FOREIGN DIRECT INVESTMENT

DGCA- DIRECTORATE GENERAL OF CIVIL AVIATION

TEFS- TECHNO-ECONOMIC FEASIBILITY STUDY

MOD- MINISTRY OF DEFENSE

PSU- PUBLIC SECTOR UNIT

SPV- SPECIAL PURPOSE VEHICLE

CA- CONCESSION AGREEMENT

SHA- SHARE HOLDER AGREEMENT

SSA- STATE SUPPORT AGREEMENT

LLA- LAND LEASE AGREEMENT

PQB- PRE QUALIFIED BIDDERS

DPR- DETAIL PROJECT REPORT

ADF- ADVANCE DEVELOPMENT FEE

UDF- USER DEVELOPMENT FEE

PSF- PASSENGER SERVICE FEE

BCAS- BUREAU OF CIVIL AVIATION SECURITY

CNS/ATM- COMMUNICATION, NAVIGATION AND SURVEILLANCE / AIR

TRAFFIC MANAGEMENT

DBFOT- DESIGN, BUILD, FINANCE, OPERATE AND TRANSFER

MCA- MODEL CONCESSION AGREEMENT

ATS- AIR TRAFFIC SERVICES


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IMD- INDIA METEOROLOGICAL DEPARTMENT

OMDA- OPERATION MANAGEMENT AND DEVELOPMENT

AGREEMENT

GOI- GOVERNMENT OF INDIA

HIAL- HYDERABAD INTERNATIONAL AIRPORT

BIAL- BANGALORE INTERNATIONAL AIRPORT

DIAL- DELHI INTERNATIONAL AIRPORT

CIAL- COCHIN INTERNATIONAL AIRPORT

AERA- AIRPORTS ECONOMIC REGULATORY AUTHORITY

RTI- RIGHT TO INFORMATION ACT

KIC- KARNATAKA INFORMATION COMISSION


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CONTENT

1.0 ROLE OF AIRPORT INFRASTRUCTURE IN NATIONAL DEVE LOPMENT

1.1 Economy

1.2 Social Payback by Airports

1.3 Influence of Aviation on Tourism

1.4 Environment Benefits of Airports and Aviation

2. AIRPORT ENVIRONMENT IN INDIA.

2.1 Present airport infrastructure in India.

2.2 Major Airports of India

2.3 Present Classification of Airports in India

2.4 Proposed classification of Airports in India

2.5 Greenfield and Brownfield Airports

3 PUBLIC PRIVATE PARTNER SHIP

3.1 Introduction to PPP

3.2 Key drivers and enablers of PPP.

3.2.1 Conventional procurement issues.

3.2.2 Naresh Chandra committee

3.2.4 To meet the growing needs of airport infrastr ucture in

India

3.2.5 Passenger Growth

3.2.6 Cargo Growth

3.2.7 To Meet Financial Requirements to Support Suc h

Growth and to Infuse Private Fund in the Airport

Infrastructure Sector

3.2.8 To Increase the Standards of India Airports-T o

International Standards

3.2.9 Drivers and enablers

3.3 Present Indian scenario


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4. PROCEDURAL GUIDELINES FOR SETTING UP OF PPP AIRP ORT.

4.1 Policy Framework

4.2. Promoters

4.3 Study stages

a. Pre-feasibility Study Stage

b. Detailed Feasibility Study Stage

c. TECS

d. approval decision

4.4 Site Selection

4.5 Detailed Design Stage and Approval

4.6 Project Implementation Stage

4.7 Setting up a Special Purpose Vehicle (SPV)

4.8 Public Private Partnership (PPP) Model

4.9 Bidding Process and Selection criteria

4.10 Viability Enhancement

5.0 CONCESSION AGREEMENT FOR PPP

5.1 Need for a framework

5.2 Elements of financial viability

5.3 Technical parameters

5.4 Performance standards

5.5 Concession period

5.6 Selection of Concessionaire

5.7 Concession fee

5.8 Risk allocation

5.9 Financial close

5.10 User Fee

5.11 Construction

5.12 Operation and maintenance

5.13Reserved Services

5.14 Right of substitution

5.15 Force majeure


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5.16 Termination

5.17 Monitoring and supervision

5.18 Support and guarantees by the Government

5.19 Real estate development

5.20 Miscellaneous

6.0 RESERVED ACTIVITIES

7.0 EMERGING CHALLENGES AND RISKS IN PPP

7.1 General Issues

7.2 Financial Challenges

a) Financial Risk

b) Project Finance and Revenue Streams

c) Revenue Streams

7.3 Legal Challenges

7.4 Public Risk

7.5 Asset Risk

7.6 Operating Risk

7.7 Sponsor Risk

7.8 Default Risk

8.0 EMERGING REGULATORY ISSUES

8.1 Amendment of AAI Act and Aircraft Rules Act

8.2 Regulatory authority for AERA

9.0 THE CHANGED ROLE OF GOVERNMENT UNDER PPP AND NE W SET

OF AGREEMENTS AND NEW LEGAL FRAME WORK

10 .0 PPP airports and RTI Act

10.1 PPP airports public authority or not

10.2 BAIL case


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10.3 In case of brown field airport –AAI act apply – the operator in

AAI shoes

11.0 RECOMMENDATION IN REGULATION FOR PPP

12. CONCLUSION

13. REFERENCES.

14. ANNEXURE.


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PREFACE Over the years, the basic infrastructure in India has been developed to an

extent, which is not sufficient enough while considering India’s geographical

size, its population and the pace of overall economic development.

Infrastructure bottleneck has been a serious concern in India and basic

infrastructure like roads, railways, ports, airports, communication and power

supply are not comparable to the standards prevalent in its competitor

countries.

To develop the Indian infrastructure to a world class and to remove the

infrastructure inadequacy in the country, the investment requirements are

mammoth, which could not be met by the public sector alone due to fiscal

constraints and mounting liabilities of the Government. This would call for

participation of private sector in coordination with the public sector to develop

the public infrastructure facilities. In this direction, the economic reforms

initiated in the country provide forth the policy environment towards public

private partnership (PPP) in the infrastructure development. Sector-specific

policies have also been initiated from time to time to enhance the PPP in

infrastructure building. While the PPP is spreading to develop basic

infrastructure world wide, in India, the participation of private sector in the

infrastructure building has not been much encouraging, despite several rounds

of policy reforms.

Against this setting, the rest of the paper is organized as follows. Section I and

II assesses the Indian market and the need for PPP in the airport infrastructure

development. Section III attempts to review the structure of PPP through

literature survey. Section IV and V evaluates the status of private sector

participation in infrastructure development guidelines and concession

agreement. Section VI captures the Indian experiences in this regard. Section

VII reviews the investment requirements to bridge the infrastructure gap in the

country. Section VIII focuses on the challenges of infrastructure projects with

the status of PPP and overall private sector participation along with sector-

specific concerns. Generic issues while implementing the airport infrastructure

projects in the country with private participation and options thereon are

analyzed in Section IX, X and XI. Finally, concluding observations are drawn in

Section XII.


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1.0 ROLE OF AIRPORT INFRASTRUCTURE IN NATIONAL DEV ELOPMENT

Airports are the gateway for the country; they open doors for trade, tourism.

Economy of a country depends on the trade and tourism, simultaneously the

trade and tourism depends on the airports. A country without national carriers

can still trade with other countries as well catch the fancy of tourists, but the

country without an airport will be handicapped to advance economically. So it

becomes very important for every country to have an airport.

The rapid growth of the trade and tourism between the nations has chosen the

air transport mode for its Quick, Reliable, Efficient and Safe services. The

recent trends in the development of free trade, globalisation, liberalization and

deregulation left the mankind to race with time and air transport is found to be

very appropriate, thus propelling the aviation industry to paramount.

Airports also represent a country’s window on the world. Passengers form their

first impressions about a nation from the state of its airports. They can be

effectively used as symbols of national pride, if we pay sufficient attention to

their quality and maintenance.

In many remote, hilly and inaccessible areas of the country, air transport is the

quickest and sometimes the only mode of travel available. This is especially

true of sensitive regions on the borders with our neighbours in the west, north

and north-east.

Airports need to be integrated with other modes of transport like Railways and

Highways, enabling seamless transportation to all parts of the country.


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1.1 Economy

The impact of air transportation on economic activity differs from other

transportation modes because of its distinctive characteristics speed, cost,

flexibility, reliability, and safety. It is the only realistic long-distance

Transportation mode for high-value perishable commodities and time-sensitive.

Airports being nuclei of economic activity assume a significant role in the

national economy. The quality of airport infrastructure, which is a vital

component of the overall transportation network, contributes directly to a

country's international competitiveness and the flow of foreign investment. The

availability of better air transportation services effectively increases the scope

of new business and industrial economic activity. The economy moves towards

higher value-added products, particularly in agriculture, an increasing

proportion of the produce will have to move by air, both within the country and

abroad. In addition, the more remote and inaccessible regions of the country,

such as the North-east, can realise their true potential when such a transition

becomes possible. Increasing economic activity in turn generates the need for

passenger travel and freight and drives the demand for air transportation

services. Cargo carried by air in India weighs less than 1% of the total cargo

exported, it accounts for 35% of the total value of exports. Better cargo

handling facilities lead to enhanced levels of imports, especially of capital

goods and high-value items. Likewise, It is observed that 2% growth in aviation

industry leads to 1% growth in GDP.

Export and Import Trade of India with World for Last Five Years

EXPORT AND IMPORT DATA

0.00

20,000,000.00

40,000,000.00

60,000,000.00

80,000,000.00

100,000,000.00

120,000,000.00

140,000,000.00

160,000,000.00

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

FINANCIAL YAER

INR

EXPORT IMPORT

(See Annexure –I for export and import data) Fig.1


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1.2 Social Payback by Airports

Airport provides employment in the aviation sector and creates wider

socioeconomic benefits through its potential to facilitate certain types of

activities in a local development. Studies evaluate the direct, indirect and

induced employment impact of air transportation. Direct impact is employment

in the aviation industry, indirect impact is the employment in the industries

down the aviation supply chain, and induced impact is the employment

supported by the expenses of those directly and indirectly employed in the

aviation industry, studies has been assessed that every job in the aviation

industry will create seven other jobs directly or indirectly through its catalytic

impact on tourism and business.

At the macroeconomic level, airport impacts economy by providing employment

and by enabling effects including enabling access: to markets, to people, to

capital, to ideas and knowledge, to labour supply, to skills, to opportunity, and

to resources.

airport industry which in the past was considered to be a simple transit areas

but now the modern airports have become place where one works, eats, makes

purchases, and even sleeps. The whole idea of modern airports is to provide a

pleasant reception area with increasingly commercial outlook; private rooms,

game areas, religious facilities, malls, shopping canters.

Air transport provides significant social benefits few of them as follows:

• Air transport contributes to sustainable development. By facilitating tourism

and trade, it generates economic growth, provides jobs, improves living

standards, alleviates poverty, increases revenues from taxes, and fosters the

conservation of protected areas.

• Air transport is often the only means of transportation to/from remote areas,

and promotes social inclusion by connecting those living in such communities

with the rest of the country.

• The air transport network facilitates the delivery of emergency and

humanitarian aid relief anywhere on earth, and ensures the swift delivery of

medical supplies and organs for transplantation.


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• Air transport improves quality of life by broadening people’s leisure and

cultural experiences. It provides a wide choice of holiday destinations around

the world and an affordable means to visit distant friends and relatives.

• Air transport improves productivity, by encouraging investment and

innovation; improving business operations and efficiency; and allowing

companies to attract high quality employees. And Cities always develop

towards the airport because of its socioeconomic factor.

1.3 Influence of Aviation on Tourism

Tourism and Air Transport industry are complementing each other. Tourism

depends on transportation to bring visitors, while the transportation industry

depends on tourism to generate demand for its services. The growth in tourism

industry directly reflects onto the air transportation. Over the last 25 years, the

number of international tourists has more than doubled. The expansion of

international tourism has a large impact on the discipline of transport

geography.

Transport is the cause and the effect of the growth of tourism. To start with, the

improved facilities have stimulated tourism, and the expansion of tourism has

stimulated transport. Accessibility is the main function behind the basics of

tourism transport. In order to access the areas that are mainly aimed, tourists

will use any transportation mode. However, air transport is the main mode for

international tourism. Air transport plays a dominant role in inter-regional

movements of tourists, which normally entails travel over long-distance. Growth

rates of international air traffic are pegged with growth rates of international

tourism. Attractive package tours, competitive airfare attract more and more

tourist day by days, therefore both the industry is expanding rapidly.

Air transport is far advance than the transport mode. Air transport has

revolutionized the geographical aspect of distances; the most remote areas can

now be attained, any journey around the world can be measured in terms of

hours of travelling. With jet that, can reach up to 1950 km/hrs, international

tourism is no longer an on going adventure.


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Inducement tour - Tourism now a day not only the personal influence, but it also

is group affluence as well, many company to induce their work force arrange

tour overseas, which is the significant reason of Group tour.

“Whatsoever the reason of travelling people need transportation for movement,

the next question arise which mode of transportation? The answer is affordable,

time saving, convenient and safety. So, air transportation is the one meet most

all of the above”, which basically requires good airport infrastructure

Airports provide the only worldwide transportation network, which makes it

essential for global business and tourism. Airport alleviate poverty and helps to

improve living standards by facilitating tourism. Air transport improves quality of

life by broadening people’s leisure and cultural experiences. It provides a wider

choice of holiday destinations around the world and an affordable means to visit

distance friends and relatives. Air transport contributes to sustainable

development not only by facilitating tourism and trade, it generates economic

growth, provides jobs, increase revenues from taxes as well as facilitates the

delivery of emergency humanitarian aid relief and swift delivery of medical

supplies anywhere on the earth.97% of the country's foreign tourists arrive by

air and tourism is the nation's second largest foreign exchange earner.

1.4 Environment Benefits of Airports and Aviation

As with all human activity there is an environmental impact. Aviation is widely

understood to be responsible for 2% of worldwide man-made CO2 emissions;

where as other transport provides 16%. The IPCC provides a comprehensive,

objective, open and transparent assessment of climate change. Today, 80% of

aviation’s greenhouse gas emissions are related to passenger flights exceeding

1,500km/900 miles for which there is no practical alternative.


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AVIATION: ONLY 2% OF MAN-MADE CO 2 EMISSION

Fig.2

AIRCRAFT TODAY ARE 75% QUIETER AND 70% CLEANER THAN 40 YEARS AGO

Aviation’s small contribution to CO2 emissions is not a coincidence, but rather

the result of a constant focus on innovation. Manufacturers must strive to

reduce fuel consumption to remain competitive, but it is much more than just

good business. Since the start of commercial jet services in the 1950s, aircraft,

engine and other related manufacturers have been driven by a number of

factors. Safety is understandably considered above all others, although the cost

of aircraft operations for the airlines has been and remains a critical

consideration. Much of the airlines’ and manufacturers’ focus has always been

to reduce fuel costs. Today, this can account for 36% of airline operating


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expenses, even though manufacturers have reduced the fuel consumption by

37% per 100 passenger kilometres travelled, since 1987. Over the last 50

years, aircraft have become increasingly efficient in terms of their individual

impact on the environment throughout their entire life cycle. This continues to

be driven by the demands of passengers and airlines, as well as both

international and local legislation.

Today, aircraft are 20dB quieter than the closest comparable aircraft produced

in the 1960s, which equates to 75% less perceived noise. Of the entire

population affected by transport noise, 79% live near roads, 14% near railways

and only 7% live near airports. Similarly, everyone has seen pictures or film of

aircraft from that period taking off with plumes of black smoke billowing from the

engines, which is not seen at the world’s airports today. In fact, today’s aircraft

produce 90% less smoke or unburned hydrocarbons than aircraft of the 1970s,

with a carbon monoxide (CO) reduction of more than 50%.

Furthermore, aircraft burn 70% less fuel and, therefore, emit 70% less CO2

than aircraft flying in this period. Another trend having a significant effect is

improved aircraft load factors. In other words airlines have filled their planes

more efficiently, thereby effectively reducing the need for more aircraft or

frequencies, together with their associated fuel burn. Since 1970, airlines have

improved load factors by an average of 0.6 percentage points per year, with

industry wide load factors averaging 76% in 2006.


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2. AIRPORT ENVIRONMENT IN INDIA.

2.1 Present airport infrastructure in India.

There are 449 airports/airstrips in the country. Among these, the AAI owns and

manages 88 airports, 27 civil enclaves at defence airfields and 5 PPP airports

and provides air traffic services over the entire Indian airspace and adjoining

oceanic areas. Historically, air traffic at Indian airports has broadly followed a

particular distribution pattern, except that some airports have changed their

inter-se positions vis-à-vis volume of traffic.

2.2 Major Airports of India

“Major airport means an airport which has, or is designated to have, annual

passenger throughput in excess of one and a half million or any other airport as

the Central Government may, by notification, specify as such”

Presently twelve (12) airports in the country have annual passenger throughput

in excess of one and a half million as can be seen from the following table.

Sl. No. Name of Airport Passenger Throughput

2008-09 (in million)

1 Mumbai 23.43

2 Delhi 22.84

3 Chennai 9.84

4 Bangalore 8.76

5 Kolkata 6.99

6 Hyderabad 6.22

7 Cochin 3.36

8 Ahmedabad 2.83

9 Goa 2.22

10 Trivandrum 1.95

11 Pune 1.77

12 Calicut 1.68


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• 2 airports – Mumbai and Delhi being leased airports of AAI under PPP

management, with majority private participation;

• 3 airports – Bangalore, Hyderabad and Cochin being private

• 5 airports – Chennai, Kolkata, Ahmedabad, Trivandrum and Calicut

being airports under the Airports Authority of India; and

• 2 airports – Goa and Pune being Civil Enclaves at defence airfields,

managed and operated by the Airports Authority of India.

2.3 Present Classification of Airports in India

i. International Airports: These are declared as international airports and

are available for scheduled international operations by Indian and foreign

carriers. Presently, Mumbai, Delhi, Chennai, Calcutta and

Thiruvananthapuram are in this category.

ii. Custom Airports: These have customs and immigration facilities for

limited international operations by national carriers and for foreign tourist

and cargo charter flights. These include Bangalore, Hyderabad,

Ahmadabad, Calicut, Goa, Varanasi, Patna, Agra, Jaipur, Amritsar and

Tiruchirapally.

iii. Model Airports: These are domestic airports which have minimum

runway length of 7500 feet and adequate terminal capacity to handle

Airbus 320 type of aircraft. These can cater to limited international traffic,

if required. These include Lucknow, Bhubaneshwar, Guwahati, Nagpur,

Vadodara, Coimbatore, Imphal and Indore.

iv. Other Domestic Airports: All other airports are covered in this category.

v. Civil Enclaves in Defence Airport: There are 28 civil enclaves in Defence

airfields.

2.4 Proposed classification of Airports in India

Reclassification of airports is proposed to develop the capacity of airports in

accordance with the future projections of air traffic:

International Hubs: This category of airports will be that of International Hubs,

which may cover airports currently classified as international airports, and those

eminently qualified to be upgraded. These would at present cover Delhi,

Mumbai, Chennai, Kolkata and Thiruvananthapuram. Airports at Bangalore,


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Hyderabad, Ahmedabad, Amritsar and Guwahati would be added to the list

after their facilities are upgraded to the desired level. International hubs would

be used for dispersal of international traffic to the hinterland. At these airports,

the facilities would be of world-class standards, including convenient

connections for international and domestic passengers, airport-related

infrastructure like hotels, shopping areas, conferencing and entertainment

facilities and aircraft-maintenance bases, among others.

Regional Hubs : The government is keen to encourage the development of

regional airlines with fleets of small aircraft, to provide air-linkages witin the

interior areas of the country. Regional hubs will have to act as operational

bases for regional airlines and also have all the facilities currently postulated for

model airports, including the capability to handle limited international traffic. The

identification of Regional Hubs will be made on the basis of origin-destination

surveys, traffic demand and the requirements of the airlines. The state

government would be closely associated as co-promoters of regional airlines.

Other Operational airports: These would be developed so as to be cost-

effective on the basis of individual needs, to meet the requirements of traffic

handled by them. Airports serving state capitals would be given priority. The

status of individual airports may be reviewed at five-yearly intervals, on the

recommendation of a committee of experts. Grant of status as International

hubs would be with prior cabinet approval. It is clarified that international hubs

shall have the status of an international airport for purposes of bilateral

agreements.

2.5 Greenfield and Brownfield Airports

Greenfield Airport means a new airport which is built from scratch in a new

location because the existing airport is unable to meet the projected

requirements of traffic. The word Greenfield originates from software

engineering, meaning a project which lacks any constraints imposed by prior

work. Brownfield projects are the projects which are modified or upgraded from

existing facilities.


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3 PUBLIC PRIVATE PARTNER SHIP

3.1 Introduction to PPP

PPP can be defined as arrangements whereby private parties participate in, or

provide support for, the provision of infrastructure, and a PPP project results in

a contract for a private entity to deliver public infrastructure-based services.

The mechanics of the arrangements can take many forms and may incorporate

some or all of the following features

•The public sector entity transfers land, property or facilities controlled by it to

the private sector entity (with or without payment in return) usually for the term

of the arrangement;

•The private sector entity builds, extends or renovates a facility;

•The public sector entity specifies the operating services of the facility;

•Services are provided by the private sector entity using the facility for a defined

period of time (usually with restrictions on operations standards and pricing);

and

•The private sector entity agrees to transfer the facility to the public sector

(with or without payment) at the end of the arrangement.

3.2 Key drivers and enablers of PPP.

3.2.1 Conventional procurement issues.

A lot of the blame for the poor record in the design and construction of capital

works on the attitudes and culture of the public sector, which result in time

delays and costs overruns being commonplace. Since then, more complete

and damning evidence has come to hand on the extent of cost overruns and

revenue shortfalls on infrastructure investments phenomena that have come to

be known under the heading ‘appraisal optimism’.

Appraisal Optimism : Optimism bias is the tendency for a project’s costs and

duration to be underestimated and/or benefits to be overestimated. It is

expressed as the percentage difference between the estimate at appraisal and


23

the final outturn.

National Audit Office (NAO) undertakes a rolling review of all

government procurement, including PFI procurement, PFI construction

outcomes showed that in contrast to traditionally procured projects, the PFI

projects were largely being delivered on time or early (76 per cent versus 30

per cent) and on budget (78 per cent versus 27 per cent).

Construction performance of PFI and conventional projects

Projects PFI projects NAO census

(%)

Government

procurement survey (%)

On time 76 30

On budget 78 27

UK Green Book calls ‘optimism bias’ – the estimated difference between the

business case and the final outcome for each category of project. For all

projects, time overruns exceeded the estimated duration by 17 per cent.

Differences between actual and estimated costs in large public works transport

projects.

Project Type All regions

Number of projects Average cost escalation (%)

Transport 258 27.6

3.2.2 Naresh Chandra committee

The Indian aviation industry took off on to a higher growth plane following the

liberalization of the airlines industry in the late 1990s. In the decade following

liberalization, the growth was propelled further by the emergence of low-cost

carriers, competition-induced decline in travel costs, and sustained economic

growth. With that, renewed focus came to be placed on the aviation


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infrastructure segment, in which investments by the Airport Authority of India

(AAI)—till then the monopoly owner of most of the Indian airports—had

historically been inadequate. The emphasis on further developing the country’s

aviation infrastructure meant opening up of airports to private investment, as

was one of the key recommendations of The Naresh Chandra Committee

Report on the Road Map for the Civil Aviation Sector—November 2003.

3.2.4 To meet the growing needs of airport infrastr ucture in India

India’s airports have suffered from decades of neglect and underinvestment.

When the Naresh Chandra Committee presented its report to the Ministry of

Civil Aviation in November 2003, it remarked frankly that the country’s

“passenger airports are for the most part an embarrassment”.

The inadequacy of the state of airport infrastructure was exposed as air traffic

expanded dramatically from 2004 onwards, pushing several metro airports to

well beyond their design capacity. Congestion in the terminals, on the runways

and in the air, resulted in a deteriorating passenger experience and an

increasingly inefficient (and costly) operating environment for the airlines.

3.2.5 Passenger Growth

In the recent past, India has encountered an extraordinary growth in passenger

air traffic. In India 87% of the total air traffic is generated by the 15 international

airports (listed in annexure-I), of which a total of 84% of domestic traffic and

93% of international traffic is generated from these airports.

The growth of International and domestic passenger traffic is shown in the

Graphs below. The statistics analysis follows the regression line of polynomial

representing the international and domestic passenger growth respectively.

y = 95946x2 - 317907x + 4E+06

y = 464620x2 - 1E+06x + 1E+07


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International & Domestic Passenger Traffic

y = 95946x2 - 317907x + 4E+06 y = 464620x

2 - 1E+06x + 1E+07

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raffi

c INTERNATIONAL PASSENGER DOMESTIC PASSENGER

(See Annexure II for the passenger data) Fig.3

The estimates from the graph represent a 100 and 20 million in Domestic and

international air traffic by 2014. While passenger traffic in metros grew by an

average of 31%, smaller stations like Port Blair, Nagpur and Raipur registered

traffic growths of 41.8%, 94.8% and 70.3%, respectively.

According to the Airports Authority of India data, of the top 45 airports, 9

airports registered a 50% growth in passenger traffic. These include

Hyderabad, Pune, Coimbatore, Mangalore, Nagpur, Port Blair, Raipur, Ranchi

and Jaipur. Among the four metros, Kolkata registered the highest growth of

39.5%, followed by Chennai, Delhi and Mumbai at 35%, 27.1% and 22.4%

respectively.

3.2.6 Cargo Growth

The air cargo market in the country has also witnessed increased activity over

the last few years especially with the entry of number of new players in cargo

handling market (terminal management, development and operation).

International operators like Menezies (JV with Bobba group at Bangalore and

GHIAL at Hyderabad) and SATS Singapore (JV with Air India at Bangalore)

have made significant investments for offering newer and better services for

cargo users. International express cargo operators like FedEx and DHL are

also increasingly establishing their presence in the Indian market.

y = 1615.4x2 - 10948x + 114582

y = 195.64x2 + 14984x + 131194


26

International & Domestic Cargo Traffic

y = 1615.4x2 - 10948x + 114582 y = 195.64x2 + 14984x + 131194

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

1999-

00

2000-

01

2001-

02

2002-

03

2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

2008-

09

2009-

10

2010-

11

2011-

12

2012-

13

2013-

14

Year

Carg

o in

To

nn

es

INTERNATIONAL CARGO TRAFIC DOMESTIC CARGO TRAFFIC

(See Annexure-III for the cargo data)

Fig.4

Form the polynomial regression analysis and form the graph this is evident that

400000 and 350000 tons of cargo is likely to reach by 2014.

3.2.7. To Meet Financial Requirements to Support Such Growth and to Infuse

Private Fund in the Airport Infrastructure Sector Recognising the potential for

airport infrastructure constraints to stifle the aviation industry, in 2005 the

Government of India announced a USD10 billion airport upgrade and

modernisation programme over 5 years to 2010. A further USD20 billion of

investment is expected in the following 10 years. Acknowledging that it

possesses neither the expertise nor the capital to carry out such an undertaking

by itself, the government has invited private sector participation in the process.

3.2.8 To Increase the Standards of Indian Airports- To International

Standards

The ICAO also standardizes certain functions for use in the airline industry,

such as the Aeronautical Message Handling System AMHS; this probably

makes it an organization. The ICAO defines an International Standard


27

Atmosphere (also known as ICAO Standard Atmosphere), a model of the

standard variation of pressure, temperature, density, and viscosity with altitude

in the Earth's atmosphere. This is useful in calibrating instruments and

designing aircraft. The ICAO standardizes machine-readable passports

worldwide. Such passports have an area where some of the information

otherwise written in textual form is written as strings of alphanumeric

characters, printed in a manner suitable for optical character recognition. This

enables border controllers and other law enforcement agents to process such

passports quickly, without having to input the information manually into a

computer. ICAO publishes Doc 9303, Machine Readable Travel Documents,

and the technical standard for machine-readable passports. A more recent

standard is for biometric passports. These contain biometrics to authenticate

the identity of travellers. The passport's critical information is stored on a tiny

RFID computer chip, much like information stored on smartcards. Like some

smartcards, the passport book design calls for an embedded contact less chip

that is able to hold digital signature data to ensure the integrity of the passport

and the biometric data.

3.2.9 Drivers and enablers

Drives Enablers

• Financial need, e.g. budget deficit • Aging or poor infrastructure • Search for greater efficiency and

creativity • Desire to introduce competition • Shortage of domestic experience

or skills • Desire to educate national

contractors and remain competitive

• Bandwagon effect

• Political framework: stability explicit political will or commitment, e.g. a dedicated unit, ability to push schemes through, creative and willing local government

• Legal frame work: no roadblocks, and documentation not excessively complicated

• Public acceptance of private sector involvement and specific impacts, e.g. environmental impact of new airports

• Quality practitioners: good quality, experienced project sponcers and lenders

• Readily available finance, mature or sophisticated banking sector and capital markets culture


28

3.3 Present Indian scenario

The privatization initiative that followed gained traction with the award of build-

operate-transfer (BOT) concessions to private players for Greenfield airports at

Bangalore and Hyderabad in 2004 and the privatization of the international

airports at Delhi and Mumbai in 2006. All these airports are now being operated

by separate joint venture companies (JVCs)

The details including Type of PPP, Contract Period, Project Proponent,

Contract Award method, Estimated Project Cost, Amount of Government

Support - (VGF), Legal Instrument, Regulatory framework, financial information

including Equity, Debt, Other Financial Instrument, Market Structure and

Competition of these projects are included in appendix-(3)

While the award of BOT projects for two Greenfield airports and privatization of

the Delhi and Mumbai airports are positive steps towards involving the private

sector in development of the country’s aviation infrastructure, there is also a

growing need to put together a sound regulatory framework for the aviation

industry as a whole and have a functioning and independent regulator to

balance the often opposing demands of the airlines and aviation infrastructure

sectors. The regulatory factor apart, the aviation infrastructure sector is

currently facing the challenges of a weak global economy, declining traffic

levels, and deteriorating financial health of airlines. As a result, revenue

generation by airports has been impacted severely, which, along with the

pressures on liquidity, has caused funding gaps to arise both for private players

as well as the state-owned AAI. Another development that has hit the aviation

infrastructure segment has been the downturn in the real estate sector since

the second half of fiscal 2008-09. The downturn has forced some private airport

concessionaires to look for alternative sources of funds, given that their

business models rely significantly on the development and sale of land adjacent

to the airports. An important issue in all airport privatizations and projects is the

degree of risk transfer to the private sector. To what extent will the

concessionaire or sponsor bear the risk in relation to matters such as existing

asset condition (if privatization), construction costs, operational costs, traffic

volumes, revenues, change of law, non-insurable risks and financing risk? This

is nothing unique to airport concessions and projects – similar issues arise in

most other contexts. Full risk transfer to the private sector is unlikely to be


29

achievable. Certain risks, particularly those having a political dimension, will

inevitably need to remain with the Government, such as changes in law, war,

terrorism and expropriation.

See annexure-IV for details

Fig 5

(See annexure-V for details) Fig-6

Development and use of PPPs for delivering infrastructure services has now at

least 11 years of precedence in India, with the majority of projects coming in

line in the last 5 years. Policies in favor of attracting private participation as well


30

as innovation with different structures have met with varying degrees of

success. Some sectors like telecommunications, power, and ports and roads,

have done very good progress compared to limited success in other sectors. As

far as current status of projects in place, there have been at least 450 PPP

projects in our main sectors of focus where a contract has been awarded and

projects are underway – in the sense that they are either operational, have

reached construction stage, or at least construction/implementation is

imminent. The total project cost is estimated to be about Rs. 2, 24,175.75

Crore. In this airport counts 19111 crore which is spent for only on five projects.

We see that airport projects account for 1.1% of the total number of projects

and 8.52% by total value. In terms of contract award method the International

Competitive Bidding yielded 39% of total investment in India followed by

Domestic Competitive Bidding with 33% in PPP. However airport count 100%

international competitive bidding which is mainly because of building airport to

international standard and to achieve technically highest of design standard.

Present Greenfield airport details were given in annexure-VII

See annexure-VI for state wise PPP detail in India.

Investor Type

Total

Investment

% of total

number of

projects

% of total

project cost

Foreign Investor 1725.85 7% 1%

Indian Private Investor 134145.57 93% 99%

Total 135871.42 100% 100%

Sector-wise break-up of foreign investor participation in PPP projects

Foreign Investor Versus

Sector

No. of

Projects Investment

% of total

project

cost

Ports 9 416.5 24%

Roads 9 256.22 15%

Airports 4 1053.13 61%

Total 22 1725.85 100%


31

Fig-6

Foreign equity participation of 27 foreign companies in PPP projects was only

at Rs 1,725.85 crore which is meager 1 per cent of the total project investment.

Prominent PPP projects where foreign companies have an equity stake include

modernization of Mumbai and Delhi international airports, Delhi-Noida toll

bridge, Papaya port, Bangalore international airports and JNPT container

terminal etc.Airport counts 61% of total foreign investment.


32

4. PROCEDURAL GUIDELINES FOR SETTING UP OF PPP AIRPORT .

4.1 Policy Framework

• Airport Infrastructure Policy of 1997 provides the following:-

• In view of the fact that there are already a sufficient number of airports,

many of which are not viable; Greenfield airports will normally not be taken

up either in the public or private sector without the prior approval of the

Government. In the case of the Other Airport category run by private

operators, the approval of the DGCA would suffice as at present.

• A Greenfield airport may be permitted where an existing airport is unable to

meet the projected requirements of traffic or a new focal point of traffic

emerges with sufficient viability. It can be allowed both as a replacement for

an existing airport or for simultaneous operation. This aspect will have to be

clearly spelt out in the notice inviting tenders.

• No Greenfield airport will normally be allowed within an aerial distance of

150 kilometers of an existing airport. Where it is allowed as a second airport

in the same city or close vicinity, the parameters for distribution of traffic

between the two airports will be clearly spelt out.

• The Government may, while permitting a Greenfield airport, decide whether

it will be in the public or private sectors or be taken up as a joint venture.

• Where the Government decides to set up a Greenfield airport through the

AAI on social considerations even though the same is not economically

viable, suitable grant-in-aid will be provided to AAI to cover both the initial

capital cost as well as the recurring losses.”

4.2. Promoters

The Central Government, Airports Authority of India, State Government, a local

self Government Institution e.g. Municipality, Corporation etc., a private

company, a consortium or a group of individuals can act as the promoter for the

Greenfield airport either individually or jointly.

4.3 Study stages

a. Pre-feasibility Study Stage

The promoter, after preliminary clearance of Ministry of Civil Aviation on his


33

proposal in the first instance, will commission a pre-feasibility report to study

the overall potential of the project and see whether the project is attractive

enough to warrant detailed study. The study should cover demand, technical,

manpower, financial, economic and social modules of the project. The study

may also utilize secondary research and information. The promoter shall submit

the pre-feasibility report to the Ministry for further approval. The cost of the pre-

feasibility will be borne by the promoter.

b. Detailed Feasibility Study Stage

Based on study of pre-feasibility report, the promoter shall again approach the

Central Govt. for preliminary clearance of undertaking a detailed Techno-

Economic Feasibility Study (TEFS). The Central Govt. after due examination of

all modules of pre-feasibility study will determine whether the project shows

promise of meeting the financial, economic and social criteria which have been

set for public investment expenditure. In case, the Govt. find it appropriate, it

may permit the promoter to take up detailed TEFS.

c. The primary promoter will commission a TEFS including simulation study for

conflict free operation by a competent professional body. Cost of TEFS

including the simulation study will be borne by the primary promoter. During this

phase, the accuracy of variables will be further improved to see if the project

has potential for success. This may require primary research etc.

d. Upon establishing the technical / financial viability through sensitivity analysis

of realistic traffic and revenue projections, as emerging from the TEFS, the

primary promoter will submit the proposal to the Ministry with full justification,

inter alia, enclosing the TEFS and other studies in this regard. Such proposal

shall cover the respective State Government’s commitments to the proposal in

respect of acquisition of land, supply of water and power, construction of

access roads and other financial support. It is only after TEFS that the most

important decision has to be made whether the project should be approved.

4.4 Site Selection

Site selection for any Greenfield airport will be undertaken by the promoters at

pre-feasibility stage only in consultation with Director General of Civil Aviation

(DGCA) including AAI, Ministry of Environment & Forest, and Ministry of

Defence (MOD). In case, the Greenfield airport is proposed at a location, which


34

has an existing airport, while taking the decision to accord approval for the

Greenfield airport, the Government would also decide whether the existing

airport would be closed down or the new airport would be a second airport with

full-fledged simultaneous commercial operations. In case, the existing airport is

decided to be closed down, the unrecovered investments of AAI in the existing

airport will have to be compensated by a suitable mechanism such as share in

the concession fee to be given by the greenfield operator to the Govt. The

Government shall, in general, promote competition in setting up a greenfield

airport in addition to the existing one.

If a Greenfield airport is established in lieu of an existing AAI airport, the

existing airport with all assets will revert to AAI. AAI may decide on the future

usage of the airport in consultation with Ministry of Civil Aviation. The issue of

providing employment to AAI’s employees working at the AAI airport after its

closure has engaged attention of the Govt. The JVC will absorb AAI employees

subject to merit and efficiency in operational/ management dep’t. Against

vacancies at the airport.

4.5 Detailed Design Stage and Approval

Based on the TEFS and State Government/Promoters’ recommendations, the

Central Government will consider giving approval for the airport project as per

the extant policy. The approval will be given by the Union Cabinet as per the

Civil Aviation Policy. The Central Government after approval will then go ahead

to develop detailed design of the project which should then result in formulation

of operational plan. At this stage, the project can once again be reviewed

whether it shall meet required criteria.

4.6 Project Implementation Stage

A Steering Committee is set up by State Govt. / promoter comprising of officials

of the State Govt. and the Ministry of Civil Aviation as this stage involves

coordination and allocation of resources. This Committee will oversee the

implementation of the project, funding proposal, and preparation of tender and

other documents, bidding and selection of the preferred investor. The State

Govt./ promoter will designate an agency preferably a PSU to coordinate the

activities and assumes responsibilities and authority for moving ahead .


35

4.7 Setting up a Special Purpose Vehicle (SPV)

The State Govt./ promoter shall set up a SPV wholly owned buy it to begin with.

Later, on the selection of successful bidders, the private investor will be

inducted in the SPV with 74% equity shares.

4.8 Public Private Partnership (PPP) Model

• The State Government as a primary promoter may consider joint venture

(JV) with private investors through Public Private Partnership Model (PPP).

In case it proposes to have a joint venture with private promoters, it shall be

the primary responsibility of the State Government to choose private sector

partners through a transparent competitive bidding process subject to the

guidelines on foreign equity participation.

• State Govt. / AAI may also participate in the JV with equity which will be

limited to 13% each (Rs. 50 crores cap or 13%, whichever is lower in case

of AAI)

4.9 Bidding Process and Selection criteria

• The Joint Venture Partner / Greenfield Operator shall be selected by the

State Govt. through a transparent competitive bidding process based on

technical and financial criteria. While inviting bids from prospective bidders

by the State Govt. / promoters, the draft Concession Agreement (CA),

Shareholder Agreement (SHA), State Support Agreement (SSA), Land

Lease Agreement (LLA), (CNS/ATM) Agreement, principles of Finance

Agreement, principles of Airport Operator Agreement along with format of

commitment from lenders regarding debt/ equity will be furnished to the pre-

qualified bidders. Before inviting technical and financial bids, these

documents will be frozen in consultation with Pre- Qualified Bidders (PQBs).

• It may be divided into technical and financial criteria. The technical criteria

may include financial, development and management abilities. A broad list

of these will be made part of the bid documents. The financial criteria could

be the minimum bid for State Support and viability gap funding or maximum

concession fee.

• The successful bidder inducted into SPV through SHA shall use the

Detailed Project Report (DPR) for realizing and operationalising the project.


36

4.10 Viability Enhancement: - The Greenfield airport project can be made

Viable by following means:-

(i) Land and external infrastructure provided by the State Government for the

airport on lease through Land Lease Agreement with variety of combinations

such as token lease, moratorium on lease, deferred payment of lease etc.

(ii) The State Government may enter into a State Support Agreement in

addition to Land Lease Agreement with the greenfield airport operator providing

for State Support such as grant, infrastructure loan, interest free loan etc.

(iii) Central Government may levy an Advance Development Fee (ADF) from

embarking passengers at the existing airport or for the development of new

airport on terms and conditions as per ADF rules framed by the Ministry.

(iv)The Greenfield airport operator may be allowed to levy a User Development

Fee (UDF) at the new airport, subject to the Regulatory regime in force.

(v) Aeronautical Charges may be leviable at the airport shall be as approved by

the Govt. / Regulator.

(vi)The Passenger Service Fees (PSF) levied at all airports would be applicable

to the Greenfield airports also. ADF / UDF would be charged in addition to the

PSF. PSF being levied through passenger tickets will have two components viz.

(a) Security charges, (b) levy for Airport Maintenance and Upkeep. The PSF

components collected through airline passenger tickets will be passed on by

the airline to AAI as far as security component is concerned and the Greenfield

operator for service component.

(vii) Concessions have also been given by the Union Govt. through budget

pronouncement from time to time.

• While Security will be the responsibility of the Central Govt. {through AAI/

Bureau of Civil Aviation Security (BCAS)}, the airport operator will be

required to provide security equipments, operate and maintain as per

standards laid down by the Bureau of Civil Aviation Security (BCAS), and

meet the costs thereof.

• Communication, Navigation and Surveillance (CNS) / Air Traffic

Management (ATM) equipment along with allied infrastructure required for

Greenfield airport will be provided by Airports Authority of India (AAI) at its


37

cost and the revenue from (RNFC)/ (TNLC) accrue to AAI directly. The

Greenfield operator will provide ATC tower, required buildings/ office

accommodation, utilities on payment of rental on mutually agreed terms.

The State Govt. / Operator will also earmark land for a residential colony for

CNS/ATM personnel. The colony will be developed by AAI at its own cost.

The Greenfield airport operator will sign a CNS / ATM agreement with AAI in

this regard wherein AAI will commit performance standards also in terms of

aircraft movement per hour.

• If the selected Greenfield airport operator wants to take initiative in

developing business strategies through traffic building at the airport, the

Central Government may consider giving positive support keeping in view

the overall bilateral requirements also as per the Civil Aviation Policy.

• The airport operator would be allowed to optimize the use of land subject to

the applicable land rules and regulations of the State Government on land

use and encouraging non-aeronautical revenues. In this context, the

concept of developing the entire area with an integrated approach may be

encouraged. While the land given by State Govt. may be used to raise non-

aero revenue, the JVC and the State Govt. will ensure that the airport does

not assume real estate orientation. Hence, the land leased out will be first

used for full length aero development over the concession period. Only the

residual land will be subject to non-aero exploitation for those activities

which are directly related with passengers, cargo, air transport industry/

services etc.

• Landing, parking, housing charges will accrue to the airport operator.

• The airport operator will provide requisite space and facilities for regulatory

agencies like Customs, Immigration, Health, Plant and Animal Quarantine,

Security and State Governments on terms and conditions as per CA.

• The JVC while providing healthy corporate governance, will ensure that

major contracts are awarded through a competitive bidding process, arm

length method for related parties transaction and achieve the best value of

money for JVC through a mechanism of independent engineer, auditors etc.

The EPC Contract of the JVC shall also be awarded through transparent

and competitive procedures by the JVC.

• The Centre/ State Governments in due course will evolve following model


38

agreements for the purposes of selection of JV partner through a

Competitive bidding process:-

(i) CA

(ii) SHA

(iii) SSA

(iv) LLA

(v) CNS-ATM

• The sequence of signing agreements will generally be as follows:-

(i) SHA amongst shareholders at the time of induction in SPV

(ii) Stands deleted

(iii) EPC contract process to firm up costs by SPV

(iv)Selection of financial arranger and finalization of landing

conditions by SPV

(v) Financing Agreements

(vi) Direct Agreements of lenders with GOI

(vii) The work begins


39

5.0 CONCESSION AGREEMENT FOR PPP

5.1 Need for a framework

Accelerated economic growth, aided by expansion of air services in a

competitive environment, has manifested itself in a rapid increase in air traffic.

For providing connectivity to regions hitherto not served by commercial flights, it

is necessary to expand the network of air services by setting up new airports.

Some of the State Governments have already taken steps for setting up

Greenfield airports. Examples in the past include Cochin, Hyderabad and

Bangalore where Greenfield airports have been commissioned with the active

support and participation of the respective State Governments. The policy

relating to setting up of Greenfield airports has since been liberalised by the

Central Government and several new projects are being planned in different

states. The airport sector has been witnessing significant interest from both

domestic as well as foreign investors following the policy initiatives taken by the

Central Government to promote Public Private Partnerships (PPP) on Design,

Build, Finance, Operate and Transfer (DBFOT) basis. However, the actual

inflow of investment has been less than expected, and future prospects will

depend on adoption of a comprehensive policy and regulatory framework

necessary for addressing the complexities of PPP, and particularly for

balancing the interests of users and investors. Moreover, transformation of

rules will have to be accompanied by a change in the institutional mindset. For

building and operating a Greenfield airport on DBFOT basis, a precise policy

and regulatory framework is being spelt out in this Model Concession

Agreement (MCA). This framework addresses the issues which are typically

important for limited recourse financing of infrastructure projects, such as

mitigation and unbundling of risks; allocation of risks and rewards; symmetry of

obligations between the principal parties; precision and predictability of costs

and obligations; reduction of transaction costs; force majeure; and termination.

It also addresses other important concerns such as user protection,

independent monitoring, dispute resolution and financial support from the

Government. The MCA also lays out a structure for commercialising airports in

a planned and phased manner through optimal utilisation of resources on the

one hand and adoption of international best practices on the other. The


40

objective is to secure value for public money and provide efficient and cost-

effective services to the users.

5.2 Elements of financial viability

The four critical elements that determine the financial viability of an airport are

concession period; traffic volumes; user fees and other revenues; and capital

costs. The concession period for such capital-intensive projects is normally in

the range of 50 to 60 years. This timeframe should enable a robust project

structure and any further extension in the concession period would improve

financial viability only marginally as the present value of projected revenues

after 50 years would be very low from the Concessionaire’s perspective. For a

Greenfield airport, the traffic projections are likely to be conservative as it would

take time for traffic to build up. As a result, user fees alone may not provide

financial viability, especially since they would have to be kept at affordable

levels. Additional revenues can, however, be generated from non-aeronautical

sources and real estate development to enable some cross-subsidisation of

user fees. Three of the four parameters stated above could be virtually taken as

given, and as a result capital cost is the variable that will determine the financial

viability of an airport project. If the potential for non-aeronautical and real estate

revenues is inadequate, bidders may seek an appropriate capital grant/subsidy

from the Government in order to reduce their capital investment for arriving at

an acceptable rate of return. As such, reduction in capital costs and phasing out

some capital expenditure can help improve project viability significantly. Though

PPPs undertaken so far in the sector have been financially viable and self-

sustaining, the government’s initiative to build Greenfield airports in remote

areas may require cost-efficient designs as well as some capital subsidy.

5.3 Technical parameters

Unlike the normal practice of focussing on construction specifications, the

technical parameters proposed in the MCA are based mainly on output

specifications, as these have a direct bearing on the level of service for users.

Only the core requirements of design, construction, operation and maintenance

of the airport are to be specified and enough room would be left for the

Concessionaire to innovate and add value.In sum, the framework focuses on


41

the ‘what’ rather than the ‘how’ in relation to the delivery of services by the

Concessionaire. This would provide the requisite flexibility to the

Concessionaire in evolving and adopting cost-effective designs without

compromising on the quality of service for users. Cost efficiencies would occur

because the shift to output-based specifications would provide the private

sector with a greater opportunity to innovate and optimise on designs in a way

normally denied to it under conventional input based procurement

specifications.

5.4 Performance standards

For an airport project, the Concessionaire would not only procure the civil works

and equipment, it would also provide various passenger related services as

well as cargo handling. The efficiency of its operations would normally be

reflected in the quality of service provided to the users. The MCA, therefore,

identifies the key performance indicators relating to operation of the

aeronautical assets, terminal building, cargo terminal etc., and specifies

penalties for failure to achieve the requisite levels of performance, especially in

relation to user services. The MCA includes a Passenger Charter that the

Concessionaire should publish and implement for the benefit of users of the

airport. This will add to the accountability of the Concessionaire to the users.

5.5 Concession period

The concession period should normally be long enough to enable the

concessionaire to recover its investment with a reasonable rate of return. In the

case of a Greenfield airport, the traffic build-up may be gradual and the

investments in airport infrastructure as well as real estate may take long to

recover. As such, a total concession period of 50 to 60 years has been

provided. This would enable the Concessionaire to realise the full potential of

the project and thus offer a competitive bid. A shorter concession period would

require a greater capital subsidy and/ or higher user charges. The time required

for construction of the airport (about two to three years) has been included in

the concession period so as to incentives early completion that would maximise

the revenues of the Concessionaire.


42

5.6 Selection of Concessionaire

Selection of the Concessionaire will be based on open competitive bidding. All

project parameters such as the concession period, user fees, price indexation,

real estate development and technical parameters are to be clearly stated

upfront, and short listed bidders will be required to specify the concession fee

that they are willing to offer to the Government. The bidder who offers the

highest concession fee should win the contract. In exceptional cases where

instead of offering a concession fee, the bidders seek a capital grant/ subsidy

from the Government, the bidder who seeks the lowest grant would win the

contract.

5.7 Concession fee

Concession fee will be a fixed sum of Re. 1 per annum for the concession

period. The Concessionaire shall, commencing from the 20th year of the

Concession Period, pay a Premium equal to 1 per cent of the total realisable

fee which shall be increased every year by an additional 1 per cent of the total

realisable fee. Where bidders do not seek any grant and are willing to offer a

higher Premium to the Government and/or an earlier commencement of its

payment, they will be free to do so, subject to a ceiling of 40 per cent of the

total realisable fee. In case of an exceptionally viable project, the bidders would

be free to offer an upfront payment in addition to a share in the fee. The

rationale for the above fee structure is that in the initial years, debt service

obligations would entail substantial outflows. Over the years, however, the

Concessionaire will have an increasing surplus in its hands on account of the

declining debt service on the one hand and rising revenues on the other.

Recognising this cash flow pattern, the concession fee to be paid by the

Concessionaire will be based on an ascending revenue-share.

5.8 Risk allocation

As an underlying principle, risks have been allocated to the parties that are best

suited to manage them. Project risks have, therefore, been assigned to the

private sector to the extent it is capable of managing them. The transfer of such

risks and responsibilities to the private sector would increase the scope of


43

innovation leading to efficiencies in costs and services. The commercial and

technical risks relating to construction, operation and maintenance are being

allocated to the Concessionaire, as it is best suited to manage them. Other

commercial risks such as the rate of growth of traffic have also been allocated

to the Concessionaire. On the other hand, all direct and indirect political risks

are being assigned to the Government. It is generally recognised that economic

growth will have a direct influence on the growth of traffic and that the

Concessionaire cannot in any manner influence the rate of economic growth.

By way of risk mitigation, the MCA provides for extension of the concession

period in the event of a lower than expected growth in traffic. Conversely, the

concession period is proposed to be reduced if the traffic growth exceeds the

expected level. The MCA provides for a target traffic growth and stipulates an

increase of upto 20 per cent in the concession period if the growth in traffic is

less than projected. For example, a shortfall of 6 per cent in the target traffic will

lead to extension of the concession period by 9 per cent. On the other hand, a

reduction of up to 10 per cent of the concession period is stipulated in the event

of a higher than expected growth. For example, an increase of 6 per cent in the

target traffic will reduce the concession period by 6 per cent.

5.9 Financial close

Unlike other agreements for private infrastructure projects which neither define

a time-frame for achieving financial close, nor specify the penal consequences

for failure to do so, the MCA stipulates a time limit of 180 days for achieving

financial close (extendable for another 120 days on payment of a penalty),

failing which the bid security shall be forfeited. By prevalent standards, this is a

tight schedule, which is achievable only if all the parameters are well defined

and the requisite preparatory work has been undertaken. The MCA represents

a comprehensive framework necessary for enabling financial close within the

stipulated period. Adherence to such time schedules will usher in a significant

reduction in costs besides ensuring timely provision of the much-needed

infrastructure. This approach would also address the typical problem of

infrastructure projects not achieving financial close for long periods.


44

5.10 User Fee

A precise mechanism for determination of user fee has been specified for the

entire concession period since this would be of fundamental importance in

estimating the revenue streams of the project and, therefore, its viability. The

user fee shall be based on the rates to be notified by the Government prior to

bidding for the contact. The MCA provides for indexation of the tariffs to the

extent of 60 per cent thereof linked to WPI. Since repayment of debt would be

substantially neutral to inflation, the said indexation of 60 per cent is considered

adequate. A higher level of indexation is not favoured, as that would require the

users to pay more when they should be receiving the benefit of a depreciated

asset. A higher indexation would also add to uncertainties in the financial

projections of the project. In respect of non-aeronautical services, however, the

Concessionaire shall be free to determine the charges thereof.

5.11 Construction

Handing over possession of at least 90 percent of the required land as well as

procuring the environmental clearances are proposed as conditions precedent

to be satisfied by the Government before financial close. The MCA defines the

scope of the project with precision in order to enable the Concessionaire to

determine its costs and obligations. Additional works may be undertaken within

a specified limit, but only if the entire cost thereof is borne by the Government.

Before commencing the collection of fees, the Concessionaire will be required

to subject the airport to specified tests for ensuring compliance with the

specifications and standards relating to safety and quality of service for the

users. The Schedules would include the master plan of the airport. The Master

Plan should specify the land use and other restrictions on development of the

airport and should also earmark vacant land for future expansion of the airport.

5.12 Operation and maintenance

Operation and maintenance of the airport is proposed to be governed by strict

standards with a view to ensuring a high level of service for the users, and any

violations thereof would attract stiff penalties. In sum, operational performance

would be the most important test of service delivery. The MCA provides for an

elaborate and dynamic mechanism to evaluate and upgrade safety


45

requirements on a continuing basis. The MCA also provides for traffic

regulation, security and rescue operations.

5.13 Reserved Services

Certain services at any airport are to be provided by government agencies. The

MCA specifically details the obligations of the Concessionaire in respect of the

reserved services with a view to ensuring that the respective agencies are able

to provide such services without any obstacles from the Concessionaire.

5.14 Right of substitution

The project assets may not constitute adequate security for lenders. It is the

project revenue streams that constitute the mainstay of their security. Lenders

would, therefore, require assignment and substitution rights so that the

concession can be transferred to another company in the event of failure of the

Concessionaire to operate the project successfully. The MCA accordingly

provides for such substitution rights.

5.15 Force Majeure

The MCA contains the requisite provisions for dealing with force majeure

events. In particular, it affords protection to the Concessionaire against political

actions that may have a material adverse effect on the project.

5.16 Termination

In the event of termination, the MCA provides for a compulsory buy-out by the

Government, as neither the Concessionaire nor the lenders can use the airport

in any other manner for recovering their investments. Termination payments

have been quantified precisely as compared to the complex formulations in

most agreements relating to private infrastructure projects. Political force

majeure and defaults by the Government are proposed to qualify for adequate

compensatory payments to the Concessionaire and will thus guard against any

discriminatory or arbitrary action by the Government. Further, the project debt

would be fully protected by the Government in the event of termination, except

for two situations, namely, (a) when termination occurs as a result of default by

the Concessionaire, 90 per cent of the debt will be protected, and (b) in the


46

event of non-political force majeure such as Act of God (normally covered by

insurance), 90 per cent of the debt not covered by insurance will be protected.

However, no termination payment will be due to payable if the Concessionaire

fails to commission the project owing to its own default. A different method of

valuation has been adopted for the real estate. It will enable a more transparent

and predictable valuation of real estate in the event of termination.

5.17 Monitoring and supervision

Day-to-day interaction between the Government and the Concessionaire has

been kept to the bare minimum by following a ‘hands-off’ approach, and the

Government shall be entitled to intervene only in the event of a material default.

Checks and balances have, however, been provided for ensuring full

accountability of the Concessionaire. Monitoring and supervision of

construction, operation and maintenance is proposed to be undertaken through

an Independent Engineer (a qualified firm) that will be selected by the

Government through a transparent process. Its independence would provide

added comfort to all stakeholders, besides improving the efficiency of project

implementation. If required, a public sector consulting firm may discharge the

functions of the Independent Engineer. The MCA provides for a transparent

procedure to ensure selection of well-reputed statutory auditors, as they would

play a critical role in ensuring financial discipline. As a safeguard, the MCA also

provides for appointment of additional or concurrent auditors. To provide

enhanced security to the lenders and greater stability to the project operations,

all financial inflows and outflows of the project are proposed to be routed

through an escrow account.

5.18 Support and guarantees by the Government

By way of comfort to the lenders, loan assistance from the Government has

been stipulated for supporting debt service obligations in the event of a revenue

shortfall resulting from political force majeure or default by the Government.

Guarantees and/ or compensation have also been provided to protect the

Concessionaire, though for a limited period, from construction of competing

airport which can upset the revenue streams of the project.


47

5.19 Real estate development

Provision for development of real estate by the Concessionaire has been made

in the MCA. The Concessionaire can grant sublicenses for the real estate and

the same would revert to the Government at the end of the concession period.

Real estate in the form of developmental rights over adjacent lands could also

be provided for improving project viability. While allowing sufficient flexibility to

the Concessionaire with respect to exploitation of commercial space at the

airport, the MCA stipulates some limits and restrictions to prevent excessive

commercialisation.

5.20 Miscellaneous

a) A regular traffic census and annual survey has been stipulated for keeping

track of traffic growth. Sample checks by the Government have also been

provided for. As a safeguard against siphoning of revenue share by the

Concessionaire, a floor level in present and projected traffic has also been

stipulated. The MCA addresses other important issues such as dispute

resolution, suspension of rights, change in law, insurance, defects liability,

and indemnity, redressal of public grievances and disclosure of project

documents.

b) Security Issues

Any other ground handling service providers selected through competitive

bidding on revenue sharing basis by the airport operator subject to security

clearance from Bureau of Civil Aviation Security and observance of

performance standards as may be laid down by the airport.

c) CNS / ATM

The Airports Authority of India provides Communication, Navigation,

Surveillance and Air Traffic Management (CNSATM) services at all the civil

airports in the country which covers Indian airports measuring over 2.8

million square nautical miles (land area 1.05 million square nautical miles

and oceanic area 1.75 million square nautical miles). CNSATM services are

provided by AAI at 9 other airports also which are not managed by AAI i.e.

Delhi, Mumbai, Bangalore, Hyderabad, Cochin, Lengpui, Diu, Puttaparthy

and Vidyanagar airports.


48

6.0 RESERVED ACTIVITIES

On any Greenfield airport to be developed under these Policy Guidelines,

activities relating to Air Traffic Services (ATS), security, customs and

immigration would be reserved for central government agencies. Provision of

these services would be governed by the policy to be laid down by the Central

Government from time to time. Prior to grant of license, an applicant for license

shall procure the following clearances

Defence clearance: An applicant seeking a license would need prior

clearance from the Ministry of Defence. Guidelines for this purpose

would be issued by the Ministry of Defence from time to time.

(b) Air Traffic Services (ATS): Functions related to ATS are being

discharged by AAI. The applicant will have to enter into a CNS/ATM

Agreement with AAI for the provision of ATS services at the proposed

airport. ATS would be provided on a cost recovery basis and AAI

would publish a standard agreement for this purpose. The Airport

Company would also provide the required infrastructure to AAI free of

cost for provision of ATS.

(c) Security: The applicant will have to enter into an agreement for provision

of security by the concerned authority. The cost of providing security

will have to be borne by the Airport Company. Guidelines for this

purpose would be issued by the Ministry of Civil Aviation from time to

time.

(d) Customs: In case of an international airport, the applicant will obtain

clearance from the Department of Revenue for provision of Custom

services. The cost of providing these services will have to be borne

by the Airport Company. Ministry of Finance would issue the

necessary guidelines from time to time.

(e) MHA Clearance: The applicant seeking a license would need prior

clearance from the Ministry of Home Affairs regarding location of the

airport, acquisitions and installation of security equipment and

verification of credentials of the developers.

(f) Immigration: In case of an international airport, the applicant will procure

clearance from the Ministry of Home Affairs for provision of


49

immigration services. The cost of providing these services will have

to be borne by the Airport Company. Ministry of Home Affairs would

issue the necessary guidelines from time to time.

(g) BCAS Clearance: The applicant seeking a license would need prior

clearance from BCAS regarding location of the airport and acquisition

and installation of security equipment.

(h) Airport Meteorological Services: The applicant will have to enter into a

CNS/ATN agreement with IMD for provision of meteorological

services at the proposed airport to be provided by India

Meteorological Department (IMD). The meteorological services would

be provided on a cost recovery basis and IMD would publish a

standard agreement for this purpose. The airport company would

also provide the required infrastructure to IMD free of cost for

provision of meteorological services.

A memorandum of understanding would be entered into between the Airport

Company and each GOI agency/department providing the following

Reserved Activities, setting out the terms and conditions on which the said

services shall be provided by the relevant GOI agencies/departments:

Customs control

Immigration services

Health services

Plant quarantine services and

Animal quarantine services

NOTE: MEMORANDUM OF UNDERSTANDING CAN BE CHANGED FR OM

TIME TO TIME


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7.0 EMERGING CHALLENGES AND RISKS IN PPP

7.1 General Issues

1. PPPs are considered appropriate where private sector project management

skills, more innovative design and risk management expertise can be

brought in to give substantial benefits. In their opinion, however, PPP is

unlikely to deliver value for money in other areas, for example where the

transaction costs of pursuing PPP are disproportionate compared to the

value of the project or where fast paced technological change makes it

difficult to specify contractual requirements over the long term.

2. The reality is that many things can go wrong, and often do, with difficulties in

securing right of way, delays in meeting environmental impact process

requirements, inadequate design, planning changes, slowness in securing

permits, underestimation of project construction and operations costs,

overestimation of traffic-based revenues, ‘teething’ problems, and a slow

build-up of patronage. These problems are compounded by a failure of the

contracting parties to adopt a realistic and cooperative approach to the

assessment, mitigation and sharing of risks.

3. The PPP are joint ventures of a number of private companies which agree

in advance to subcontract each of the different activities and take equity

stakes in the SPV to cement the relationship. two problems are thereby

introduced. First, good constructors may be teamed with less good

financiers. Superior knowledge of one activity may not carry over to other

activities. Second, competition is limited to those bodies which are part of

the group. Companies, especially local entities, with perhaps good technical

know-how but poor financial capability are unable to bid because the

activities are jointly, rather than separately, auctioned. Transparency and

competitiveness in the bidding process are lost, or more correctly traded-off

for innovation opportunities, which the authors consider may not always be

the best solution.

4. Cost of capital- In summary, most PPP/PFI projects involve substantial

private sector finance and, in all but very exceptional circumstances, this

finance in itself will be more costly than public sector borrowing, although


51

there are many hidden costs in the latter. Clearly, governments are not

immune from fiscal difficulties, which can lead to credit rating downgrades

and higher project costs, but the main reason why the government’s cost of

borrowing is low is that it can levy taxation to repay the debt. Due to these

taxing powers, lenders to government consider that it is unlikely to default,

and so demand a lower interest rate risk premium. But having the true risks

hidden and passed on to taxpayers in the form of a contingent liability does

not mean that public investments are risk-free. Project risks depend more

on the project’s design than on the specific financing mechanism

5. BUNDLING- The economic efficiency of ‘bundling’ from an ‘incomplete’

contracting perspective, in which imperfections arise because it is hard to

foresee and contract about uncertain future events. PPPs are generally

entered into for a lengthy period of time, usually 20 to 30 years, and are

developed in an environment of uncertainty. As such they exhibit, as Hart

suggests, the characteristics of ‘incomplete’ contracts, and their usefulness

as integrated arrangements hinges on the nature of contracting costs.

6. VALUE FOR MONEY-Value for money has been defined as ‘the optimum

combination of whole life cost and quality (or fitness for purpose) to meet

the user’s requirement’. Value for money is improved by the transfer of

appropriate risk as the supplier is able to reduce either the probability that

the risk will occur, the financial consequences if it does eventuate, or both.

There comes a point, however, when this transfer becomes sub-optimal. If

risks that, in fact, cannot be best managed by the private sector continue to

be transferred to private bodies, value for money will decline since the

premium demanded by the private sector will outweigh the benefit to the

public procurer. Optimum, rather than maximum, risk transfer is the

objective of the PPP arrangement.

Over this issuers airport infrastructure face nine categories of specific risk

• Technical risk, due to engineering and design failures;

• Construction risk, because of faulty construction techniques and cost

escalation and delays in construction;

• operating risk, as a result of higher operating costs and maintenance costs;

• Revenue risk, e.g. because of traffic shortfall or failure to extract


52

resources, the volatility of prices and demand for products and services sold

(e.g. minerals, office space, etc.) leading to revenue deficiency;

• Financial risks arising from inadequate hedging of revenue streams and

financing costs;

• Force majeure risk, involving war and other calamities and acts of God.

• Regulatory/political risks, resulting from planning changes, legal changes and

unsupportive government policies;

• Environmental risks, because of adverse environmental impacts and hazards;

• Project default, as a result of failure of the project from a combination of any

of the above.

7.2 Financial Challenges

a) Governments frequently have been motivated to enter into PPP

arrangements by the desire to reduce debt (and contain taxation), while

facing pressure to improve and expand public facilities. However, the PPPs

are the only way of delivering the public infrastructure (and the services)

that the community wants is exaggerated, for PPPs still draw on public

funds when user charges do not cover the cost of services. What differs is

that the public payments are made over a very different time frame. When

infrastructure is provided under a PPP, the government does not own the

asset but, instead, enters into a contract to purchase infrastructure and

related ancillary services over time from the private sector. These operating

payments must cover operating costs as well as giving the service providers

a return on risk capital, therefore a project delivered under a partnerships

approach will have a similar (although not identical) effect on the

government’s annual operating surplus to that if the asset was publicly

funded.

Figure 7.1 illustrates the cash flow differences between public funding and a

PPP project. From the public sector side, PPPs require little or no upfront

capital expenditure but involve a larger operating expenditure over time to

purchase the services. By contrast, the public asset approach requires a large


53

Fig 7.1

Comparison of public funding and partnerships on cash flow

Upfront capital funding commitment and relatively lower operating expenditure

over time. Thus the PPP route may on these grounds hold some attractions to

a government with a backlog of infrastructure projects and facing an uncertain

fiscal climate. But the major merit is in terms of the predictability of costs and

funding. A PPP ensures that whole-of-life costing and budgeting are

considered, providing infrastructure and related ancillary services to

specification for a significant period, and including any growth or upgrade

requirements. This provides budgetary predictability over the life of the

infrastructure and reduces the risks of funds being diverted (for example, away

from scheduled refurbishment) during the life of the project, impacting on

residual value risk to the asset.

b) Financial Risk

Under this heading there are a number of risks. First, the financial parameters

may change prior to the private party fully committing to the project, adversely

affecting price. Second, the financiers (debt and equity) may not continue to

provide funding to the project. Third, the financial structure may not be

sufficiently robust to provide fair returns to debt and equity over the life of the

project, calling into question its continuing viability. In evaluating these risks, the

government is mindful of the fact that private sector entities and their financiers

must be confident of the stability of the revenue stream, and the continued

involvement of the financiers in the project provides some comfort to it that the


54

consortium has incentives to deliver the contracted services. Nonetheless,

many of the problems begin at the outset, and what is needed is for

government to undertake a reality check and not to encourage underbidding.

Experience has shown that if the partnership does not work financially for the

private sector – where, for example, the consortium has materially under priced

its bid to win the project – it is unlikely that the project will work for the

government either. Where a private party drives a bad bargain for itself (the

‘winner’s curse’), which it may do when under intense competitive pressure or

under internal pressure because of the loss of other contracts, the project can

set off along a wrong trajectory which is likely to result in continuing difficulty, if

not commercial failure. Also to be watched are situations in which the sponsor

is dependent on refinancing at more favourable rates to make the contract

commercially viable in the longer term. While ordinarily this may be possible

when the project enters a lower risk phase, if an event materializes and risk is

assessed as remaining at comparatively high levels, the private party may find

itself in an untenable commercial situation, prompting default or walk away.

c) Project Finance and Revenue Streams

Characteristic of DBFO-type projects is the participation of private risk capital,

with the expectation that those with money at risk will require there to be a

harder-nosed approach to project evaluation, risk management and project

implementation. Project-financing techniques are employed and a mixture of

instruments and methods is available, including asset-based financing, leasing,

hire purchase, and the use of special-purpose non-recourse financing vehicles.

The underlying premise is that projects are income producing and borrowings

can be serviced from these proceeds. Future income from the investment is

earmarked for the service of the borrowings, providing security to the financiers

by decoupling the servicing of the loans from the financial fortunes of the

owners or sponsors of the investment. A fairly standard approach is for the

sponsors of a project to establish a special purpose vehicle company (SPV) in

which they are principal shareholders. Each sponsor holds a sufficiently small

share of the equity in the joint venture so that for legal and accounting purposes

the SPV cannot be construed as a subsidiary. Funding of the project is then

routed through the SPV.


55

Revenue Streams

When private financiers commit funds under PPPs for infrastructure, they need

to be convinced that a viable revenue stream can be tapped. In a public–private

arrangement, revenues to the private firm can come from two sources, namely

consumer payments, or public entity payments (or from some combination of

both). The source is important because it determines

(1) The incentives of a private firm to adjust the cost and quality to consumers’

willingness to pay for them,

(2) The amount and timing of public expenditures, and

(3) The nature of the risks to which revenues are exposed.

In order to attract private participation, the first prerequisite is an economic

regulatory framework which provides clarity and certainty to investors on the

commercial potential of any specific airport operation. The absence of a clear

set of guidelines for airport operators ensures that their revenue models remain

subject to national debate and controversy. Resources are allocated

inappropriately; further reducing investor confidence in future projects, denying

India access to critical expertise and capital. The end result is likely to be

under-construction – and, ultimately, continued suppression of economic

expansion and consumer benefits.

7.3 Legal Challenges

a) The absence of a reliable commercial and legal framework.

Legal framework: Ideally a robust system of commercial laws needs to be in

place. Private sector interests have to be protected under the existing laws.

Government agencies have also to facilitate the involvement of the private

sector in infrastructure projects or public utilities. Restrictions on public

procurement may adversely affect the implementation of PPPs. PPP projects

usually require a number of permits, consents and administrative decisions.

The partners of the public entity are often foreign companies, the operations of

which sometimes face additional restrictions in the host country.

b) Taxation. A good appreciation of the taxation ramifications is needed in any

dealings with private sector entities. The very complexity of PPPs creates many


56

points where an unhelpful taxation system can impose itself. For example, are

direct grants from the public sector to pay for a portion of the PPP asset

taxable? Is the hardback of the asset to the public sector assessed for tax? Is

property used in the PPP exempt from taxation? Can infrastructure assets be

depreciated for taxation purposes? The existing taxation system, like the legal

system, may be ill-equipped to deal with PPPs.

c) Accounting. Determining the appropriate accounting treatment of PPPs has

proven to raise complicated and controversial issues. The main problem

consists of providing a correct answer to the question: in whose books should

the assets covered by a given agreement be reported? Recognizing a given

asset in the balance sheet also means recognizing a related liability in the

accounts. Assets covered by a given agreement should be recognized in the

accounting records of the party which is not only exposed to the greatest extent

to the economic risk associated with using those assets, but which is also able

to make use of related economic benefits to the greatest extent. A detailed

analysis of each individual case must be conducted in order to determine this,

focusing on the variability over time of the revenue and costs connected with

using a given asset and the parties exposed to the greatest risk. Evolving

international standards largely accept this point, but not all national systems do,

creating ambiguities as to the conditions under which PPP payment obligations

can be treated as off-balance sheet transactions by the public sector

7.4 Public Risk

Government has a duty to insist that facilities are constructed, operated and

maintained in accordance with relevant legislation and codes of practice in

order to ensure the safety and well-being of consumers and workers. It may

need to exercise its rights to ‘step in’ in order to prevent or mitigate a serious

risk to the environment or to public health, or to the safety of people or property,

or to guarantee continuity of an essential service or to otherwise discharge its

statutory duties. Step-in rights ordinarily exist as part of a package of remedies

that the government can take for project company default. They may also need

to be exercised simply because the private body is unable to deal with a

particular situation appropriately, for example, in an emergency, necessitating

government intervention. In certain cases government has a duty to ensure the


57

continuity of the contracted services to the public and needs to retain the ability

to assume control of them

Temporarily if the public interest is jeopardized. This will include stepping in to

contracted services on which the quality of its own delivery of core services

depends.

Determining the circumstances in which government should exercise its step-in

rights involves balancing the private sector’s desire to limit step-in instances

and government’s need to ensure that it has the ability to protect the provision

of the contracted services and, where relevant, core public services. Where that

balance is struck depends on the nature of the project and the sensitivity of the

public service involved. A step-in clause usually includes provisions for a

government ‘step-out’ when the relevant situation has been resolved. That

decision also needs careful assessment.

7.5 Asset Risk

Most infrastructure facilities have a physical life measured in decades. On

expiry of the concession, the government may be expecting to take possession

of an asset that still has a considerable working life at an acceptable

maintenance cost. Asset risk can arise for a number of reasons: the facility

design life or technical life may prove shorter than anticipated; the maintenance

and upgrade costs of keeping the facility serviceable might exceed expectation;

the asset may be damaged or destroyed through a force majeure event; the

project company may lose the asset through default and early termination; and

the facility may not have the value which the project financial structure has

ascribed to it.

These risks can be mitigated in part through agreed maintenance and

refurbishment schedules, combined with a right to survey the asset and compel

performance if the maintenance obligations are not being met. The contract

may also need to allow for some flexibility to upgrade the infrastructure over

time, along with incentives to do so. There may also be some non-insurable

force majeure events which come under material change in circumstances

clauses, with some government risk-sharing with the SPV.


58

7.6 Operating Risk

This is the risk that the processes for delivering the contracted services will be

affected in such a way as to prevent the private party from delivering these

services according to the agreed specifications and/or within the projected

costs. Operating risks relate to production and operation procedures,

availability and quality of inputs, quality and efficiency of project management

and maintenance and upgrade requirements, with the consequence that the

costs of operating the facility will exceed projections and therefore diminish

projected returns so that the facility will not perform to the required standards.

While the structure of a PPP is such that the government frees itself from those

operating risks that would attach to itself owning and operating the facility,

operational failure still poses a risk to government in that it may be left without

the services for which it has contracted. If the contract is breached and the

private party is not highly capitalized, the subcontractors may seek to walk

away, limiting government’s ability to obtain redress. For this reason,

guarantees from the sponsors or the private party’s parent companies or

performance bonds may be required to cover performance obligations during

the operational phase of the contract. If the contract is correctly structured and

the sponsors have invested a large amount of capital, the low risk of them

walking away may not warrant the costs to government of requiring operating

guarantees. However, this is not always the case, leaving sponsor risk that has

to be evaluated and managed.

7.7 Sponsor Risk

Typically, when a project structure is put together, the SPV that contracts with

the government is simply an entity created to act as the legal manifestation of a

project consortium, and it has no historical financial or operating record that

government bodies can assess. It is supported by external equity contributions

often provided by portfolio investors with no relationship to the project beyond

their commitment of equity and expectation of financial return. Government

therefore relies on the reputation of the consortium members to fulfil the project

obligations. Sponsor risk usually arises when the SPV and/or its subcontractors

are unable to meet their contractual obligations, and the government is unable

to enforce those obligations against the sponsors or recover some form of


59

compensation or remedy from them for the losses sustained by it as a result of

the SPV’s breach. In addition, it may occur when the sponsor(s) is, for security

or other probity reasons, unsuitable to be involved in, or connected with, the

delivery of the project, and consequently may harm the project or bring it into

disrepute. Should, after financial close, the SPV not be regarded as adequately

capitalized, the government could seek security from the sponsors or parent

guarantees or performance bonds, to ensure that the body is fully committed to

delivering the required outputs. These sureties are particularly significant in the

operational phase when construction guarantees under the construction

subcontracts are no longer in place and the sponsor may seek to walk away

from the contract rather than address operational difficulties – leaving the SPV

to be liquidated in circumstances where it lacks the resources to compensate

government for the contract breach. The sponsor may also want to sell its

interest in the SPV, and the government needs to make sure that it retains

sufficient control over any changes to the ownership of the private party, in

order to mitigate sponsor risk.

In some circumstances, parent guarantees may be a poor method of providing

security to government, inconsistent with the preference of many sponsors for

infrastructure projects to be of a non-recourse or limited recourse nature. It may

be more efficient to use performance bonds. One way of keeping down the cost

of the guarantees or performance bonds is to have the value at the minimum

required to cover necessary costs (such as the cost of installing a new

operator). Again, these issues necessitate careful management over time, and

may require ongoing tests of probity, continued tests of capability, and topped-

up letters of credit or performance bonds to meet claims or to underpin

operational performance obligations.

7.8 Default Risk

Default (breach of the contract) occurs when the contracting enterprise is

unable to perform its contractual obligations, including the inability to meet

deadlines, to perform to a specified standard, and to continue loan repayments.

Invariably, the contract will recognize the differing scale and consequences of

contractual breaches by accepting some defaults (material defaults) as giving

rise to a right of termination, and others (non-material defaults) as attracting an


60

obligation to rectify but not on their own allowing the other party to terminate the

contract. However, a non-material default may become a material default if it is

not rectified within the period allowed and progress is unsatisfactory, or if the

default recurs. In these circumstances the remedies available to government

may include the right of step-in, as well as a right to terminate the contract. In

extreme cases, government can have the underlying infrastructure assets

transferred to it, subject to a predefined valuation mechanism. Before looking to

terminate the contract in the event of a default, government generally seeks

other avenues of redress (e.g. abatement of service charge). Termination is

viewed as an option of last resort, and can have very real ramifications and

costs for government (if, for example, it is unable to find alternative services or

is unable to deliver its own services). Contracts generally provide for adequate

resolution periods and distinguish between – and provide different regimes for –

material and non-material defaults. The presence of a reasonable resolution

regime for defaults is important for financiers, and one that imposes harsh

penalties without a reasonable opportunity to remedy defaults is likely to make

the project difficult to finance and increase the cost of finance, leading to a less

attractive value-for-money outcome. Good contract management aims to keep

the contract in operation for the benefit of both parties, not to seek occasions

for it to end, if circumstances are propitious. On the other hand, if the project

has little possibility of becoming viable under the present operators, it may be

better to cut losses quickly. The real issue becomes one of developing a good

monitoring system.

Along with these specific risks, there are also some problems to overcome,

such as:

• potential difficulties in putting together a cost-effective financial package;

• limited financial flexibility of the public sector arising from the long term

commitment of funds under the PPP contract;

• complex, more expensive and time-consuming transactions costs in the

development stage, requiring dedicated resources from both public and

private sectors;


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7.9 Risk matrix for public private partnership airp ort

Type of Risk Source of Risk Risk taken by

Site conditions Ground condition, supporting

structures

Construction contractor

Site preparation Site redemption, tenure,

pollution/discharge, obtaining

permits, community liaison

Operating company /

project company

Land use

technical risks

Native title, culture heritage fault

in tender specifications

contractor design fault

Government

Design contractor

Construction risk

cost overrun

Inefficient work practice and

wastage of materials


Delay in

completion

Changes in law, delay in

approval etc, lack of coordination

of contractors, failure to obtain

standard planning approvals

Project company/

investors construction

contractor

Failure to meet

performance

criteria

Quality shortfall/ defects in

construction / commissioning

test failure

Insurer construction

contractor / project

company

Operating risk

operating cost

overrun

Project company request for

change in practice

Industrial relation, repairs,

occupational health and safety,

maintenance, other costs

government change to output

specifications

Project company /

investors

Operator

Government

Delays or

interruption in

operation

Operator fault Operator

Shortfall in

service quality

Government delays in granting

or renewing approvals, providing

contracted inputs

Operating faults

Government

Operator


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Revenue risk

increase in input

prices

Contractual violations by

government owned support

network

Contractual violations by private

supplier other

Government

Private supplier

Project company/

investors

Change in taxes,

tariffs demand

for output

Fall in revenue

Decreased demand

Project company/

investors

Financial risks

interest rates

inflation

Force majeure

risk

Regulatory/

political risk

Change in law

Fluctuations with insufficient

hedging payments eroded by

inflation floods, earthquake,

riots, strikes

Construction period operating

period

Project company/

government


project company, with

government

compensation as per

contract

Political

interference

Breach / cancellation of licence

expropriation

Falure to renew approvals,

Government

Insurer, project

company/ investor

government

Project default

risks

Discriminatory taxes, import

restrictions combination of risk

Equity investors followed

by bank, bondholders

and institutional lenders

government

Asset risk Sponsor suitability risk technical

obsolescence termination

Residual transfer value

Project company/

operator

Government, with

compensation for

maintenance obligation


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7.10 PRESENT PPP AIRPORT AND RISK STRUCTURE

Modernization of Mumbai International Airport

Risk

Allocation RISK DESCRIPTION

Pre-Construction AAI shall obtain approval and authorization

from GoI to make lease of the Airport and grant

relevant Clearances requisite for operation and

management of the Airport by the JVC, among

others as per the OMDA Agreement.

AAI and JVC to jointly enter into State

Government Support Agreement, State Support

Agreement.

JVC shall deliver full Upfront Fee to AAI, deliver

bank guarantees, among others as per the

OMDA Agreement.

Technical Risk (Acceptance of Site, Drawing or

Document) to be borne by the JVC as per the

OMDA Agreement.

Construction To be borne by the JVC as per provisions of the

OMDA Agreement.


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Operational Transfer of Rights in Airport and Transition

Phase (3 months from Effective Date): JVC

shall perform at its own risk and cost (including

payment obligations to counter parties) under

all existing contracts and agreements between

AAI or any Relevant Authority and any third

party as relatable to the Airport from the

Effective Date, as if JVC was an original party

to such contracts and agreements.

AAI shall provide operational support (for a

period of 3 years from the Effective Date) to the

JVC through the General Employees at the

estimated annual Operation Support Cost.

Commercial Subject to the provisions of the OMDA

Agreement, the JVC shall be fully and

exclusively responsible for, and shall bear the

commercial risks in relation to the design,

financing, modernization, construction,

completion, commissioning, maintenance,

operation, management and development of

the Airport and all its other rights and

obligations under or pursuant to the Agreement.

Financial Subject to the provisions of the OMDA

Agreement, the JVC shall be fully and

exclusively responsible for, and shall bear the

financial risks in relation to the design,

financing, modernization, construction,

completion, commissioning, maintenance,

operation, management and development of

the Airport and all its other rights and

obligations under or pursuant to the Agreement.


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Political Step-in Rights of AAI: In the event of an

emergency, AAI shall have the right to

temporarily assume control (upto 3 months) of

the Airport in place of the JVC as per provisions

of the State Support Agreement.

Waiver of Immunity: The execution, delivery

and performance by AAI of the Agreement

constitute private and commercial acts rather

than public or governmental acts and

accordingly, no immunity from proceedings

brought against it or its assets in relation to this

Agreement shall be claimed.

Regulatory No relief on account of Change in Law is

available under the OMDA Agreement, and is

dealt with as per terms of the State Support

Agreement.

In the event that JVC becomes qualified to avail

the benefits available under Section 10(23)(g)

and Section 80 IA of the Indian

Income Tax Act, 1961, as a result of which, the

JVC incurs an increase in net after tax return or

other financial gain or benefit, the JVC shall

notify AAI and pay to AAI an amount that would

put the

JVC in the same financial position it would

have, had the Benefits not been available.


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Force Majeure The time for compliance or performance by the

affected Party of any obligation, with any time

limit or exercise of any right affected by Force

Majeure, shall be extended by the period during

which such Force Majeure continues and by

such additional period thereafter as is

necessary

to enable the affected Party to achieve the level

of activity prevailing before the event of Force

Majeure.

Modernization of Delhi International Airport

Risk


Pre-Construction

AAI shall obtain approval and authorization from GoI to

make lease of the Airport and grant relevant

Clearances requisite for operation and management of

the Airport by the JVC, among others as per the OMDA

Agreement. AAI and JVC to jointly enter into State

Government Support Agreement, State Support

Agreement.

JVC shall deliver full Upfront Fee to AAI, deliver bank

guarantees, among others as per the OMDA

Agreement. Technical Risk (Acceptance of Site,

Drawing or Document) to be borne by the JVC as per

the OMDA Agreement.

Construction

To be borne by the JVC as per provisions of the OMDA

Agreement.


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Operational

Transfer of Rights in Airport and Transition Phase (3

months from Effective Date): JVC shall perform at its

own risk and cost (including payment obligations to

counter parties) under all existing contracts and

agreements between AAI or any Relevant Authority

and any third party as relatable to the Airport from the

Effective Date, as if JVC was an original party to such

contracts and agreements.

AAI shall provide operational support (for a period of 3

years from the Effective Date) to the JVC through the

General Employees at the estimated annual Operation

Support Cost.

Commercial Subject to the provisions of the OMDA Agreement, the

JVC shall be fully and exclusively responsible for, and

shall bear the commercial risks in relation to the

design, financing, modernization, construction,

completion, commissioning, maintenance, operation,

management and development of the Airport and all its

other rights and obligations under or pursuant to the

Agreement.

Financial Subject to the provisions of the OMDA Agreement, the

JVC shall be fully and exclusively responsible for, and

shall bear the financial risks in relation to the design,

financing, modernization, construction, completion,

commissioning, maintenance, operation, management

and development of the Airport and all its other rights

and obligations under or pursuant to the Agreement.


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Political Step-in Rights of AAI: In the event of an emergency,

AAI shall have the right to temporarily assume control

(upto 3 months) of the Airport in place of the JVC as

per provisions of the State Support Agreement.

Waiver of Immunity: The execution, delivery and

performance by AAI of the Agreement constitute

private and commercial acts rather than public or

governmental acts and accordingly, no immunity from

proceedings brought against it or its assets in relation

to this Agreement shall be claimed.

Regulatory No relief on account of Change in Law is available

under the OMDA Agreement, and is dealt with as per

terms of the State Support Agreement.

In the event that JVC becomes qualified to avail the

benefits available under Section 10(23)(g) and Section

80 IA of the Indian Income Tax Act, 1961, as a result of

which, the JVC incurs an increase in net after tax return

or other financial gain or benefit, the JVC shall notify

AAI and pay to AAI an amount that would put the JVC

in the same financial position it would have, had the

Benefits not been available.

Force Majeure The time for compliance or performance by the affected

Party of any obligation, with any time limit or exercise

of any right affected by Force Majeure, shall be

extended by the period during which such Force

Majeure continues and by such additional period

thereafter as is necessary to enable the affected Party

to achieve the level of activity prevailing before the

event of Force Majeure.


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Bangalore International Airport

Risk


Pre-

Construction

• The Ministry of Civil Aviation shall endeavor that all

learances to be granted by it or that are within its direct

control and as are required for or in connection with the

Project, are granted by it.

• Technology risk to be borne by BIAL.

Construction

To be borne by BIAL as per the project contract

Operational

• To be borne by BIAL as per the project

contract.

• Government of India (GoI) shall carry our Reserved

Activities like Customs, Immigration and Quarantine,

Security, Meteorological Services at the Airport.

Commercial

To be borne by BIAL as per the project contract.

Financial

To be borne by BIAL as per the project contract.

Political : Sovereign Immunity: Government of India (GoI)

unconditionally and irrevocably agrees that the execution,

delivery and performance by it of this Agreement and those

comprising the Security, constitute private and commercial

acts rather than public or governmental acts. Also, in case

of any proceedings against it or its assets in relation with

this Agreement, no sovereign immunity shall be claimed.


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Regulatory : If as a result of Change in Law, BIAL suffers an increase

in costs or reduction in net after tax return or other financial

burden, loss, liability or damage in connection with its

development or operation of the Airport, the aggregate

financial effect of which exceeds Rupees ten million

(10,000,000) in any financial year, BIAL may notify

Government of India (GoI) and propose amendments to this

Agreement so as to put BIAL in the same financial position

as it would have occupied had there been no such Change

in Law.

Force Majeure : Neither Party shall be liable for any failure to comply, or

delay in complying, with any obligation under or pursuant to

this Agreement and they shall not be required to perform

their obligations to the extent that the performance by either

Party of its obligations under this Agreement is prevented,

hindered, impeded or delayed in whole or in part by reason

of Force Majeure and in particular, but without limitation,

the time allowed for the performance of any such

obligations (including, without limitation, achieving the

Airport Opening Date) shall be extended accordingly.

Hyderabad International Airport

Risk


Pre-

Construction

• The Ministry of Civil Aviation shall endeavor that all

Clearances to be granted by it or that are within its direct

control and as are required for or in connection with the

Project, are granted by it. (Government of India (GoI) shall

limit its responsibilities to the permissions within its domain

and not take any responsibility for the permission within the

domain of Government of Andhra Pradesh (GoAP)).

• Technology risk to be borne by HIAL.

Construction To be borne by HIAL as per the project contract


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Operational • To be borne by HIAL as per the project contract.

• Government of India (GoI) shall carry our Reserved

Activities like Customs, Immigration and Quarantine,

Security, Meteorological Services at the Airport.

Commercial To be borne by HIAL as per the project contract.

Financial To be borne by HIAL as per the project contract.

Political • Sovereign Immunity: Government of India (GoI)

unconditionally and irrevocably agrees that the execution,

delivery and performance by it of this Agreement and those

comprising the Security, constitute private and commercial

acts rather than public or governmental acts. Also, in case

of any proceedings against it or its assets in relation with

this Agreement, no sovereign immunity shall be claimed.

Regulatory • If as a result of Change in Law, HIAL suffers an increase

in costs or reduction in net after tax return or other financial

burden, loss, liability or damage in connection with its

development or operation of the Airport exceeding Rupees

ten million (10,000,000) in any financial year, HIAL may

notify Government of India (GoI) and propose amendments

to the Agreement so as to put HIAL in the same financial

position as it would have occupied had there been no such

Change in Law.

Force Majeure • Neither Party shall be liable for any failure to comply, or

delay in complying, with any obligation under or pursuant to

this Agreement and they shall not be required to perform

their obligations to the extent that the performance by either

Party of its obligations under this Agreement is prevented,

hindered, impeded or delayed in whole or in part by reason

of Force Majeure and in particular, but without limitation,

the time allowed for the performance of any such

obligations (including, without limitation, achieving the

Airport Opening Date) shall be extended accordingly.


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8.0 EMERGING REGULATORY ISSUES

8.1 Amendment of AAI Act and Aircraft Rules Act

� AAI Act, 1994 was amended by Indian Parliament in 2003 to facilitate

private sector participation in development of Greenfield airports. Which,

inter-alia, provides exclusion of ‘Private Airports’ from the ambit of AAI Act.

� The Aircraft Rules, 1937, were also amended, which, inter-alia, provide

conditions for grant of licence, validity of licence, tariff fixation including

levy of Passenger Service Fee and User Development Fee, Ground

handling provisions etc.

8.2 Regulatory authority for AERA

The Parliament of India enacted an Act called “The Airports Economic

Regulatory Authority of India Act, 2008”. the establishment of a statutory

authority is to regulate tariff for the aeronautical services, determine other

airport charges for services rendered at major airports and to monitor the

performance standards of such airports.

As per the Act, AERA is to perform the following functions in respect of major

airports:

• To determine the tariff for the aeronautical services;

• To determine the amount of the development fees in respect of major

airports;

• To determine the amount of the passengers service fee levied under rule 88

of the Aircraft Rules, 1937 made under the Aircraft Act, 1934; and

• To monitor the set performance standards relating to quality, continuity and

reliability of service as may be specified by the Central Government or any

authority authorized by it in this behalf.

Also, as per the Act, an airport, which is “designated” to have annual passenger

throughput in excess of one and a half million could come under AERA’s

purview for tariff determination and monitoring of set performance standards. In

other words, an airport where actual passenger throughput is not in excess of

1.5 million but which has a designated capacity of 1.5 million or above would

qualify to be a major airport.


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9.0 THE CHANGED ROLE OF GOVERNMENT UNDER PPP AND NE W SET

OF AGREEMENTS AND NEW LEGAL FRAME WORK

A switch from traditional public procurement methods to infrastructure provided

under a PPP signals a changed role for the public sector. This section

examines the different role for government occasioned by the PPP

procurement process relative to the conventional procurement method.

As managers of contractual relationships, public bodies authorize contracts

(government as concession grantor), evaluate infrastructure needs

(government as network planner), provide supporting facilities (e.g. land) and

pay for services (government funding), define performance outcomes and

standards (government as customer), undertake detailed procurement planning

(government as project manager), ensure facilities are constructed, used and

maintained satisfactorily (government as inspector), require compliance with

standards and specifications (government as overseer), monitor business and

financial viability (government as contract manager), assess environmental

impacts (government as protector of the environment),and guarantee

community access and achieve social policy objectives (government as

representative of the public interest).

The table below sets out the major stages involved in developing a typical PPP

project and indicates the different perspectives that the government must apply

in each stage. At the same time, a very different obligation are placed on the

private sector entity because the government is not acquiring and taking

immediate ownership of infrastructure assets but, rather, is contracting to buy

infrastructure and related ancillary services from the private sector over time.


74

Stages Main Tasks Government Role

Define service need

• identify service needs customer, network planner

• consider network effects, corridor planning

• allow scope for innovation

• determine outputs

Appraisal

• examine various alternatives (refurbishment,

• reconfiguration, new assets)

• evaluate financial consequences, risks and otherimpacts

• network planner, protector of environment,

• representative of public

interest

Business case

• quantify risks and costs, establish net benefit

• cost–benefit analysis, PSC• obtain funding and project approval

• network planner, funding

Project development

• assemble project resources (steering committee, project director, probity auditor,procurement team)

• create a project plan

• project manager

Bidding process

• develop and issue expression of interest invitation

• evaluate responses and preparea

shortlist • issue Project Brief

• evaluate bids

• concession

grantor

Project,

finalization review Final negotiation

• confirm value for money and achievement of policy intent

• establish negotiation

• probity review • execute contract

• financial close

• network planner, • representative of

public interest • concession

grantor, funding

Contract

management

• handover to contract • Management • Team

• formalize management

responsibilities • finalize project delivery • handle variations to contract • monitor the service outputs • maintain the integrity of the contract

• inspector, overseer, contract

• manager


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10 .0 PPP airports and RTI Act

10.1 PPP airports public authority or not

Because of the government’s equity stake and a range of tax, cess and other

exemptions granted the PPP may be considered as public authority. Under

section 2(h) of the RTI act, public authority includes non-government

organisations substantially financed, directly or indirectly by funds provided by

the appropriate government. The crucial point examined was whether or not the

PPP is “substantially financed” directly or indirectly through government.

10.2 BAIL case

The State promoters have 26 per cent stake in Bangalore International Airport

Limited (BIAL), the company developing the airport. Yet, the ordinary citizen

cannot ask for information about the airport from its promoters apparently

because the BIAL is “a company in the private sector,” is not a “public authority”

and “provisions of the Right to Information Act 2005 and Karnataka

Transparency in Public Procurements 1999” are not applicable.

As defined by the RTI Act, is any body or institution that is controlled or

substantially financed, directly or indirectly by funds provided by the appropriate

government. The 26 per cent stake by State promoters in the BIAL, is enough

to consider the BIAL a public authority and all rules and regulations of the RTI

act are applicable to it.

On 14 may the Karnataka information commission (KCI) ruled that the

Bangalore international airport limited (BAIL) can be constructed as “public

authority” and therefore it would be within the purview of the RTI act. This issue

arose out of an RTI application regarding suo motu disclosure by BAIL sought

Benson Isaac, a citizen

While refusing to entertain Isaac’s RTI application, BAIL took the stand that it

was not a public authority as defined under the act and as such was not under

any obligation to make disclosures under RTI.


76

The KIC took onto account section 14 of the comptroller and auditor general

(CAG) act 1971 which address the question of “substantially financed” for the

purpose of public audit of the accounts of a body or authority.

It noted that apart from equity by the private promoters and government

promoters, financing for BIAL includes rs. 350 crores interest-free debt from the

government of Karnataka under a state support agreement, exemption from

entry taxes, exemption of property taxes for 5 years, lease of land on

confessional rent, wavier of stamp duties and registration charges, exemption

from fees for change of land use and exemption from payment of road cess.

The KIC noted that even excluding indirect support such as tax and cess

exemptions, total government funding of BIAL is Rs.434 crores, which is higher

than the total share of the private promoters- Siemens, unique Zurich and

Larsen & toubro. If the indirect support is also taken into account, the

government support would be much higher, noted the KIC.

Observing this and more, the KIC came to the conclusion that “the BIAL is a

body substantially financed by the government is therefore a public authority as

defined under section 2(h) of the act.”

The implication of this landmark judgment is that citizen will now be able to

access information through RTI in respect of many public private partnership

(PPP) infrastructure projects which often are vital concern to the people at

large.

10.3 In case of brown field airport –AAI act apply – the operator in AAI

shoes

� AAI Act, 1994 was amended by Indian Parliament in 2003 to facilitate

private sector participation in development of Greenfield airports. Which,

inter-alia, provides exclusion of ‘Private Airports’ from the ambit of AAI Act.

� The Aircraft Rules, 1937, were also amended, which, inter-alia, provide

conditions for grant of licence, validity of licence, tariff fixation including levy

of Passenger Service Fee and User Development Fee, Ground handling

provisions etc.


77

� Government will have no role in the management of such private sector

airports except for security and Air Traffic Control. The amendment also

provides for levying ‘Advance Development Fee’ at existing airports to

finance new airports in lieu of the existing one and ‘Users Fee’ at the new

airports.

� Government of India formulated a new national policy on airport

infrastructure in 1997 to provide a broad framework for development of

airport infrastructure with public and private sector participation.

� This Policy provides for foreign equity participation in airport projects upto

74 % with automatic approvals and 100% on case-to-case basis. Foreign

airports authorities can also participate. Private sector participation is

encouraged in the development of cargo infrastructure including satellite

freight cities.

� The policy permits development of Greenfield Airports where an existing

airport is unable to meet the projected requirements of traffic or a new focal

point of traffic emerges with sufficient viability. It can be allowed both as

replacement for an existing airport or for simultaneous operations.


78

11.0 RECOMMENDATION IN REGULATION FOR PPP

a) Rather than there being a ‘model’ of a partnership, PPPs should be thought

of as a process, designed to ensure that all the risks are valued and taken

into account in a meaningful way. Because both parties have committed

resources and prestige to the success of the project, the partnership relies

on a detailed step-by-step analysis of cost-sharing arrangements, risk

mitigation and risk allocation.

b) It recognizes that the PFI/DBFO route involving an SPV may be the most

appropriate one for very complex projects, involving significant risks in the

design and construction phase that carry over into the operational phase.

Here project management disciplines and having some or all of the partners

putting their equity at risk are relevant conditions, and there is a strong case

for the integration of the contractors and subcontractors.

c) Treatment of risk: the conception of risk allocation with a PPP is

straightforward. The government frees itself entirely from asset-based risk

(including design, construction, operation and possibly residual value risk),

and becomes the purchaser of a product that is risk-free in the sense that

government does not pay if the service is not delivered, or is not delivered to

the specified standards. That is, the public sector purchases the long-term

provision of a service of a guaranteed standard, along with the security that

if the service is not provided at the right time or to a satisfactory quality then

reduced payments are made or compensation is received. a satisfactory

quality then reduced payments are made or compensation is received. That

is the underlying philosophy. In practice, risk allocation in a PPP is more

complex. Rather than shifting all risk to the private sector, the policy aims at

allocating risk to the party that is best suited to manage it and demonstrating

value for money for any expenditure by the public sector. Those in the best

position to manage a particular risk should do so at the lowest price.

Unloading inappropriate forms of risk onto the private entity merely adds

unnecessary cost to a PPP agreement, as the private sector does not bear

risk cheaply. Driven by the requirement for ‘value for money’, the

government may agree to assume some risks for which the private party

would charge too much if the risk transfer to the private party were to remain

complete. Only ‘efficient’ levels of risk should be transferred to the private


79

party, reducing individual risk premia and the overall cost of the project.

Thus the conceptual framework underlying PPPs is that, as service recipient

paying only on satisfactory delivery, the government initially transfers all

project risk to the private party. It is then a matter for government to

determine, on a value-for-money basis and having regard to the cooperative

framework of the partnership, what risks it should ‘take back’ to achieve an

optimal risk position. Taking back means a deliberate decision by

government to assume or share a risk that would otherwise lie at the door of

the private party. The outcome of this analysis is reflected in the contract.

The upshot is that a PPP contract differs from a standard procurement

contract because it is not part of a traditional product supplier/buyer

relationship. Under a PPP, the parties allocate risks between them and work

together in an ongoing relationship to meet project objectives. It is also more

complex than a procurement agreement.

d) PPP is better if the quality of the service can be well specified in the initial

contract (or, more generally, there are good performance indicators that can

be used to reward or penalize the service provider), whereas the quality of

the building cannot.

e) A fully integrated (bundled) approach where construction incorporates a

particularly innovative special-purpose design, leading to integration

between construction risk and operating risk. But, with most public projects

following well-established design principles, such cases are regarded as

rare.

f) PPP do provide such a ‘proper mechanism’ for private sector involvement,

but they have to be managed to bring about good outcomes. From our

knowledge the factors that need to be put in place are as follows:

– consensus among participating bodies

– a clear approval process

– allocation of ownership rights

– identification of rights and responsibilities

– a valid comparator for value for money

– A clear business model.


80

g) Government bodies must view the transaction as the purchase of a service

and not the acquisition of the underlying asset (with payment made when

the service is provided satisfactorily, not when the asset is built).

h) Both parties must accept that the transaction is not a purchaser–supplier

contract but is a partnership in which there is a sharing of risks and

responsibilities.

i) It is necessary to establish that both sides have the capabilities to fulfil and

carry out their side of the bargain. The private party has to have the abilities

and motivation. The government agency must understand the market and

have the capacity to formulate the business plan and manage the contract.

j) Interaction is essential during the tendering process, and the negotiations

for contract fulfilment need to be managed with cooperation and

forbearance. Competitive tensions will inevitably surface and they must be

recognized and dealt with in the right spirit.

k) Careful preparation work has been undertaken with respect to:

l) Timelines need to be established that are realistic and take into account

other commitments.

m) The PPP contract should be sufficiently flexible to take account of any new

targets and future monitoring and reporting requirements that may develop

over the lifetime of the project.

n) Risk allocation has to be cost-effective so that risks are allocated to the

party best able to manage them and respond to the incentives they offer.

This last factor is essential for maximizing efficiency. Only by transferring

risk can there be certainty that the private sector has the incentives to price

and produce efficiently. The risk allocation in PPPs is the topic of the next

chapter when we consider the nature of the risks and the ‘tools’ available for

allocating risks between the participating parties. But first we outline a case

study of a recent hospital project in the UK with particular focus on the

reasons for going ahead with the deal. The type of incentives just mentioned

featured prominently in the decision.


81

o) Risk and managements

p) Identify all the project risks. These include the general risks which feature in

the risk matrix and the project specific risks (for example, the risk to public

health in a water project);

q) Determine the core services which are to be provided by government and

for which the risk cannot be transferred to the private party;

r) Examine each risk and identify those which government is best placed to

manage as a result of the level of control it exercises and those which it may

otherwise not be optimal to leave with the private party. These should in

each instance be taken back by government;

s) Ascertain whether any of the remaining risks should be shared because of

market convention or specific factors relating to the project; and

t) Adjust the risk allocation inherent in the basic PPP adjustment structure and

use the contract to reflect that adjustment and allow for any power

imbalance between the parties arising from special government powers.


82

CONCLUSION

For the sector as a whole, progress is still slow. In the first two years of the

VGF scheme the government granted approval to 23 proposals with estimated

funding of just US$683 million while IIFCL has so far approved 64 credit

proposals worth US$3.8 billion. In March 2006 IIFCL has disbursed only

US$105 million against approvals for 57 projects amounting to US$3.2 billion

although disbursals will pick up in the latter part of these long-gestation

infrastructure projects. For their part, government officials argue that the lower

expected VGF disbursals are because projects are more robust than previously

anticipated.

Limited access to long-term financing from non-government resources due to

the absence of a well-developed debt market is also constraining the increase

in PPP projects. However, most private sector participants believe that the

availability of money is not the problem; too much money chasing too few

projects is the main issue. Other factors hindering the growth of PPP in India

include the absence of a regulatory and policy framework governing PPP

projects. There is a great deal of contractual ambiguity and over reliance on

protracted legal procedures to handle any conflicts that may arise between the

concerned authorities and private sector partners, a problem compounded by

the lack of independent regulators and adjudication authorities. Contract

enforcement is another cause for concern, even orders by the Supreme Court

sometimes proving hard to implement on the ground. However, the relatively

progressive Ministry of Civil Aviation managed to push the Airports Economic

Regulatory Authority (AERA) bill through the Cabinet in May 2007. Although the

parliament has passed the bill, its eventual implementation will lead to the

creation of an independent regulator to set tariffs and other charges for

aeronautical services and monitor performance standards of airports as well as

to the establishment of an appellate tribunal to adjudicate disputes. The general

absence of such strong institutions has resulted in messy disagreements

between the government and private sector participants in some prominent

PPP projects. The Delhi airport privatization programme, for instance, landed

up in controversy after the Delhi International Airport Ltd (DIAL) - a consortium


83

led by the GMR Group - decided to form a subsidiary to develop the land

around the airport. DIAL's new arm plans to charge private builders a high

deposit (totaling around US$700 million) and treat it as a cost while lowering

the rent, thereby reducing the revenue due to AAI (which is supposed to

receive 45.9 per cent of DIAL's revenue). A disapproving Ministry of Civil

Aviation finally referred the dispute to India's attorney general, who recently

gave a judgment in favour of DIAL. Although the airport modernization

programme had already hit air pockets due to political opposition to privatizing

more airports, such disputes could make the government even more hesitant to

invite more private developers into public projects. The process of obtaining

approvals from various ministries and government departments is

cumbersome, and private investors have faced long delays in acquiring land for

the projects and getting regulatory clearances. However, the government has to

get its act together on this front by clearly allocating responsibility for individual

projects to different agencies.


84

References:

1. http://www.capaindia.com/PDFs/AERA%20April%2009.pdf

2. http://civilaviation.nic.in/moca/airppol.htm#role

3. http://infrastructure.gov.in/mca.htm

4. http://infrastructure.gov.in/pdf/Greenfield%20Airport.pdf

5. http://www.capaindia.com/PDFs/AERA%20April%2009.pdf

6. http://www.ipcc.ch/pdf/special-reports/spm/av-en.pdf

7. http://planningcommission.nic.in/

8. public private partnership in construction by Duncan cartlidge.

9. E-learning the partnership challenges.

10. fostering public private partnership for innovation by OECD

11. public private partnerships in pursuits of risk sharing and value for

money by OECD.

12. Mobilizing Private Finance for Local Infrastructure in Europe and Central

Asia An Alternative Public Private Partnership Framework BY Michel

Noel and W. Jan Brzeski

13. Public/Private Partnerships Innovation Strategies and Policy Alternatives

by Albert .N.Link

14. The economic and social benefits of air transport 2008 by IATA

15. flying by nature global market forecast 2007- 2026 by Airbus

16. public private partnerships by Darrin Grimsey and Mervin k. Lewis

17. http://dgca.nic.in/

18. http://civilaviation.nic.in/

19. http://www.icao.int/

20. http://www.aai.aero/AAI/main.jsp

21. http://civilaviation.nic.in/aera/mainpage.htm

22. http://www.hyderabad.aero/

23. http://www.bengaluruairport.com/portal/page/portal/BIAL_PageGroup/BI

AL_HOME

24. http://www.newdelhiairport.in/

25. http://www.csia.in/

26. http://cochinairport.com/


85

ANNEXURE

Annexure-I EXPORT

S.No. Country 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 1 AFGHANISTAN TIS 74,333.46 63,164.15 82,227.81 100,192.14 182,344.16

2 ALBANIA 2,349.56 2,485.12 2,020.77 2,804.38 5,589.70

3 ALGERIA 103,889.54 120,152.38 151,952.64 151,747.96 299,636.27

4 AMERI SAMOA 568.51 130.55 124.09 80.59 58.26

5 ANDORRA 80.61 39.59 58.16 53.26 412.37

6 ANGOLA 32,751.82 67,146.25 90,717.60 106,027.64 170,381.68

7 ANGUILLA 123.32 51.49 404.86 70.27 39.04

8 ANTARTICA 4.08 20.58 168.47

9 ANTIGUA 471.02 500.44 636.89 748.05 1,314.82

10 ARGENTINA 83,714.57 88,327.70 95,798.55 116,569.32 160,966.71

11 ARMENIA 3,253.57 3,184.55 3,908.03 7,988.56 9,221.80

12 ARUBA 199.13 274.59 661.99 270.88 900.86

13 AUSTRALIA 323,617.14 363,586.27 418,457.01 463,013.06 657,633.39

14 AUSTRIA 52,635.44 58,649.35 59,705.70 73,725.43 232,281.02

15 AZERBAIJAN 13,836.39 12,753.60 11,105.75 10,370.55 15,910.20

16 BAHAMAS 2,492.85 4,141.54 27,690.31 7,068.34 1,034.54

17 BAHARAIN IS 70,301.55 85,114.86 83,071.38 101,333.63 131,407.49

18 BANGLADESH PR 732,887.76 736,872.18 736,596.95 1,174,321.30 1,131,721.47

19 BARBADOS 780.28 1,024.38 1,206.23 1,013.76 1,761.65

20 BELARUS 4,766.12 5,409.66 6,504.93 8,526.90 16,350.95

21 BELGIUM 1,127,648.32 1,271,195.60 1,572,170.46 1,694,309.84 2,030,939.59

22 BELIZE 451.53 1,180.94 710.38 2,467.02 1,312.25

23 BENIN 21,173.80 42,775.13 68,554.93 110,842.92 93,677.50

24 BERMUDA 284.91 146.86 339.92 503.94 351.17

25 BHUTAN 38,004.47 43,905.27 26,018.73 34,885.74 50,927.26

26 BOLIVIA 1,780.09 2,902.06 2,469.47 3,063.56 4,382.33

27 BOSNIA-HRZGOVIN 1,229.58 587.92 1,646.85 2,024.38 2,449.17

28 BOTSWANA 3,552.48 4,771.83 4,916.37 6,814.12 11,704.04

29 BR VIRGN IS 49.79 295.42 397.13 171.99 17,119.26

30 BRAZIL 304,711.88 482,853.41 657,677.17 1,013,178.34 1,187,440.98


86

31 BRUNEI 2,275.46 19,010.55 3,759.13 4,206.74 7,994.52

32 BULGARIA 11,124.42 10,655.39 18,192.93 28,690.97 33,011.76

33 BURKINA FASO 9,480.82 8,824.91 6,785.93 13,006.24 21,960.15

34 BURUNDI 3,253.90 4,749.77 3,586.04 3,238.25 6,494.28

35 C AFRI REP 392.65 616.24 1,090.57 525.45 1,122.73

36 CAMBODIA 8,148.07 10,710.02 23,603.66 21,510.37 21,507.71

37 CAMEROON 11,995.56 15,366.28 37,555.03 29,232.00 42,335.75

38 CANADA 389,467.70 452,287.04 502,450.46 509,400.52 624,678.79

39 CANARY IS 45.37 18,323.59 35.78 17.11

40 CAPE VERDE IS 270.28 66.89 96.22 169.85 175.76

41 CAYMAN IS 303.09 173.63 145.02 258.38 265.85

42 CHAD 1,580.65 1,861.89 12,740.30 5,267.52 7,188.97

43 CHANNEL IS 66.02 48.29 162.43 87.41 22.18

44 CHILE 49,965.75 67,361.05 169,826.43 100,443.79 177,677.13

45 CHINA P RP 2,523,296.90 2,992,491.28 3,752,978.03 4,359,741.59 4,266,133.36

46 CHRISTMAS IS. 163.98 36.68 16.91 926.01 96.56

47 COCOS IS 183.84 84.06 113.76 34.82 0.72

48 COLOMBIA 148,590.78 201,451.27 260,923.11 304,907.57 168,762.56

49 COMOROS 1,095.77 2,257.83 7,030.69 3,917.99 11,732.01

50 CONGO D. REP. 1,268.91 898.08 546.48 1,686.01 7,048.26

51 CONGO P REP 41,902.23 49,418.63 61,657.14 60,803.20 96,329.64

52 COOK IS 37.56 40.8 2.14 49.83 60

53 COSTA RICA 7,403.17 7,110.03 9,280.20 12,743.20 15,711.43

54 COTE D' IVOIRE 45,393.32 46,989.80 64,099.13 104,142.84 43,288.06

55 CROATIA 10,264.76 12,841.95 24,747.91 29,155.85 39,161.66

56 CUBA 3,341.95 5,274.66 12,148.67 7,702.08 17,075.91

57 CYPRUS 13,198.64 14,348.77 15,108.63 19,278.70 114,200.89

58 CZECH REPUBLIC 39,537.63 42,887.59 46,336.11 72,580.62 83,299.38


87

59 DENMARK 137,374.13 181,647.03 207,161.34 199,651.29 267,651.55

60 DJIBOUTI 57,793.27 101,989.22 139,207.94 184,276.22 160,806.39

61 DOMINIC REP 9,901.64 14,074.42 16,754.46 17,110.95 23,514.00

62 DOMINICA 910.62 1,161.01 1,287.59 1,184.19 1,197.18

63 ECUADOR 10,206.10 11,598.16 23,652.76 22,293.27 58,350.32

64 EGYPT A RP 199,824.37 297,706.24 344,350.86 562,131.18 759,464.44

65 EL SALVADOR 3,993.94 5,311.52 7,993.01 4,881.17 7,676.42

66 EQUTL GUINEA 1,724.19 2,850.43 2,152.15 4,445.17 2,969.06

67 ERITREA 3,792.58 3,621.44 3,008.65 44,531.43 7,354.63

68 ESTONIA 4,599.55 6,136.90 12,710.98 28,089.71 22,455.87

69 ETHIOPIA 24,939.38 33,089.99 52,384.09 79,579.55 114,291.89

70 FALKLAND IS 20.85 13.14 114.04 24.14 42.67

71 FAROE IS. 64.18 97.83 149.04 96.89 27.29

72 FIJI IS 12,843.97 12,864.33 20,101.12 19,426.76 39,679.98

73 FINLAND 64,495.58 90,625.54 87,924.24 96,419.44 120,559.43

74 FR GUIANA 36.14 21 34.9 890.02 17,546.61

75 FR POLYNESIA 239.5 337.3 927.82 825.78 587.01

76 FR S ANT TR 63.97 5,700.00 36.78 4.01 0.78

77 FRANCE 755,271.75 920,707.57 950,601.41 1,045,415.11 1,377,671.15

78 GABON 4,653.10 7,341.37 7,531.04 10,405.17 9,922.00

79 GAMBIA 6,691.74 7,437.41 12,459.87 12,184.62 14,067.84

80 GEORGIA 12,039.46 15,131.79 18,533.07 37,405.02 33,414.71

81 GERMANY 1,269,875.33 1,587,701.77 1,800,723.12 2,059,892.83 2,919,475.35

82 GHANA 82,262.34 88,909.82 208,633.62 324,961.98 249,717.48

83 GIBRALTAR 291.31 149.64 7,884.05 518.7 4,025.93

84 GREECE 137,642.42 249,743.87 304,306.09 213,659.96 406,323.82

85 GREENLAND 19.48 1,492.73 1.18 23.7 38.41

86 GRENADA 105.18 386.06 353.62 502.22 207.18

87 GUADELOUPE 610.82 496.42 773.97 625.39 684.83

88 GUAM 171.19 154.98 1,215.51 234.19 248.38


88

89 GUATEMALA 16,999.96 20,337.09 33,502.31 30,041.40 36,984.11

90 GUINEA 23,056.59 23,138.03 36,223.70 52,546.00 35,446.38

91 GUINEA BISSAU 416.59 326.15 307.79 1,796.93 16,491.57

92 GUYANA 3,082.18 4,937.72 5,951.67 5,475.73 5,555.41

93 HAITI 4,576.25 7,228.63 9,822.70 10,746.83 20,342.04

94 HEARD

MACDONALD

19.66 24 5.31 5.43 0.09

95 HONDURAS 9,572.94 15,317.73 51,204.17 38,322.31 31,588.43

96 HONG KONG 1,658,790.01 1,979,610.39 2,117,937.83 2,538,525.32 3,039,069.39

97 HUNGARY 48,568.73 37,261.30 46,846.21 92,466.11 199,667.93

98 ICELAND 5,800.97 5,779.27 5,200.01 5,541.14 5,708.88

99 INDONESIA 598,756.65 611,063.22 917,696.77 869,277.93 1,157,782.95

100 IRAN 553,282.72 526,123.79 656,482.05 784,482.83 1,156,517.42

101 IRAQ 58,944.80 69,041.06 92,066.55 109,130.26 198,127.14

102 IRELAND 95,249.84 123,864.37 102,184.09 126,414.59 203,497.12

103 ISRAEL 451,902.26 531,944.06 597,937.21 645,339.92 658,430.72

104 ITALY 1,027,129.27 1,115,267.10 1,621,242.79 1,574,812.54 1,736,487.94

105 JAMAICA 6,033.65 11,447.67 9,111.92 9,931.50 10,342.24

106 JAPAN 956,101.81 1,098,539.39 1,295,361.13 1,551,559.21 1,380,771.30

107 JORDAN 57,622.91 81,891.55 80,881.48 143,802.45 196,036.40

108 KAZAKHSTAN 36,581.85 40,228.56 37,710.02 45,034.32 60,244.72

109 KENYA 191,693.99 255,254.87 595,254.94 635,609.27 614,088.18

110 KIRIBATI REP 177.82 37.92 1,520.00 71.5 980

111 KOREA DP RP 55,675.01 24,143.62 47,742.02 342,420.51 403,661.57

112 KOREA RP 468,043.69 808,970.14 1,137,900.98 1,148,153.52 1,835,359.19

113 KUWAIT 189,357.35 227,447.64 277,989.71 274,490.59 362,840.57

114 KYRGHYZSTAN 22,271.78 12,438.38 16,852.48 12,706.31 10,385.08

115 LAO PD RP 1,190.39 2,422.73 1,076.38 1,542.58 4,445.31

116 LATVIA 7,826.98 12,571.09 18,010.54 23,920.68 20,389.30

117 LEBANON 30,311.51 31,804.06 30,307.41 38,869.00 61,349.66

118 LESOTHO 6,026.37 5,655.79 2,470.46 3,431.63 15,730.64

119 LIBERIA 8,224.40 9,363.53 10,916.54 9,242.05 13,483.02

120 LIBYA 77,970.65 45,731.67 39,011.82 54,517.18 59,829.60


89

121 LIECHTENSTEIN 213.07 148.68 315.25 70.69 2,109.99

122 LITHUANIA 13,747.13 14,807.99 18,362.14 23,778.95 27,293.60

123 LUXEMBOURG 5,227.82 4,722.13 7,748.71 4,694.13 5,138.89

124 MACAO 940.78 1,088.84 732.04 1,797.56 2,580.30

125 MACEDONIA 1,167.39 1,739.46 2,578.95 3,345.98 4,755.99

126 MADAGASCAR 16,231.29 18,881.92 20,650.42 23,013.25 111,534.40

127 MALAWI 26,176.12 19,318.59 19,277.43 25,848.02 40,906.58

128 MALAYSIA 487,084.68 514,398.01 590,192.56 1,033,728.54 1,578,036.20

129 MALDIVES 21,393.88 29,918.78 31,096.43 36,055.22 59,028.43

130 MALI 9,746.31 12,353.24 28,891.37 12,982.88 17,907.49

131 MALTA 14,151.69 53,707.45 27,413.19 13,861.52 48,608.92

132 MARSHALL ISLAND 23.72 93.45 8,634.20 36.02 49.56

133 MARTINIQUE 239.01 372.72 952.31 797.58 19,097.74

134 MAURITANIA 11,104.07 19,986.30 9,827.12 11,588.90 16,367.53

135 MAURITIUS 116,012.77 88,296.78 333,275.80 437,245.94 439,831.09

136 MEXICO 165,606.49 196,160.66 242,437.53 238,204.69 301,051.91

137 MICRONESIA 153.34 3.19 14.68 20.09 41.97

138 MOLDOVA 2,518.52 2,403.24 2,497.39 2,981.03 3,065.25

139 MONACO 332.57 167.72 381.14 195.91 158.76

140 MONGOLIA 605.66 516.14 1,066.79 3,051.03 7,059.86

141 MONTSERRAT 177.78 112.42 70.59 28.66 93.28

142 MOROCCO 50,540.04 56,452.49 74,343.33 83,745.29 110,544.19

143 MOZAMBIQUE 36,530.66 56,466.45 86,753.70 179,489.16 191,948.96

144 MYANMAR 50,859.74 49,009.52 63,374.59 74,619.38 101,776.52

145 N. MARIANA IS. 12.71 24.01 9.05 34.93 205.42

146 NAMIBIA 3,245.03 6,484.58 8,363.95 16,519.08 41,920.85

147 NAURU RP 6.52 4.83 8.33 29.84 52.67

148 NEPAL 333,903.93 380,738.81 420,138.23 606,348.08 715,577.12


90

149 NETHERLAND 721,088.56 1,095,671.92 1,208,248.30 2,103,846.13 2,888,996.20

150 NETHERLANDANTIL 2,369.95 4,843.32 5,811.37 4,085.12 8,633.71

151 NEUTRAL ZONE 28.54 10,198.75 4.39

152 NEW CALEDONIA 374.34 526.83 1,464.80 899.57 2,055.12

153 NEW ZEALAND 41,886.64 62,823.84 227,770.60 63,819.20 85,696.81

154 NICARAGUA 5,111.90 4,708.16 6,758.94 21,517.23 9,447.83

155 NIGER 18,103.82 9,850.76 6,481.71 19,104.29 11,834.18

156 NIGERIA 289,662.55 386,964.68 408,822.31 436,162.10 706,530.56

157 NIUE IS 7.87 1.71 50 2.99 3.66

158 NORFOLK IS 43.41 39.37 245.06 195.04 181.99

159 NORWAY 46,642.97 57,646.14 82,972.37 106,308.47 172,119.42

160 OMAN 120,268.74 180,827.06 285,267.87 377,358.31 354,968.47

161 PAKISTAN IR 6.76 610,688.43 782,736.66 0.01

162 PALAU 234,117.76 305,146.68 73.1 65.22 653,206.80

163 PANAMA C Z 23.27 28.78 227.61 266.63 99.66

164 PANAMA REPUBLIC 214.12 2,004.22 74,525.03 27,542.67 439.19

165 PAPUA N GNA 25,139.56 27,914.97 4,861.40 5,930.75 55,942.32

166 PARAGUAY 6,416.07 4,078.29 12,348.18 18,727.93 8,950.52

167 PERU 5,396.48 7,252.12 56,836.89 115,487.41 17,636.87

168 PHILIPPINES 30,922.00 37,303.49 263,596.76 249,073.46 139,324.62

169 PITCAIRN IS. 185,219.60 219,005.40 30.88 14.01 337,935.11

170 POLAND 9.13 0.43 138,582.66 179,961.34 12.57

171 PORTUGAL 79,212.50 100,481.31 165,721.87 199,155.96 234,698.64

172 PUERTO RICO 100,273.81 115,503.36 12,920.87 14,185.79 199,195.84

173 QATAR 6,591.19 8,529.00 149,939.95 216,550.06 30,438.24

174 REUNION 94,095.16 114,817.02 9,839.44 13,422.15 307,192.44

175 ROMANIA 4,132.44 6,581.92 76,637.48 105,996.30 17,487.09

176 RUSSIA 47,608.79 37,364.53 408,548.71 378,346.96 228,655.44

177 RWANDA 283,636.04 324,589.03 6,219.23 5,199.71 495,824.21


91

178 SAHARWI A.DM RP 3,758.26 4,709.91 2.62 13,672.29

179 SAMOA 6.47 4.69 93.93 171.64 27.77

180 SAO TOME 123.4 159.69 393.17 596.63 317.69

181 SAUDI ARAB 45.22 182.49 1,171,137.11 1,492,255.46 459.77

182 SENEGAL 634,460.47 801,248.19 68,895.23 79,689.56 2,294,014.13

183 SEYCHELLES 31,110.81 41,395.16 5,844.40 28,888.77 66,069.08

184 SIERRA LEONE 4,772.59 4,703.44 9,403.73 12,122.08 41,355.12

185 SINGAPORE 5,895.68 8,207.53 2,746,160.82 2,966,223.24 21,858.39

186 SLOVAK REP 1,797,534.89 2,401,965.25 16,307.16 19,205.70 3,775,688.18

187 SLOVENIA 10,719.19 9,477.38 40,193.43 48,080.91 16,430.93

188 SOLOMON IS 28,472.47 33,913.35 132.91 11,223.92 73,298.14

189 SOMALIA 115.4 98.8 38,941.73 48,892.80 408.87

190 SOUTH AFRICA 21,165.93 17,558.25 1,016,527.68 1,069,875.52 30,883.97

191 SPAIN 442,142.40 676,000.35 849,693.12 922,504.63 899,429.11

192 SRI LANKA DSR 624,263.18 710,883.44 1,020,638.25 1,137,428.97 1,138,792.36

193 ST HELENA 634,964.97 896,391.21 750.46 653.6 1,089,497.01

194 ST KITT N A 47.14 343.35 175.92 216.29 85.81

195 ST LUCIA 219.96 182.17 298.14 217.88 322.13

196 ST PIERRE 210.42 325.1 10,115.02 2,204.48 494.83

197 ST VINCENT 1,116.17 709.4 155.49 189.15 1.31

198 SUDAN 112.68 181.19 182,686.19 164,172.97 371.07

199 SURINAME 142,633.84 130,449.92 7,531.83 4,530.49 221,794.09

200 SWAZILAND 7,897.87 6,935.48 2,133.88 4,164.50 6,364.85

201 SWEDEN 10,006.03 2,318.72 175,293.03 218,818.23 20,585.39

202 SWITZERLAND 108,643.69 144,505.28 211,095.95 247,593.88 257,963.42

203 SYRIA 243,027.94 212,300.92 184,818.20 270,911.07 352,525.70

204 TAIWAN 113,759.19 122,492.04 413,348.74 698,497.17 166,657.08

205 TAJIKISTAN 277,907.23 278,500.66 3,374.67 4,997.12 668,173.16


92

206 TANZANIA REP 2,961.79 2,763.18 130,694.35 236,454.70 7,630.08

207 THAILAND 78,127.12 107,783.96 653,562.38 727,877.20 472,958.89

208 TIMOR LESTE 405,008.07 476,076.01 240.46 162.04 872,399.50

209 TOGO 703.43 174.31 55,147.25 92,333.02 422.42

210 TOKELAU IS 118,337.65 40,331.73 68.71 18.17 65,620.17

211 TONGA 65.06 32.62 225.83 135.63 15.8

212 TRINIDAD 316.06 196.37 48,903.89 54,763.53 148.77

213 TUNISIA 12,995.28 29,504.28 49,486.13 49,992.79 143,698.43

214 TURKEY 33,454.86 36,554.99 598,311.51 704,338.53 96,789.44

215 TURKMENISTAN 325,168.46 447,197.82 15,309.07 14,517.51 637,029.19

216 TURKS C IS 6,854.40 8,336.26 238.02 335.13 19,145.32

217 TUVALU 142.36 182.48 42.85 2,625.27 236.38

218 U ARAB EMTS 86.26 61.57 5,444,497.47 6,291,503.22 2,959.92

219 U K 3,301,512.11 3,803,884.65 2,542,129.00 2,696,748.35 11,022,907.95

220 U S A 1,653,971.05 2,239,920.89 8,536,848.54 8,338,806.93 3,034,457.97

221 UGANDA 6,185,157.56 7,682,808.04 48,609.62 61,857.99 9,645,841.97

222 UKRAINE 34,138.18 41,017.22 131,061.29 160,480.30 100,749.23

223 UNION OF SERBIA

& MONTENEGRO

93,336.06 114,308.73 5,428.86 5,371.72 180,771.03

224 UNSPECIFIED 4,156.12 3,699.82 109,508.10 146,773.93 6,382.94

225 URUGUAY 167,963.42 84,939.82 16,695.75 20,441.67 2,031,903.63

226 UZBEKISTAN 11,011.87 12,364.57 13,432.07 16,224.15 29,728.79

227 VANUATU REP 9,590.91 10,819.55 1,014.48 868.96 20,927.32

228 VENEZUELA 743.09 813.23 57,234.92 57,782.33 2,409.86

229 VIETNAM SOC REP 32,337.83 41,800.54 444,623.84 645,128.09 84,764.70

230 VIRGIN IS US 249,800.55 305,786.46 711.75 455.82 794,947.72

231 WALLIS F IS 697.21 278.13 274.57 19.1 621.12

232 YEMEN REPUBLC 41.87 41.54 536,639.08 409,668.74 70.51

233 ZAMBIA 110,717.19 123,440.62 49,037.69 53,225.19 353,281.31

234 ZIMBABWE 22,647.10 29,448.45 14,444.58 12,841.47 49,058.39

India's Total

Export 37,533,952.62 45,641,786.15 57,177,928.52 65,586,352.18 84,075,505.87


93

IMPORT

S.No. Country 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 1 AFGHANISTAN TIS 21,120.40 25,866.13 15,613.31 43,976.20 59,245.85

2 ALBANIA 14.35 85.62 16.76 224.63 81.46

3 ALGERIA 2,836.78 6,485.22 339,488.55 496,169.26 451,753.95

4 AMERI SAMOA 24.38 128.92 38,119.73 467.23 114.02

5 ANDORRA 10.19 12.43 4.08 40.8

6 ANGOLA 407.66 1,438.17 111,098.32 409,608.66 653,900.05

7 ANTIGUA 2.88 50.99 5.36 17.51

8 ARGENTINA 242,448.07 333,837.75 506.13 25.61 35.38

9 ARMENIA 348.6 919.42 398,459.26 364,530.43 234,594.26

10 ARUBA 8.36 34,480.40 1,515.24 1,276.40

11 AUSTRALIA 1,718,418.00 2,190,614.78 18.17 8.3

12 AUSTRIA 117,873.85 152,310.25 3,171,090.05 3,155,208.44 5,049,651.71

13 AZERBAIJAN 3,464.81 2,595.41 206,156.66 235,735.88 320,738.18

14 BAHAMAS 20,397.65 95.08 30,339.88 69,510.92 86,416.95

15 BAHARAIN IS 54,758.43 83,925.72 5,485.80 98.28 19,754.74

16 BANGLADESH PR 26,676.51 56,240.09 213,109.67 333,881.62 636,671.99

17 BARBADOS 4.47 15.58 103,390.55 103,468.16 141,846.07

18 BELARUS 5,537.57 16,761.77 65.82 13.07 37.46

19 BELGIUM 2,061,865.48 2,091,983.27 42,248.92 50,410.47 125,541.11

20 BELIZE 4.45 13.8 1,874,160.28 1,754,571.92 2,605,788.66

21 BENIN 35,849.35 34,299.65 2,670.88 5,408.71 48.19

22 BERMUDA 585.64 19.91 36,563.01 28,987.66 49,119.57

23 BHUTAN 31,902.98 39,301.99 250.24 155.04 31,262.39

24 BOLIVIA 96.06 417.16 64,000.12 78,260.06 68,786.18

25 BOSNIA-HRZGOVIN 54.87 173.4 1,332.79 1,427.16 3,421.21

26 BOTSWANA 187.57 63.13 190.71 4,922.60 632.41

27 BR VIRGN IS 0.97 82.48 26.01 0.25 9,778.74


94

28 BRAZIL 356,035.76 395,386.84 8,712.27 70.95 147.86

29 BRUNEI 242.27 389.35 448,731.16 381,813.84 544,949.69

30 BULGARIA 8,067.64 10,653.70 129,068.31 90,868.70 188,194.37

31 BURKINA FASO 3,792.39 1,191.19 35,181.48 48,163.66 27,187.64

32 BURUNDI 194.24 16.21 2,517.05 7,793.52 18,889.87

33 C AFRI REP 115.4 162.24 2.03 742.95 323.13

34 CAMBODIA 108.27 343.61 200.71 461.53 1,149.03

35 CAMEROON 5,262.64 5,413.18 714.94 1,155.25 1,197.33

36 CANADA 348,543.47 407,258.01 3,443.26 7,571.91 14,390.41

37 CAPE VERDE IS 0.78 804,269.25 794,017.51 1,129,675.53

38 CAYMAN IS 1.77 10.87 93.05 1.07 159.85

39 CHAD 701.81 32.14 26,533.75 65,058.47 58.67

40 CHILE 155,270.24 192,368.44 74.65 394.76 1,883.47

41 CHINA P RP 3,189,230.68 4,811,665.23 867,814.22 741,939.94 666,443.07

42 CHRISTMAS IS. 29.72 7,900,860.72 10,911,607.12 14,760,559.50

43 COLOMBIA 6,365.48 4,142.25 6,971.82 284.11 260.81

44 COMOROS 67.03 1,719.72 6.37 18.63

45 CONGO D. REP. 1,140.61 6,289.91 34,668.60 33,756.81 8,104.24

46 CONGO P REP 9,872.98 19,454.58 3,142.49 834 143.44

47 COOK IS 3.38 7,709.94 5,547.29 47,379.75

48 COSTA RICA 15,935.09 16,761.49 27,036.17 41,967.83 218,453.37

49 COTE D' IVOIRE 71,928.94 85,857.23 12.14 0.2

50 CROATIA 924.25 13,055.71 19,875.75 35,584.56 33,977.75

51 CUBA 776.21 1,468.98 82,202.22 80,217.68 145,197.24

52 CYPRUS 2,170.99 11,302.38 25,813.10 7,430.87 7,137.32

53 CZECH REPUBLIC 78,782.03 115,279.09 503.61 5,735.42 616.25

54 DENMARK 121,414.00 228,424.71 50,082.04 58,529.75 68,127.22

55 DJIBOUTI 1,399.82 1,484.60 160,068.12 179,893.01 218,371.15


95

56 DOMINIC REP 1,239.80 2,365.81 153,925.59 186,886.22 218,073.47

57 DOMINICA 152.92 75.77 970.07 1,830.79 1,685.39

58 ECUADOR 10,306.65 9,000.59 822.3 1,135.27 4,763.87

59 EGYPT A RP 68,585.21 97,598.66 169.39 425.35 291.4

60 EL SALVADOR 823.33 913.79 22,318.80 87,230.92 15,004.57

61 EQUTL GUINEA 325.15 32.45 788,705.58 798,278.20 976,506.19

62 ERITREA 446.46 438.36 1,127.53 2,358.84 2,665.85

63 ESTONIA 322.46 3,992.64 47.2 66,050.25 88.42

64 ETHIOPIA 4,609.62 3,770.97 154.38 600.78 2,740.54

65 FAROE IS. 10.36 11,869.63 4,328.14 7,138.32

66 FIJI IS 135.18 376.92 5,136.59 5,482.41 5,127.45

67 FINLAND 174,699.15 258,326.33 6.4 0.93 436.63

68 FR GUIANA 175.42 12.99 71.34 11.64

69 FR POLYNESIA 3.27 7.04 8,413.10 103.55 325.99

70 FR S ANT TR 33.72 1.23 275,924.79 373,001.40 557,769.67

71 FRANCE 851,046.97 1,821,101.32 72.38 770.25 2,527.82

72 GABON 19,231.65 18,636.77 12.42 9.17 44.78

73 GAMBIA 5,175.57 5,712.52 0.73 1.92

74 GEORGIA 6,926.24 8,798.20 1,905,933.21 2,517,563.53 2,116,519.65

75 GERMANY 1,804,156.35 2,666,872.86 52,302.36 48,520.64 76,962.53

76 GHANA 23,038.66 34,943.93 8,104.79 6,079.55 12,492.60

77 GIBRALTAR 1.75 158.56 33,956.51 4,304.82 7,409.24

78 GREECE 10,701.24 24,958.04 3,414,674.94 3,973,603.74 5,492,241.61

79 GREENLAND 5.64 0.02 46,701.35 56,554.48 77,856.21

80 GRENADA 15.98 69.22 5.43 98.49

81 GUADELOUPE 318.04 115.73 94,867.89 51,029.76 31,933.84

82 GUAM 96.35 523.21 21.95 0.06 1.42

83 GUATEMALA 476.89 809.54 29.77 7.43 33.42

84 GUINEA 12,398.74 9,852.01 72.08 79.64 33.24

85 GUINEA BISSAU 31,841.07 42,558.57 87.68 142.9 34.07

86 GUYANA 3,220.54 9,408.89 949.4 1,433.91 1,322.06


96

87 HAITI 458.39 129.26 154,934.34 281,951.86 120,995.25

88 HONDURAS 102.08 138.24 22,503.52 25,706.44 46,596.16

89 HONG KONG 777,373.79 977,107.64 6,676.82 6,373.60 5,024.90

90 HUNGARY 14,165.84 13,999.00 513.22 790.51 817.18

91 ICELAND 1,031.48 2,796.90 48.13 13.62

92 INDONESIA 1,176,190.06 1,331,795.58 766.01 857.93 2,197.06

93 IRAN 184,313.68 311,004.87 1,123,930.26 1,086,707.05 2,973,253.51

94 IRAQ 503.45 908.11 52,452.66 45,600.43 88,152.53

95 IRELAND 82,289.84 71,681.09 1,689.17 1,522.92 1,620.70

96 ISRAEL 443,972.70 456,543.75 1,886,485.99 1,942,053.15 3,075,129.40

97 ITALY 616,955.00 821,552.51 3,451,547.40 4,394,593.48 5,582,184.47

98 JAMAICA 1,189.96 945.52 2,500,501.79 2,749,466.41 3,428,501.21

99 JAPAN 1,453,593.31 1,797,990.11 130,633.23 104,550.82 110,214.16

100 JORDAN 159,905.54 195,836.23 488,558.03 574,633.67 949,903.46

101 KAZAKHSTAN 6,915.21 11,642.77 1,210,171.66 1,569,445.00 1,998,356.25

102 KENYA 20,994.42 21,480.40 272.95 9,327.01 506.38

103 KOREA DP RP 4,191.67 25,046.69 2,079,487.72 2,545,779.99 3,583,282.46

104 KOREA RP 1,576,541.54 2,020,577.01 213,223.53 275,738.00 800,087.81

105 KUWAIT 137,465.04 204,478.80 39,910.77 30,915.45 73,352.81

106 KYRGHYZSTAN 280.93 652.81 25,556.87 34,829.71 37,619.20

107 LAO PD RP 23.24 46.34 17.49 0.59 29.45

108 LATVIA 495.95 4,484.86 222,471.06 64,852.28 24,147.79

109 LEBANON 9,194.92 8,196.83 2,174,699.81 2,430,790.74 3,965,818.96

110 LESOTHO 0.04 2,711,417.52 3,095,993.03 4,319,944.55

111 LIBERIA 20,227.22 56,073.33 348.4 364.42 451.63

112 LIBYA 6,112.33 5,284.61 162.52 45.69 214.92

113 LIECHTENSTEIN 229.86 351.56 14,163.44 16,575.32 53,692.34

114 LITHUANIA 7,924.61 12,820.68 5,026.93 3,790.52 6,248.27

115 LUXEMBOURG 4,354.22 7,129.41 21,347.30 96,487.68 120.55

116 MACAO 0.06 71.34 61,029.12 501,066.51 63,531.98


97

117 MACEDONIA 37.86 1,701.17 172.92 1,495.16 307,213.58

118 MADAGASCAR 3,580.30 7,243.57 9,116.41 3,900.94 34.64

119 MALAWI 2,282.80 796.94 14,413.56 14,420.78 262,067.29

120 MALAYSIA 1,032,979.47 1,069,473.44 88.27 152.39 11,413.46

121 MALDIVES 274.94 876.34 116.18 112.04 113.09

122 MALI 5,874.24 1,137.20 8,704.09 6,733.17 320.23

123 MALTA 16,561.31 7,006.95 2,269.47 6,217.63 8,538.00

124 MARSHALL ISLAND 0.3 79,234.68 2,395,876.10 2,417,613.44 3,355.31

125 MARTINIQUE 1.21 15.67 1,382.76 1,669.73 3,259,156.48

126 MAURITANIA 575.83 453.19 1,260.34 1,611.17 1,793.35

127 MAURITIUS 3,228.42 3,245.36 90,477.91 3,144.03 4,303.65

128 MEXICO 37,124.07 43,216.90 6,611.80 26.89 2,332.29

129 MICRONESIA 4.11 0.86 2.2 62.15

130 MOLDOVA 65.29 93.59 290.21 473.6 185.33

131 MONACO 421.83 41.91 6,565.80 4,055.79 2,039.52

132 MONGOLIA 92.4 717.45 357,648.55 476,543.09 6,557.86

133 MONTSERRAT 10.62 24.79 9.7 6.12 799,801.38

134 MOROCCO 162,725.56 202,051.99 206.13 157.74 0.21

135 MOZAMBIQUE 18,673.96 22,406.53 79.75 385 3,044.07

136 MYANMAR 182,382.99 232,862.77 1,015.88 3,742.61 159.29

137 NAMIBIA 22 9,195.00 21.13 41.88 8,358.64

138 NAURU RP 758.1 81.65 222,309.64 200,747.26 5.81

139 NEPAL 155,385.77 168,173.09 12,811.14 19,078.92 429,263.55

140 NETHERLAND 355,613.52 464,673.27 354,094.52 325,928.14 14,824.63

141 NETHERLANDANTIL 24.44 151.99 424,076.82

142 NEW CALEDONIA 4,125.68 1,375.50 1,546.76 8,441.50 32.24

143 NEW ZEALAND 57,493.70 95,909.48 343.21 163.13 1,596.75

144 NICARAGUA 89.55 2,430.90 138,450.90 252,725.72 12,396.21

145 NIGER 324.52 337.29 523,286.18 772,866.39 225,567.56


98

146 NIGERIA 21,746.00 32,081.93 488.25 504.88 866,962.05

147 NORFOLK IS 39.54 56.8 9,656.09 4,094.35 639.92

148 NORWAY 105,626.95 128,101.62 120,266.43 135,305.78 4,754.70

149 OMAN 9,259.82 117,584.07 34.13 153.59 195,096.15

150 PAKISTAN IR 42,673.53 79,498.02 2,448.30 269.33 290.43

151 PANAMA C Z 3,929.95 211.81 3,179,651.97 3,066,290.73 74.33

152 PANAMA REPUBLIC 40,830.45 109,549.31 131.63 15.95 3,999,547.98

153 PAPUA N GNA 42,773.49 28,389.94 7.35 166.53

154 PARAGUAY 1,245.16 1,863.38 345,727.77 654,444.76 392.55

155 PERU 16,331.74 10,208.86 208,233.76 456,384.48 512,341.29

156 PHILIPPINES 84,199.37 104,260.26 146,272.82 115,871.88 546,437.92

157 PITCAIRN IS. 0.46 0.92 4.65 166,838.70

158 POLAND 40,602.95 47,733.33 13.73 4.48

159 PORTUGAL 8,511.83 13,392.17 138,370.13 100,570.33 4.37

160 PUERTO RICO 2,231.29 3,235.98 126,685.82 78,154.92 64,680.01

161 QATAR 302,323.52 399,179.06 1,286.33 183.06 103,976.04

162 REUNION 1,547.88 1,467.17 58,097.01 63,269.74 263.91

163 ROMANIA 75,684.48 119,592.32 75,737.13 82,387.82 121,693.97

164 RUSSIA 594,328.52 895,294.01 2.33 1.96 116,542.91

165 RWANDA 324.52 17.04 53,032.94 76,179.69 0.01

166 SAMOA 25.61 13,790.83 14,373.07 121,491.09

167 SAO TOME 7.51 3,084.79 3,509.00 25,510.32

168 SAUDI ARAB 584,626.77 722,693.17 935,908.92 988,889.45 4,721.84

169 SENEGAL 81,414.15 129,525.86 2,490.47 5,025.66 1,589,469.10

170 SEYCHELLES 259.93 507.37 132,011.66 168,123.18 11,354.13

171 SIERRA LEONE 1,022.07 1,578.07 1,090,283.53 993,832.96 152,425.37

172 SINGAPORE 1,191,311.70 1,484,833.35 741.45 267.38 1,978,742.31

173 SLOVAK REP 10,285.90 17,645.53 500.1 2.13 1,080.42

174 SLOVENIA 9,637.32 10,454.25 1.59 9.36


99

175 SOLOMON IS 132.36 1,227.80 6,056,149.96 7,811,031.38 27.18

176 SOMALIA 3,356.92 5,116.33 32,924.24 60,376.01 8,974,703.51

177 SOUTH AFRICA 987,443.96 1,094,352.70 338.66 379.31 99,452.94

178 SPAIN 175,029.46 253,891.51 1,058.77 20,183.12 536.35

179 SRI LANKA DSR 170,019.05 255,768.08 2,483,996.69 3,268,217.81 3,588.12

180 ST HELENA 19.02 215.09 8,958.71 17,886.42 3,456,141.62

181 ST KITT N A 4.85 16,426.37 23,185.33 20,913.92

182 ST LUCIA 4.05 883.49 2,645.81 34,414.52

183 ST PIERRE 42.83 1,575.69 8,209.58 3,112.44 235.78

184 ST VINCENT 1,033.23 32,867.49 1,118,413.70 1,454,655.62 2,741.46

185 SUDAN 10,280.03 14,440.92 283,669.65 400,097.68 2,488,228.72

186 SURINAME 430.01 2,870.94 212,955.68 254,091.64 466,128.41

187 SWAZILAND 1,412.66 10,460.10 103.04 1.97 162,367.62

188 SWEDEN 421,156.65 518,974.60 2.07 35.7 11.38

189 SWITZERLAND 2,668,898.37 2,902,482.09 1.6 1,540.71

190 SYRIA 1,715.00 2,270.64 7,900.77 11.71 12,484.21

191 TAIWAN 490,685.00 612,284.48 1,066.39 14,468.76 11.08

192 TAJIKISTAN 1,835.92 2,607.04 40,424.61 173,722.03 3,007.23

193 TANZANIA REP 59,152.95 53,019.98 496.17 343.79 183,956.05

194 THAILAND 389,050.73 536,409.91 25,750.29 14,958.46 535.08

195 TIMOR LESTE 6.71 19.3 874,623.00 857,810.52 17,439.11

196 TOGO 20,682.40 35,089.60 4,128,316.92 3,957,082.02 888,754.71

197 TOKELAU IS 0.98 13.24 35,995.02 8,155.82 5,270,320.98

198 TONGA 49.88 759,424.86 966,396.61 76,397.86

199 Trade to

Unspecified

Countries

1,969,299.95 8,621,800.16 3,644.23 3,899.27 1,294,132.16

200 TRINIDAD 6,268.35 807.65 44,392.18 66,221.28 8,066.21

201 TUNISIA 42,657.98 44,783.94 789,880.06 926,400.41 91,817.54

202 TURKEY 60,621.87 85,800.78 270.17 19.89 1,235,265.25


100

203 TURKMENISTAN 4,882.40 5,468.81 34,509.81 24,509.51 99.76

204 TURKS C IS 1,550.19 109.6 30.66 63,404.96

205 TUVALU 0.97 72.14 16.61 6.37

206 U ARAB EMTS 2,085,317.23 1,927,703.35 23,012.34 70,164.39 80.31

207 U K 1,602,345.39 1,740,081.50 65,256.00 62,845.56 46,896.84

208 U S A 3,145,813.32 4,185,945.49 150,630.51 680,148.98 276,172.05

209 UGANDA 2,966.86 1,255.84 5,457.35 3,454.20 664,242.24

210 UKRAINE 242,030.80 350,817.85 144.94 163.39 5,537.56

211 UNION OF SERBIA

& MONTENEGRO

1,910.44 862.17 639.12 769

212 UNSPECIFIED 11,672,714.29 10,983,028.66 3,917,494.34 5,423,319.30 169.64

213 URUGUAY 1,820.26 1,788.98 1,888,929.92 1,994,151.94 10,592,643.31

214 UZBEKISTAN 14,135.89 11,570.74 5,310,541.44 8,462,542.31 2,676,770.80

215 VANUATU REP 91.54 21,293.72 2,137.74 6,086.68 8,481,827.99

216 VENEZUELA 1,806.11 4,228.41 451,866.00 356,346.79 8,804.17

217 VIETNAM SOC REP 38,865.36 58,169.04 785.18 1,707.55 703,995.74

218 VIRGIN IS US 31.67 164.54 307,679.87 715,187.06 6,173.83

219 WALLIS F IS 71.78 0.86 3,292.52 5,330.22 654,700.57

220 YEMEN REPUBLC 13,848.03 4,428.49 15,330.50 6,470.69 6,510.27

221 ZAMBIA 10,318.29 17,957.69 4,173.63 418.33 32,924.00

222 ZIMBABWE 12,197.03 11,311.17 336,257.42 159,794.62 3,396.47

India's Total

Imports 50,106,454.03 66,040,890.33 84,050,631.33 101,231,169.93 137,443,555.45


101

Annexure-II

ANNUAL - TOTAL DOMESTIC TRAFFIC AND OPERATING STATI STICS OF INDIAN CARRIERS FOR LAST TEN YEARS

AIRCRAFT FLOWN PASSENGERS CARGO CARRIED (TONNE) TONNE KMS PERFORMED (MILLION) .

YEAR HOURS (NO)

KMS (000)

CARRIED (no)

KMS PERFORMED (MILLION)

AVAILABLE SEAT KMS (MILLION)

PAX load factor (%) FREIGHT MAIL TOTAL PAX FREIGHT MAIL TOTAL

AVAILABLE TONNE KMS (MILLION)

WEIGHT LOAD FACTOR (%)

1999-00 231173 128637 12711139 11419 19089 59.8 137670 21209 158879 977 142 22 1141 2042 55.9

2000-01 250470 136928 13712215 12283 19897 61.7 143541 23127 166668 1052 152 19 1223 2127.2 57.5

2001-02 267329 147113 12853918 11572 20849 55.5 137983 22573 160556 989 143 23 1155 2212.8 52.2

2002-03 295173 165827 13951034 12848 22833 56.3 156254 23331 179585 1086 164 23 1273 2380.8 53.5

2003-04 343795 189336 15676948 14566 24936 58.4 176611 20879 197490 1257 191 19 1467 2551.3 57.5

2004-05 398714 213618 19445043 18030 27790 64.9 218004 27147 245151 1558 229 29 1816 2840.2 63.9

2005-06 475352 252668 25204988 23709 35077 67.6 224958 31523 256481 2067 238 35 2340 3488 67.1

2006-07 648408 347912 35792747 33519 48702 68.8 245652 20769 266421 2910 252 23 3185 4750 67.1

2007-08 805934 439378 44384302 41718 60590 68.9 282288 20277 302565 3637 272 21 3930 5984 65.7

2008-09 808442 426099 39467072 37704 59160 63.7 252971 24637 277608 3260 236 24 3520 5908 59.6


102

ANNEXURE-III

ANNUAL-TOTAL INTERNATIONAL TRAFFIC IN CARGO AND OPERATING STSTICTICS OF INDIAN CARRIERS FOR LAST TEN YEARS

AIRCRAFT FLOWN CARCO CARRIED (TONNE)

YEAR HOURS(NO) KMS(000) CARRIED(NO)

KMS.PERFORMED

(MILLION)

AVAILABLE

SEAT KMS

(MILLION0

PAX

LOAD

FACTOR

(%) FRIEGHT MAIL TOTAL PAX FRIEGHT MAIL TOTAL

AVAILABLE

TONE KMS

(MILLION)

WEIGHT

LOAD

FACTOR(%)

1999-00 94796 64454 3656642 13186 17956 73.4 98743 1555 100298 1226 390 12 1628 2311 70

2000-01 97961 65965 3827701 13928 18318 76 99832 1519 101351 1294 404 11 1709 2346 73

2001-02 110652 74547 3698442 13408 19311 69.4 95587 1942 97529 1248 371 12 1631 2457 66

2002-03 129091 84513 4200765 15819 21406 73.9 102089 1640 103729 1473 401 10 1884 2678 70

2003-04 146019 97687 4492576 18108 24972 72.5 95420 2278 97698 1680 399 13 2092 3154 66

2004-05 175368 119497 5326221 22272 31126 71.6 110157 2000 112157 2058 509 12 2579 3919 66

2005-06 237506 161848 6547185 27858 40452 68.9 110196 1983 112179 2561 562 14 3138 5143 61

2006-07 268672 186221 7561226 30355 44624 68 121991 1703 123694 2803 609 11 3422 5734 59.7

2007-08 338325 241006 9108469 36129.6 54465 66.3 140221 2680 142901 3389 769 21 4179 7588 55.1

2008-09 403323 286582 10049361 40740.8 62172 65.5 170732 3360 174092 3953 960 25 4938 8812 56


103

SCHEDULED DOMESTIC PASSENGER TRAFFIC AND PASSENGER LOAD FACTOR OF ALL SCHEDULED AIRLINES FOR LAST TEN YEARS.

PAX. LOAD FACTOR (%)

SL. NO. YEAR SCHEDULED DOMESTIC PASSENGER CARRIED (IN LAKHS)

% CHANGE IN SCHEDULED DOMESTIC PASSENGERS CARRIED

1 1999-00 127.1 59.8 -

2 2000-01 137.1 63.7 7.9

3 2001-02 128.5 55.5 -6.3

4 2002-03 139.5 56.3 8.6

5 2003-04 156.8 58.4 12.4

6 2004-05 194.5 64.9 24

7 2005-06 252 67.6 29.6

8 2006-07 357.9 68.8 42

9 2007-08 443.8 68.9 24

10 2008-09 394.7 63.7 -11.1

ANNUALISED GROWTH RATE OVER LAST TEN YEARS = 13.42


104

Annexure-IV

Sector Wise Contract Award Method

Total Number of Projects based on Contract Award Method

Sectors

Total

Number of

projects

Domestic

Competitive

Bidding

International

Competitive

Bidding

Negotiated

MOU

Value of

Contracts (Rs.

Crore)

Airports 5 0 18808 0 19111

Education 1 93.32 0 0 93.32

Energy 24 100 0 16014.59 17110.59

Ports 43 4816 24037 34591.95 66498.95

Railways 4 696.56 0 905 1601.56

Roads 271 62779.2 34161.9 1259.2 102004.78

Tourism 29 1367.76 982.32 0 2467.08

Urban Development 73 4645.83 9758.91 15 15288.47

Total 450 74583.67 87748.13 52785.74 224175.8


105

Annexure-V

Sector-wise

Sector-wise Total Number

Based on

100 Between 100

Between

251 to

More than

500 Value of

of Projects crore to 250 crore 500 crore crore contacts

Airports 5 0 0 303 18808 19111

Education 1 93.32 0 0 0 93.32

Energy 24 175.59 558 2669 13708 17110.59

Ports 43 96 970 2440 62992.95 66498.95

Railways 4 0 102.22 905 594.34 1601.56

Roads 271 3162.5 5526.49 32861.87 60453.92 102004.7

Tourism 29 742.56 674.52 0 1050 2467.08

Urban

Development 73 1283.86 1468.7 2403.91 10132 15288.47

Total 450 5638.83 9299.93 41582.78 167739.21 224175.8


106

Annexure-VI

State-Wise

State

Total

Number of

Projects

Based on

100 crore

Between 100

to 250 crore

Between 251 to

500 crore

More than 500

crore Value of contacts

Andhra Pradesh 63 1062.93 1554.27 3188.53 33473.7 39279.43

Bihar 2 4 0 418.04 0 422.04

Chandigarh 1 15 0 0 0 15

Chhattisgarh 4 70 304 464 0 838

Delhi 9 95 0 408.2 10374 10877.2

Goa 2 30 220 0 0 250

Gujarat 27 130.06 277.22 3360.9 14943.71 18711.89

Haryana 2 0 0 756 0 756

Jharkhand 6 131 550 0 0 681

Karnataka 95 980.39 1692.55 12203.31 24615.6 39491.85

Kerala 11 114 112 615.5 11131 11972.5

Madhya Pradesh 37 1027.32 1117.28 2694.95 2949 7788.55

Maharashtra 28 118.5 745.5 1099.84 32061.95 34025.79

Orissa 16 235.1 0 500 6888.34 7623.44

Pudducherry 2 0 0 419 1867 2286

Punjab 19 537.26 434.72 572 0 1543.98

Rajasthan 49 523.92 783.79 833 3112.7 5253.41

Sikkim 24 175.59 558 2669 13708 17110.59

Tamil Nadu 30 143.31 555.6 6412.87 5340 12451.78

Uttar Pradesh 5 0 0 1458.57 649.21 2107.78

West Bengal Inter-State 5 13 0 160.45 200 195 1214.4 2294.67 641 5984 2055.4 8634.12

Total 450 5638.83 9299.93 41582.78 167739.21 224175.8


107

Annexure-VII DETAILED PROJECT INFORMATION

Bangalore International Airport Project Name

Bangalore International Airport

State Karnataka Location Devanhalli

The airport site covers an area of approximately 4300 acres. It is situated on NH7, 30 km north of Bangalore. The first phase of the airport would consist of a 4000-metre-long runway, taxiways and an apron area with aircraft stands and a terminal building.

Capacity / Size

Ultimate design capacity of 50 mppa (million passengers per annum). Airport capacity to be developed to 11.5 mppa under Phase 1. The first phase of the airport would consist of a 4000-metre-long runway, taxiways and an apron area with aircraft stands and a terminal building.

Type of PPP BOOT Type of Nodal Department

Centre

Contracting Authority

Ministry of Civil Aviation, Government of India

Contract Period

30 yrs. Additional Information : : Greenfield Airport Concession Agreement shall continue from its commencement until the 30th anniversary of the Airport Opening Date whereupon the term of the Agreement shall at the option of BIAL be extended for a further period of 30 years. BIAL may at any time prior to the 27th anniversary of the Airport Opening Date, exercise the option of extending the term of the Concession Agreement by another 30 years. The 30 year period excludes Construction Period of 33 months from Financial Close Financial Close to be achieved within 6 months from the date of signing of Concession Agreement

Project Proponent Project Company/Developer /Operator

Bangalore International Airport Limited (BIAL)

Legal Status of Project Company

Joint Venture Company


108

Siemens Larsen and Toubro (L&T)

EPC Contractor

Skytanking-Indian Oil Consortium Unique Zurich GlobeGround India Air India-Singapore Air Terminal Services (SATS) Bobba Group-Menzies Aviation LSG Sky Chefs, Taj SATS HMS Host Corporation Nuance-Shoppers Stop Consortium Bharat Petroleum Corporation Limited, ST Airport Services Private Limited (STARS)

O&M Contractor

Skytanking-Indian Oil Contract Award Method

International Competitive Bidding

Estimated Project Cost

Rs. 1930 Cr.

Project Benefits and Outcomes

First Phase- Airport to cover an area of 3800 acres Construction of a passenger terminal, 4000 m long runway, entrance/exit taxi-ways, an isolation bay, air-side road system, two-way access road, air traffic complex (ATC), aeronautical equipment, rescues and fire-fighting facilities, airline support acilities, fuel farm, terminal parking, administration and maintenance buildings, ground equipment maintenance area, cargo complex and boundary/security wall. Additional phases to incorporate more facilities which will be developed based on projected passenger traffic and growth requirements


109

Performance Monitoring

BIAL shall design, procure, construct, complete, test and commission the Initial Phase, and remedy any defects in respect thereof, in accordance with the Master Plan, Good Industry Practice and Applicable Law. BIAL shall ensure that the Works shall conform with the Specifications and Good Industry Practice. BIAL shall at all times comply with Applicable Law in the operation and maintenance of the Airport and will operate, maintain, keep in good operating repair and condition in accordance with Good Industry Practice and, in accordance with the Standards and renew, replace and upgrade to the extent reasonably necessary, the Airport. In order to assist BIAL and Government of India (GoI) achieve their objectives under the Concession Agreement a joint coordination committee shall be formed comprising BIAL, Government of India (GoI) and the other Relevant Authorities providing the Reserved Activities. The joint coordination committee shall meet once a month commencing with the first month following the execution of the Concession Agreement. Throughout the term of this Agreement the Airport performance shall be monitored by passenger surveys. The criteria used to measure the Airport performance shall be the IATA Global Airport Monitor service standards or such criteria as may be mutually agreed upon from time to time (the "Standards"). The first such survey shall be conducted during the third (3rd) year after Airport Opening. From the date the Independent Regulatory Authority (IRA) has power to review, monitor and set standards and penalties and regulate any such related activities at the Airport, BIAL shall be required to comply with all such regulations framed by IRA.

Legal Instrument

BOOT

Market Structure and Competition

BIAL has the exclusive right and privilege to carry out the development, design, financing, construction, commissioning, maintenance, operation and management of the Airport (but excluding the right to carry out the Reserved Activities and to provide communication and navigation surveillance/air traffic management services which are required to be provided by AAI). No new or existing airport shall be permitted by Government of India (GoI) to be developed as, or improved or upgraded into, an International/Domestic Airport within an aerial distance of 150 kilometers of the Airport before the twenty-fifth anniversary of the Airport Opening Date.


110

Regulatory Framework

At present there is no Independent Regulatory Authority for airports to perform key regulatory functions including tariff setting, licensing, compliance oversight, ensuring fair competition, etc. Most of these functions shall be governed by the Concession Agreement. Ministry of Civil Aviation, Government of India is administering the Concession Agreement.

Tariffs other users and in respect of both domestic and international aircraft and passenger movements, at rates consistent with ICAO Policies, the following Regulated Charges: Landing, Housing and Parking charges (domestic and international), Passenger Service Fee (domestic and international) The charges to be adopted by BIAL at the time of Airport Opening will be the higher of: (a) The AAI tariff effective 2001 duly increased with inflation index up to the Airport Opening Date, or (b) The then prevailing tariff at the other AAI airports. User Development Fee (UDF) (domestic and international): BIAL will be allowed to levy UDF with effect from Airport Opening Date, duly increased in the subsequent years with inflation index from embarking domestic and international passengers, for the provision of passenger amenities, services and facilities and the UDF will be used for the development, management, maintenance, operation and expansion of the facilities at the Airport. Route Navigation Facilities Charges and Terminal Navigational Landing Charges shall be levied and collected by AAI. BIAL shall, in consideration for the grant by Government of India (GoI) of the Concession, pay to GoI a fee amounting to four per cent (4%) of Gross Revenue annually as Concession Fee. The Concession Fee in respect of the first 10 Financial Years shall be payable in 20 equal half-yearly installments, while the Concession Fee in respect of the 11th Financial Year and each succeeding Financial Year shall be payable annually.

F I N A N C I A L I N F O R M A T I O N Equity:

INVESTOR COUNTRY % HOLDING AMOUNT (Rs. Crore) Karnataka State Investment and Industrial Development Corporation (KSIIDC)

India 13 40.95

Airports Authority of India (AAI) India 13 40.95 Siemens Project Ventures GmbH Germany 40 126


111

Unique Zurich Airport (Flughafen Zeurich AG) Switzerland 17 53.55 Larsen & Toubro Ltd. India 17 53.55 Total Equity : Rs. 315 Cr.

Debt : INVESTOR AMOU

NT TENOR (YEAR)

MORATORIUM (YEAR)

TYPE

COMMENTS

State Support

Rs. 350.00 Crore

10 10 1 Interest Free Loan

ICICI led consortium

Rs. 735.00 Crore

3

Other Lenders

Rs. 461.50 Crore

3

Total Debt : Rs. 1546.5 Cr. Other Financial Instrument

Advance Security Deposits received from third party service providers

Total Others Rs. 68.5 Cr. Debt : Equity 83 % : 17 % Government Equity : Private Equity

26 % : 74 %

Government Support

VGF by Sponsoring Authority : Rs. 0 Cr.

VGF under VGF scheme of DEA : Rs. 0 Cr.


112

Other Support AAI equity investment is capped at Rs. 500 million. Land lease Agreement – Lease of land of 4000 acres at concessional rent of Rs. 1 till commencement of operations. Thereafter at the rate of 3% p.a. for a period of 6 years and 6% p.a. subsequently with an annual increase of 3%. Tax Benefits: Benefit has been assumed u/s 80IA of the Income-tax Act 1961 for tax exemption in respect of profits & gains from the business of development of an infrastructure facility viz., airport. A deduction of 100% of the profits & gains derived from such business has been assumed for any 10 consecutive assessment years out of 15 years beginning from the year in which BIAL begins to operate and maintain the infrastructure facility. Exemptions from Income Not Forming Part of Total Income: Withholding tax for technical fees payments to Germany and Switzerland will continue as per the Double Taxation Avoidance Agreements of India with the respective countries. No withholding tax on reimbursement of development costs/pre-SHA costs to foreign promoters. No R&D Cess payable on remittances on reimbursements made to foreign promoters and payments made under Operation Management Services Agreement (OMSA).

Project Cost (at Financial Close)

Rs. 1930 Cr.

Cochin International Airport Project Name Cochin International Airport State Kerala

Location

Nedumbassery (Cochin) Located 25 KMS North East of Cochin, with NH 47, the main Railway line and MC road to Trivandrum in close vicinity.

Capacity / Size

First airport in India to be developed through PPP. The airport covers an area of 1200 acres. The airport project includes 3400 m long runway, two separate centrally air-conditioned terminals for domestic and international operations measuring a total area of around 4.5 lakh sq.ft., integrated cargo complex capable of handling perishable/non perishable and dangerous cargo.

Type of PPP BOO


113

Type of Nodal Department Centre Contracting Authority Airport Authority of India Contract Period Additional Information : : Greenfield Project Project Proponent

Project Company/Developer /Operator Legal Status of Project Company EPC Contractor O&M Contractor

Cochin International Airport Limited (CIAL) Public Limited Company

Investments in Facilities/Govt. Assets Estimated Project Cost Rs. 303 Cr. Estimated Project Cost Rs. 303 Cr. Legal Instrument

BOO

Equity F i n a n c i a l I n f o r m a t i o n

INVESTOR: over 10,000 shareholders (NRIs, mainly of Keralite origin) from 29 countries Government of Kerala

Total Equity : Rs. 85 Cr. Other Financial Instrument

Interest free security deposits of Rs. 12 crore from various airport service Providers

Debt : Total Debt : Rs. 218 Cr. Project Cost (at Financial Close)

Rs. 303 Cr.

Modernization of Delhi International Airport Project Name Modernization of Delhi International Airport State Delhi Location Delhi Sector Airports Capacity / Size

Ultimate design capacity of 100 mppa (million passengers per annum) Phase 1 to have capacity of 37 mppa by 31 March 2010 for Commonwealth Games


114

Type of PPP LDOT Type of Nodal Department

Centre


Airports Authority of India (AAI)

Contract Period

30 yrs. Additional Information : : Brownfield (Lease Develop Operate Transfer (LDOT)) The OMDA agreement shall continue from the Effective Date (date on which Conditions Precedent are satisfied) until the 30th anniversary of the Effective Date. The JVC shall have a right to extend the term for an additional term of 30 years, provided there has been no JVC Event of Default during the preceding 5 years of the 25th year from the Effective Date and that such right is exercised prior to 25th anniversary from the Effective Date, but not earlier than 6 months from the 25th anniversary from the Effective Date.

Project Status Construction Project Proponent

Delhi International Airport Limited (DIAL) -

Project Company/Developer /Operator

GMR-Fraport Consortium Legal Status of Project Company Joint Venture Company (JVC)

Larsen & Toubro (L&T) Limited EPC Contractor BL Kashyap Private Limited Fraport AG Frankfurt Airport Services Worldwide

O&M Contractor

Alpha-Pantaloon Contract Award Method


Investments in Facilities/Govt. Assets

Estimated Project Cost Rs. 86 billion (Phase 1) Total land area available at IGI airport is 5106 acres (current operational area constitutes of about 1907 acres). Besidesa six-lane highway connecting the Airport to Delhi-Gurgaon (NH8) Highway, DIAL is also working with Delhi Metro for a high speed metro link between the Airport and Connaught Place in Delhi

Amount of Government Support - (VGF)

Amount : Rs. 0 Cr. Description : Not Applicable Support Payment Compliance : Not Applicable


115


Phase 1 includes renovation of Terminals 1A, 1B, 1C and Terminal 2, construction of 4.43km CAT IIIB and Code F compliant runway, construction of new domestic terminal and construction of an integrated passenger terminal (Terminal 3) catering to domestic and international passengers and spread over 480,000 sq.m. DIAL has also commissioned 4 new rapid exit taxiways, and a parallel taxiway to the secondary runway to reduce waiting time.


116


For the duration of the Transition Phase (3 months from Effective Date), a joint committee consisting of representatives each of AAI and the JVC shall be responsible for the overall supervision of the Airport operations. At the end of the Transition Phase, JVC would operate and maintain the Airport independently. JVC shall at all times comply with Applicable Law and operate, maintain, develop, design, construct, upgrade, modernize, manage, and keep in good operating repair and condition the Airport, in order to ensure that the Airport at all times meets the requirements of an international world class airport, in accordance with Good Industry Practice, Development Standards and Requirements, Operation and Maintenance Standards and Requirements, in such a way as to minimize inconvenience to users of the Airport The JVC shall develop the Airport in accordance with the Master Plan. Independent Engineer shall be appointed for the purpose of determining and ensuring compliance with planning approvals and standards with respect to Airport development and performing the Duties as specified under the Agreement. The OMDA Implementation Oversight Committee (OIOC), formed under the Chairmanship of Secretary, Ministry of Civil Aviation, will be the ‘single point of contact’ for the JVC for all matters concerning the OMDA Agreement, and will be responsible for ensuring that the Conditions Precedent are duly fulfilled. The OIOC would conduct a joint review of emerging issues and concerns and keep an oversight of the development of the Airport. The JVC shall review annually, progress under the Environmental Management Strategy, report it to AAI, and update it from time to time. JVC shall ensure that at termination the environmental condition of the Airport meets all statutory and regulatory requirements. To establish mechanisms to review and assess performance in respect to service delivery and management systems, JVC shall undertake ISO 9001:2000 Certification, achieve Objective and Subjective Service Quality Requirements, and comply with specified Development Standards and Requirements. The JVC shall submit monitoring and information reports to AAI on a regular basis.

Legal Instrument

LDOT


117


The JVC has exclusive right and authority during the Term to undertake the functions of operation, maintenance, development, design, construction, upgradation, modernization, finance and management of the Airport and to perform Aeronautical Services, and Non-Aeronautical Services (but excluding Reserved Activities) at the Airport.

Regulatory Framework

At present there is no Independent Regulatory Authority for airports to perform key regulatory functions including tariff setting, licensing, compliance oversight, ensuring fair competition, etc. Most of these functions shall be governed by the OMDA Agreement. Airports Authority of India (AAI) is administering the OMDA Agreement.

Tariffs The Aeronautical Charges (the charges to be levied at the Airport by the JVC for the provision of Aeronautical Services and consequent recovery of costs relating to Aeronautical Assets) levied at the Airport shall be as determined as per the provisions of the State Support Agreement. The JVC shall be free to fix the charges for Non-Aeronautical Services, subject to the applicable law and provisions of the existing contracts and other agreements. The Essential Services shall be provided free of charge to passengers. The Passenger Service Fees shall be collected and disbursed in accordance with the provisions of the State Support Agreement. The JVC shall pay to the AAI an upfront fee of Rs 150 Crore by the Effective Date. The JVC shall also pay to the AAI an annual fee for each Year during the Term of the Agreement, equivalent to 45.99% of the projected revenue for the year.

Dispute Resolution Mechanism

The Parties shall use their respective reasonable endeavors to settle any Dispute amicably. If a Dispute is not resolved within sixty (60) days after written notice of a Dispute by one Party to the other Party then it shall be referred to arbitration, as under. All disputed referred to arbitration shall be referred to a tribunal comprising three (3) arbitrators under the (Indian) Arbitration and Conciliation Act, 1996. Each Party to the arbitration shall appoint one arbitrator and the two arbitrators thus appointed shall choose the third arbitrator who will act as a presiding arbitrator of the tribunal.

F I N A N C I A L I N F O R M A T I O N Equity :


118

INVESTOR COUNTRY % HOLDING AMOUNT (Rs. Crore)

GMR Infrastructure Ltd. India 31.1 373.2 Airports Authority of India (AAI) India 26 312 Fraport AG Frankfurt Airport Services Worldwide

Germany 10 120

Eraman Malaysia (Malaysia Airports (Mauritius) Private Limited)

Malaysia 10 120

India Development Fund India 3.9 46.8 GVL Investments Pvt. Ltd. India 9 108 GMR Energy Ltd. India 10 120 Total Equity : Rs. 1200 Cr. Debt : INVESTOR TYPE OF

INSTRUMENT

AMOUNT TYPE

ICICI Bank as Lead Arranger None Rs. 4,400.00 Crore

3

Total Debt :Rs. 4400 Cr. Other Financial Instrument

Trade and Upfront Deposits for Land Bank Development

Total Others Rs. 3000 Cr. Debt : Equity 79 % : 21 % Government Equity : Private Equity

26 % : 74 %

Government Support

VGF by Sponsoring Authority : Rs. 0 Cr. VGF under VGF scheme of DEA : Rs. 0 Cr. Guarantee : Not Applicable


Rs. 8600 Cr.

Hyderabad International Airport Project Name Hyderabad International Airport State Andhra Pradesh Location Shamshabad in Ranga Reddy District of Andhra Pradesh About 20

km south of the present Hyderabad airport at Begumpet. Sector Airports


119

Capacity / Size

Initial phase (1A) to have capacity of 5 mppa (million passengers per annum). Ultimate development as per Master Plan caters for 40 mppa.

Type of PPP BOOT Type of Nodal Department

Centre


Ministry of Civil Aviation, Government of India

Contract Period

30 yrs. Additional Information : : Greenfield Airport Concession Agreement shall continue from its commencement until the 30th anniversary of the Airport Opening Date whereupon the term of the Agreement shall at the option of HIAL be extended for a further period of 30 years. HIAL may at any time prior to the 27th anniversary of the Airport Opening Date, exercise the option of extending the term of the Concession Agreement by another 30 years. The 30 year period excludes Construction Period of 36 months from Financial Close Financial Close to be achieved within 12 months from the date of signing of Concession Agreement

Project Proponent

Project Company/Developer /Operator

Hyderabad International Airport Limited (HIAL)

Legal Status of Project Company

Joint Venture Company

China State Construction Engineering (Hong Kong) Ltd (CSCEHK)

EPC Contractor

Larsen & Toubro (L&T) Limited Menzies & Bobba Aviation and SATS Consortia Nuance-Shoppers Stop Indian Airlines and Air India Consortia Menzies Aviation Public Limited Company

O&M Contractor

LSG Sky Chef, Sky Gourmet


120

Reliance Industries Accor Group

Contract Award Method


Investments in Facilities/Govt. Assets

The proposed outer ring road for Hyderabad will provide an alternate means of connectivity to major suburbs like the Hitech City. Rail connectivity from the city centre is expected to be ready by the time the airport is operational.

Estimated Project Cost

Rs. 2478 Cr.


Amount : Rs. 107 Cr. Description : Cash Grant by Government of Andhra Pradesh


The new airport will leverage the multiple advantages of Hyderabad city. The airport’s strategic location will help significantly reduce travel time on domestic and international routes and therefore, dramatically cut down fuel costs. First Phase- 105,300 sq.m passenger terminal Terminal building with 10 contact and 20 remote stands for aircraft parking Combined area of 35000 sq. m including- ATC, Technical section building, Cargo (100000 tonne capacity), Aircraft maintenance, Airport maintenance, CFR station, Utilities Construction of subsequent phases to be determined by actual traffic volume


121


Phase, and remedy any defects in respect thereof, in accordance with the Master Plan, Good Industry Practice and Applicable Law. HIAL shall ensure that the Works shall conform with the Specifications and Good Industry Practice. In order to assist HIAL and Government of India (GoI) achieve their objectives under this Agreement a joint coordination committee shall be formed comprising HIAL, Government of India (GoI), Government of Andhra Pradesh (GoAP) and the other Relevant Authorities providing the Reserved Activities. The joint coordination committee shall meet at least once in three months commencing with the first month following the Effective Date. HIAL shall at all times comply with Applicable Law in the operation and maintenance of the Airport and will operate, maintain, keep in good operating repair and condition in accordance with Good Industry Practice and, in accordance with the Standards and renew, replace and upgrade to the extent reasonably necessary, the Airport. Throughout the term of this Agreement the Airports performance shall be monitored by passenger surveys. The criteria used to measure the Airports performance shall be the IATA Global Airport Monitor service standards or such criteria as may be mutually agreed upon from time to time (the "Standards"). The first such survey shall be conducted during the third (3rd) year after Airport Opening. From the date the Independent Regulatory Authority (IRA) has power to review, monitor and set standards and penalties and regulate any such related activities at the Airport, HIAL shall be required (instead of the above provisions) to comply with all such regulations framed by IRA.

Legal Instrument

BOOT


HIAL has the exclusive right and privilege to carry out the development, design, financing, construction, commissioning, maintenance, operation and management of the Airport (but excluding the right to carry out the Reserved Activities and to provide communication and navigation surveillance/air traffic management services which are required to be provided by AAI). No new or existing airport shall be permitted by Government of India (GoI) to be developed as, or improved or upgraded into, an International/Domestic Airport within an aerial distance of 150 kilometers of the Airport before the twenty-fifth anniversary of the Airport Opening Date.

Tariffs


122

HIAL shall be entitled to levy and recover from airline operators, passengers and other users and in respect of both domestic and international aircraft and passenger movements, at rates consistent with ICAO Policies, the following Regulated Charges: Landing, Housing and Parking charges (domestic and international), Passenger Service Fee (domestic and international) The charges to be adopted by HIAL at the time of Airport Opening will be the higher of: (a) The AAI tariff effective 2001 duly increased with inflation index up to the Airport Opening Date, or (b) The then prevailing tariff at the other AAI airports. User Development Fee (UDF) (domestic and international): HIAL will be allowed to levy UDF with effect from Airport Opening Date, duly increased in the subsequent years with inflation index from embarking domestic and international passengers, for the provision of passenger amenities, services and facilities and the UDF will be used for the development, management, maintenance, operation and expansion of the facilities at the Airport. Route Navigation Facilities Charges and Terminal Navigational Landing Charges shall be levied and collected by AAI. HIAL shall, in consideration for the grant by Government of India (GoI) of the Concession, pay to GoI a fee amounting to four per cent (4%) of Gross Revenue annually as Concession Fee. The Concession Fee in respect of the first 10 Financial Years shall be payable in 20 equal half-yearly installments, while the Concession Fee in respect of the 11th Financial Year and each succeeding Financial Year shall be payable annually.


123


1. Negotiation and Conciliation The Parties shall use their respective reasonable endeavors to settle any dispute, difference, claim, question or controversy between the Parties amicably between themselves through negotiation. 2. Reference to Arbitrator Subject to anything contained in the relevant Independent Regulatory Authority legislation regarding the settlement of disputes, any Dispute which the Parties are unable to resolve through negotiation and conciliation within sixty (60) days (or such longer period as the Parties may agree) of the written notification by one Party to the other of the existence of a Dispute shall be finally determined by arbitration in accordance with the Indian Arbitration and Conciliation Act, 1996 and in accordance with the UNCITRAL rules (the "Rules") by three arbitrators appointed in accordance with the Rules. In case of conflict between Indian Arbitration and Conciliation Act, 1996 and the Rules, the provisions of the former will prevail.

Renegotiation and Disputes within Project

Initial Estimated Project Cost Rs. 17.6 Bn (USD 409.3 Mn) Project Cost revised to Rs. 24.78 billion on account of construction of additional facilities including a common fuel farm and business hotel.

F I N A N C I A L I N F O R M A T I O N Equity : INVESTOR COUNTRY %

HOLDING AMOUNT(Rs. Crore)

Airports Authority of India (AAI) India 13 49.14 Government of Andhra Pradesh India 13 49.14 GMR Group India 63 238.14 Malaysian Airport Holding Berhad (MAHB)

Malaysia 11 41.58

Total Equity : Rs. 378 Cr. Debt : INVESTOR AMOUNT TENOR

(YEAR) MORATORIUM (YEAR)

TYPE COMMENTS

State Support - Interest Free Loan

Rs. 315.00 Crore

5 16 1 Interest free loan refundable in 5 equal installments commencing from 16th year.

Allahabad Bank Rs. 120.00 Crore

16 3 Repayment of the loans Commence from the opening of the new airport.


124

Bank of Baroda Rs. 110.00 Crore

16 3 Repayment of the loans commence from the opening of the new airport.

Canara Bank Rs. 100.00 Crore

16 3 Repayment of the loans Commence from the opening of the new airport.

Industrial Development Bank of India (IDBI) Limited

Rs. 100.00 Crore


Infrastructure Development Finance Company (IDFC) Limited - Lead lender

Rs. 200.00 Crore


Oriental Bank of Commerce

Rs. 110.00 Crore


State Bank of Hyderabad

Rs. 120.00 Crore


Vijaya Bank Rs. 100.00 Crore


Additional debt (on account of revision in project cost) from Abu Dhabi Commercial Bank, Andhra Bank and Vijaya Bank

Rs. 718.00 Crore

3

Total Debt : Rs. 1993 Cr. Debt : Equity 84 % : 16 % Government Equity : Private Equity

26 % : 74 %


125

Government Support

VGF by Sponsoring Authority: Rs. 107 Cr. VGF under VGF scheme of DEA : Rs. 0 Cr. Guarantee : Not Applicable

Total VGF/ Government Support

Rs. 107 Cr.

Other Support AAIs equity investment is capped at Rs. 500 million Stamp Duty / Registration Fee waived off on transfer of land as well as all project agreements. Sales Tax waived off on all construction material. Land Lease – Approx 5490 acres of land co-terminus with State Support Agreement. Land was given to the developer on a nominal lease of 2 per cent of the total land cost of Rs 155 crore. Tax Benefits: Benefit has been assumed u/s 80IA of the Income-tax Act 1961 for tax exemption in respect of profits & gains from the business of development of an infrastructure facility viz., airport. A deduction of 100% of the profits & gains derived from such business has been assumed for any 10 consecutive assessment years out of 15 years beginning from the year in which HIAL begins to operate and maintain the infrastructure facility. Exemptions from Income Not Forming Part of Total Income: Withholding tax for technical fees payments to Malaysia will continue as per the Double Taxation Avoidance Agreements of India with Malaysia. No withholding tax on reimbursement of development costs/pre-SHA costs to foreign promoters. No R&D Cess payable on remittances on reimbursements made to foreign promoters and payments made under technical services agreement.


Rs. 2478 Cr.


126

Modernization of Mumbai International Airport Project Name Modernization of Mumbai International Airport State Maharashtra Location Mumbai Sector Airports Capacity / Size The Master Plan incorporates passenger traffic

capacity of 40 mppa (million passengers per annum) and cargo traffic capacity of 1 Mn tonnes per year.

Type of PPP LDOT Type of Nodal Department

Centre

Contracting Authority Airports Authority of India Contract Period 30 yrs.

Additional Information : : Brownfield (Lease Develop Operate Transfer (LDOT)) The OMDA agreement shall continue from the Effective Date (date on which Conditions Precedent are satisfied) until the 30th anniversary of the Effective Date. The JVC shall have a right to extend the term for an additional term of 30 years, provided there has been no JVC Event of Default during the preceding 5 years of the 25th year from the Effective Date and that such right is exercised prior to 25th anniversary from the Effective Date, but not earlier than 6 months from the 25th anniversary from the Effective Date.

Project Proponent Mumbai International Airport Limited (MIAL) GVK-Airports Company of South Africa

Project Company/Developer /Operator (ACSA) Consortium Legal Status of Project Company

Joint Venture Company (JVC)

Larsen & Toubro (L&T) EPC Contractor HDIL ACSA Global Limited O&M Contractor Aldeasa-ITDC

Contract Award Method International Competitive Bidding Investments in Facilities/Govt. Assets

Estimated Capital Investment Rs. 70 billion (USD 1627.91 Mn) over 20 years, of which Rs. 5800 crore (USD 1348.84 Mn) will be invested in the first seven years.

Estimated Project Cost Rs. 5800 Cr.


127


Amount : Rs. 0 Cr. Description : Not Applicable Support Payment Compliance : Not Applicable


The first phase (to be completed by 2008)includes incorporating new airline lounges, retail outlets and duty-free shops in Terminal 2B, upgrade and expand check-in counters and boarding bridges in Terminal 1A, setting up temporary cargo facilities, upgradation of air0side and city-side facilities such as construction of rapid exit taxiways and construction of multi-level car parks. The second phase (to be completed by 2010) involves construction of new terminal at Sahar-Terminal 2 for catering to domestic and international passengers, construction of road link from the western express to the new terminal, shifting of Air Traffic Control (ATC) Tower, construction of a parallel runway and new cargo facilities.


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For the duration of the Transition Phase (3 months from Effective Date), a joint committee consisting of 3 representatives each of AAI and the JVC shall be responsible for the overall supervision of the Airport operations. At the end of the Transition Phase, JVC would operate and maintain the Airport independently. JVC shall at all times comply with Applicable Law and operate, maintain, develop, design, construct, upgrade, modernize, manage, and keep in good operating repair and condition the Airport, in order to ensure that the Airport at all times meets the requirements of an international world class airport, in accordance with Good Industry Practice, Development Standards and Requirements, Operation and Maintenance Standards and Requirements, in such a way as to minimize inconvenience to users of the Airport The JVC shall develop the Airport in accordance with the Master Plan. Independent Engineer shall be appointed for the purpose of determining and ensuring compliance with planning approvals and standards with respect to Airport development and performing the Duties as specified under the Agreement. The OMDA Implementation Oversight Committee (OIOC), formed under the Chairmanship of Secretary, Ministry of Civil Aviation, will be the ‘single point of contact’ for the JVC for all matters concerning the OMDA Agreement, and will be responsible for ensuring that the Conditions Precedent are duly fulfilled. The OIOC would conduct a joint review of emerging issues and concerns and keep an oversight of the development of the Airport. The JVC shall review annually, progress under the Environmental Management Strategy, report it to AAI, and update it from time to time. JVC shall ensure that at termination the environmental condition of the Airport meets all statutory and regulatory requirements. To establish mechanisms to review and assess


129

Legal Instrument LDOT Market Structure and Competition

The JVC has exclusive right and authority during the Term to undertake the functions of operation, maintenance, development, design, construction, upgradation, modernization, finance and management of the Airport and to perform Aeronautical Services, and Non-Aeronautical Services (but excluding Reserved Activities) at the Airport.

Regulatory Framework At present there is no Independent Regulatory Authority for airports to perform key regulatory functions including tariff setting, licensing, compliance oversight, ensuring fair competition, etc. Most of these functions shall be governed by the OMDA Agreement. Airports Authority of India (AAI) is administering the OMDA Agreement.


130

Tariffs The Aeronautical Charges (the charges to be levied at the Airport by the JVC for the provision of Aeronautical Services and consequent recovery of costs relating to Aeronautical Assets) levied at the Airport shall be as determined as per the provisions of the State Support Agreement. The JVC shall be free to fix the charges for Non-Aeronautical Services, subject to the applicable law and provisions of the existing contracts and other agreements. The Essential Services shall be provided free of charge to passengers. The Passenger Service Fees shall be collected and disbursed in accordance with the provisions of the State Support Agreement. The JVC shall pay to the AAI an upfront fee of Rs 150 Crore by the Effective Date. The JVC shall also pay to the AAI an annual fee for each Year during the Term of the Agreement, equivalent to 38.7% of the projected revenue for the year.


The Parties shall use their respective reasonable endeavors to settle any Dispute amicably. If a Dispute is not resolved within sixty (60) days after written notice of a Dispute by one Party to the other Party then it shall be referred to arbitration, as under. All disputed referred to arbitration shall be referred to a tribunal comprising three (3) arbitrators under the (Indian) Arbitration and Conciliation Act, 1996. Each Party to the arbitration shall appoint one arbitrator and the two arbitrators thus appointed shall choose the third arbitrator who will act as a presiding arbitrator of the tribunal.

F I N A N C I A L I N F O R M A T I O N Equity :


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INVESTOR COUNTRY

% HOLDING

AMOUNT (Rs. Crore)

ACSA Global Limited (Airports Company South Africa Limited)

Mauritius 10 160

GVK Airport Holdings Pvt. Ltd. (GVK Industries Limited)

India 37 592

Bid Services Division (Mauritius) Ltd. (The Bidvest Group Limited)

Mauritius 27 432

Airports Authority of India (AAI) India 26 416 Total Equity : Rs. 1600 Cr. Debt :

INVESTOR

AMOUNT

TENOR (YEAR)

MORATORIUM (YEAR)

TYPE

COMMENTS

IDBI led consortium comprising of Andhra Bank, Bank of Baroda, Bank of India, Canara Bank, Central Bank of India,India Infrastructure Finance Company Ltd. (IIFC), Indian Bank, IDBI, Oriental Bank of Commerce, Punjab National Bank, Syndicate Bank, United Bank of India, UTI Bank Ltd. and Vijaya Bank

Rs. 4,200.00 Crore

17 7 1 The loan covers a seven-year drawl period. MIAL has procured an interest rate, which is benchmarked to three years Government Security plus a margin of 215 basis points. The loan will be repaid in 120 monthly payments. The loan is flexible and GVK could replace it with foreign currency borrowings.

Total Debt :Rs. 4200 Cr. Debt : Equity

72 % : 28 %


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Government Equity : Private Equity

26 % : 74 %

Government Support

VGF by Sponsoring Authority : Rs. 0 Cr. VGF under VGF scheme of DEA : Rs. 0 Cr. Guarantee : Not Applicable

Other Support

Equity contribution by AAI capped at Rs. 500 crore


Rs. 5800 Cr.