Airport Privatization in India:

Lessons from Delhi and Mumbai

Rekha Jain
G Raghuram
Rachna Gangwar
Indian Airports

• 449 airports/airstrips in the country

• 126 airports managed by AAI
- 13 international
- 85 domestic
- 28 civil enclaves at defence
airfields

Source: Annual Report 2005-06, Ministry of Civil Aviation

Airport Privatization: Earlier Non-AAI Airports

1. Cochin
• Government of Kerala (35%)
• Investor Directors and Relatives (37%)
• Public and NRIs (14%)
• Central PSU (AI, BPCL) (7%)
• Commercial Banks (6%)
• Facility Providers (AI, BPCL, SBT) (1%)

Source: Secretary, MoCA

Airport Privatization: Earlier Non-AAI Airports

2. Bangalore
• Karnataka State Investment and Industrial
Development Corporation (13%)
• AAI (13%)
• Siemens Projects (40%)
• Larsen & Toubro (17%)
• Unique Zurich Airport (17%)

Source: http://www.bialairport.com
Airport Privatization: Earlier Non-AAI Airports

3. Hyderabad
• Government of Andhra Pradesh (13%)
• AAI (13%)
• GMR Group (63%)
• Malaysia Airports Holdings Berhad (11%)

Source: http://www.newhyderabadairport.com/
 Privatization of Delhi and
Mumbai
• Early Steps and Scope
• Transaction Agreement
• Pre and Post Bid Events
• Scoring and Rescoring Criteria/Factors
• Criterion for GMR’s Choice
• Bid Specific and Other Issues
• Lessons Learned
• Post Bid Issues
Issues by GETE for Rescoring

1. Weightages were assigned to sub-factors equally. (The EC

had assigned the weightages on a ‘subjective’ basis).
2. Since the non-OECD experience of ASA was only in airport
development and not in operations, giving high marks to this
was not in conformity with the RFP. (The EC had given 75%
marks).
3. The marks for the current non-aeronautical revenue share of
the bidders were rescaled to begin at 50% (from 75%) for the
‘required’ 40% share.
4. The marks for the proposed three year staff absorption share
were rescaled to begin at 0% (from 50%) for the minimum
40% share.
 Staff Absorption Share

100

EC
% Marks

50 GETE

0 40 100
Staff Absorption Share
EGoM’s Framework (January 24th, 2006)

• GMR-Fraport is the only technically qualified bidder for

both the airports
• Financial bids of the top four technical bidders will be
opened
• GMR-Fraport is given the choice of selecting the airport
subject to matching the highest financial bid since they are
the only technically qualified bidder
• The other airport (not chosen by GMR-Fraport) will be
awarded to the highest financial bidder amongst three
bidders. Government has declared technical cut-off marks
of 50% for this airport
 Criteria for EGoM’s Framework
• Speed of decision: Commonwealth Games
• Timeliness of decision: Praful Patel’s
commitment
• Validity/robustness of current process
(weaknesses in RFP, repeated three
evaluations)
• Unbiased approach
• Potential for new bid content, other players
• Political implications
• Implications for future airports, other
infrastructure
Financial Bids (January 31, 2006)

S Management Capability Development

Name of the Bidder Financial Bid
No Pre GETE Post GETE Capability
Delhi Airport
1 Reliance-ASA 80.9 74.8 81.0 45.99
2 GMR-Fraport 84.7 81.7 80.1 43.64
3 DS Construction-Munich 73.1 73.3 70.5 40.15
4 Sterlite-Macquarie-ADP 57.0 53.5 61.9 37.04
5 Essel-TAV 37.6 40.4 41.4 Bid not opened
Mumbai Airport
1 Reliance-ASA 81.0 74.8 80.2 21.33
2 GMR-Fraport 84.7 81.7 92.7 33.03
3 DS Construction-Munich 73.1 73.3 54.7 28.12
4 Sterlite-Macquarie-ADP 57.0 53.5 65.1 Bid not opened
5 Essel-TAV 35.5 38.3 29.4 Bid not opened
6 GVK-ACSA 76.0 73.0 59.3 38.70
[Source: SC, 2006]
 Criteria for GMR’s Choice
• Highest financial bid (Delhi: 45.99%, Mumbai:
38.70%)
Revenue share increase for GMR
(Delhi: 2.35%, Mumbai: 5.67%)

• Impact on Reliance
– GMR choosing Delhi: GVK gets Mumbai
– By Choosing Mumbai: Reliance gets Delhi

• Changes in the environment after September

14, 2005
 Criteria for GMR’s Choice (?)
• Vacant land available (Delhi: 2723 acres, Mumbai: 56 acres)
• Encroached/disputed land (Delhi: 91 acres, Mumbai: 200
acres)
• Total Revenue 2003-04 (Delhi: Rs 4,089m Mumbai: Rs
4,376m)
• Use of land for Non-Aero purposes (Delhi: 5% (253 acres),
Mumbai: 10% (187.5 acres))
• Threat of traffic diversion from Mumbai airport due to
upcoming Bangalore and Hyderabad Airports as well as due
to proposal of second airport in Navi Mumbai
• Runway layout (Delhi: nearly parallel, greater scope for
simultaneous use, Mumbai: intersecting)
• By 2025, Mumbai airport will be saturated as per the SH&E
analysis
• CAGR 1999-00 to 2003-04 (Delhi: 9.39%, Mumbai: 6.54%)
• Ability to leverage commonwealth games in Delhi
EGoM’s Decision (January 31, 2006)

After GMR-Fraport chose Delhi airport and matched the

highest bid of Reliance ASA, EGoM awarded

• Delhi airport to GMR-Fraport

• Mumbai airport to GVK-ACSA
Subsequent Events

February 2, 2006 Reliance filed a writ petition under Article 226

of the Constitution in the High Court of Delhi

April 21, 2006 A division bench of the High Court dismissed

the writ petition on the primary ground that the
EGoM had absolute discretion in the matter of
choosing the modalities

April 24, 2006 The petitioner appealed to the Supreme Court

November 07, 2006 The Supreme Court also dismissed the

petition
 Bid Specific Issues
 Should the GETE report have been accepted,
especially since it revises the Reliance score to
below cut off?

 Should GMR have been given a choice? Or should

they have been given the airport where there would
have been the best value for GoI on opening the
financial bids? (GMR’s choice of Delhi airport
effectively got Reliance out of the bid).

 Should GMR, while being given the choice, be asked

to match the highest financial bid?
• What if the financial bid among the top four had been
significantly higher than GMR’s?
 Bid Specific Issues
 Should the “other” airport have been re-tendered ?
• Implications of rebidding?

 For the “other” airport, should the opportunity to

match the highest financial bid have been given in
order of the technical rank rather than treating all
above 50%/top 4 equally?

 If a key criteria for the EGoM was to come up with a

framework by which no winning bid for a specific
airport should be known apriori, to avoid possible
accusations of bias, then what choices did the EGoM
have?
Larger Issues

• Was the RFP well thought out?

• Was it OK for bidders to make contact with various

committees/those involved?

• Was lowering the cut off justified?

• Were two re-evaluations justified?

Larger Issues
 Danger of over determination in the contractual
parameters

 Pool of bidders being restricted by requirements such as

FDI caps, a foreign player having to be a constituent of
the bid consortia, and limits on airline participation

 Role of regulators, especially for tariff setting of

aeronautical charges?

 Implications for next round of bids, other sectors

 Sustainability of the high revenue share (winning bids

are in the 38-46% range, while the minimum was set at
5%)
Lessons Learned
1. A lot of thought should be given to the RFP
including
a. Bid structure
– Parameters (eg integration between different
terminals, other modes)
– Weightages and Scoring
– Obligations of bidders during the bid process
– Transparency
– Implications for those who had not bid
b. Constitution of EC and other Committees
c. Contingency plan: if none or one had qualified
Lessons Learned
2. Norms during the bidding process need to be
specified and complied with

a. Adherence to deadlines
b. responsibility of the bidders in identifying and bringing
to notice deficiencies in the bid document during pre
bid meetings
c. discretion on the part of bidders in independently
communicating with sensitive stakeholders (decision
makers, media etc)
d. deciding modifications in the evaluation by the EC, if
essential, prior to opening of the bids
Other Issues

• Positive Mood of Privatization of Infrastructure –

Central Government ; Commercial Capital and
National Capital

• Tired/Worn out: Further Modernisation not by

Privatization

• Centre vs State
Post Bid Issues
• DIAL vs MoCA on Architecture
• Subsidiaries and then JVs for Commercial Development –
Implications for Revenue Share
• Cargo Free Time
• MIAL – Encroachments, Responsibility?
• Duty Free Retail Deal
• New Airports – NOIDA, New Mumbai
• Leveraging Business at Other Airports
• Government Nominees on Board
• Airport Development Fee Vs User Development Fee
• Earnings for AAI
• AERA Constituted
 Earnings for AAI from Delhi and
Mumbai Airport
Rs Crores

Delhi Airport Mumbai Airport

Year Profit Of which, Profit Of which,

fee paid by fee paid by
DIAL MIAL
2004-05 345 - - -
2005-06 515 - - -
2006-07 482 272 - -
2007-08 403 403 - -
2008-09 432 432 - -
2009-10 544 544 397 397
AAI Financials Year

2013-14 2014-15 2015-16

(Rs cr)
Airport Navigational Services 2230 2356 2581
Airport Services 2098 2450 2891
Non-Aeronautical Services 814 981
Cargo Revenue 192 196 201
Airport Lease Revenue 2684 2907 3370
Other Income 151 394
Total 8169 9284 10284
Profit Before Tax 2520 2791
Profit 1441 1959 2537
Airport Lease Rev/Total Rev 0.32 0.31 0.31
 Developments
• Navi Mumbai Airport: Revenue Share 10%
(GVK)
• Privatization of Ahmedabad and Jaipur:
Only Management and operations
• AAI to develop Chennai and Kolkatta on
its own

• Thank You
Other Two Metro Airports
Decision on Chennai and Kolkata

• Modernization will be undertaken by AAI

• Funding through internal resources

• Estimated modernization cost for

- Chennai airport: Rs 20 bn
- Kolkata airport: Rs 15 bn
Earnings for AAI from Delhi Airport
Rs crores

AAI’s Revenue AAI’s Profit Annual fee paid by

after Tax DIAL
2004-05 2997 325 -
2005-06 3490 718 -
2006-07 3726 860 272
2007-08 4289 1,082 403
2008-09 4186 687 441
2009-10 4450 624 539
In the last 5 years, the AAI has earned Rs 4,749 crore thanks to its share of
revenue.

More specifically, since 2007, almost 20% of its current annual revenue
MoCA Annual Report 2009-10, and DIAL’s Auditors’ Report
comes from its stakes in Delhi and Mumbai Airport. And a small amount from
Privatization of Delhi and Mumbai: Early Steps
1996 Modernization of Delhi and Mumbai was first considered by
Airport Authority of India (AAI)
June 2003 AAI Board approved the modernization proposal costing
Rs 30 bn
September 2003 Government approved on a long term lease by joint venture
route with 74 per cent equity of a private consortium and 26
per cent of AAI. Empowered Group of Ministers (EGoM)
was constituted
October 2003 Ministry of Civil Aviation (MoCA) constituted the Inter
Ministerial Group (IMG) to assist the EGoM
December 2003 EGoM approved the appointment of ABN Amro as the
financial consultants
February 17, 2004 An Invitation to Register an Expressions of Interest
(ITREOI) for acquisition of 74 per cent equity stake in the
Joint Venture Company (JVC) was issued
June 04, 2004 Last date of submission of expression of interest (EOI)
DIAL vs MoCA on Architecture
• GMR wanted to give the airport facade a red
sandstone structure, much like the majestic Red Fort

http://www.businessworld.in/content/view/2534/2612
 GMR’s Proposal

http://www.businessworld.in/content/view/2534/2612
 DIAL vs MoCA on Architecture
• Praful Patel purged the design of the intended
Indianness and, presumably inspired by Singapore’s
Changi International Airport, asked for a glass-and-steel
look instead.

• The airport layout changed extensively following the

ministry’s comments. The changes to the blueprint
ultimately led to the relocation of both the new third
runway at the airport and the terminal buildings. Five
rectangle-shaped structures that will form a U, when
completed in 2040, have replaced the original H-shaped
terminals. Construction of the first terminal began from
the East in February, though according to GMR’s master
plan, it should have started from the West. “
http://www.businessworld.in/content/view/2534/2612
After Ministry’s Intervention

http://www.businessworld.in/content/view/2534/2612
 Subsidiaries for Commercial Development
Implications for Revenue Share

• Delhi Aerotropolis Private Limited (DAPL)

– Incorporated on May 22, 2007 as a 100% subsidiary of DIAL
with an objective of commercial property development at IGIA

• DIAL Cargo Private Limited (DPCL)

– Incorporated on 28th June, 2007 as a 100% subsidiary of DIAL
with an objective to carry on the business of development,
operation, providing, export, import, maintenance of cargo
services, cargo terminals for providing cargo handling services
and cargo handling system, re-engineering systems and
procedures for hassle free cargo terminal operations resulting in
reduction of dwell time.

http://www.gmrgroup.co.in/GIL11thAnnualReport2006-07.pdf
 Subsidiaries for Commercial Development
Implications for Revenue Share

• DIAL receives 250 acres of land around the Delhi airport to be

developed commercially, with 46 per cent of the revenues accruing
from it flowing back to the government
• The company passes on the licence to develop the land it had
received as part of the privatisation deal to a newly formed subsidiary
DAPL.
• Since the sale consideration would be recognised in a "separate
entity", the government would not be entitled to any share in this
revenue, GMR officials said.
• According to ballpark estimates, potential revenues from land lease
and rentals stand in excess of Rs 25,000 crore for the 250 acres of
land, with the government ideally entitled to revenues of over Rs
10,000 crore

http://in.rediff.com/money/2007/aug/16gmr.htm
 DIAL
• OMDA stands for Operations, Maintenance and Development
Agreement.
• Relevant OMDA Clause 8.5.7 (i) (a)
– Any activity may be sub-contracted by the JVC, provided always
that notwithstanding the sub-contract, the JVC retains all
management responsibility, obligations and liability in relation to the
subcontracted Airport Service. Any such subcontracting shall not
release the JVC from any of its obligation with respect of the
provision of such Airport Services under this Agreement. It is
clarified that JVC shall remain liable and responsible for any acts,
omissions or default of any sub-contractors, and shall indemnify AAI
in respect thereof. Provided however that any sub-contract involving
foreign manpower or materials shall be subject to the political
sensitivities of GOI.
• Relevant OMDA Clause 8.5.7 (i) (b)
– AAI hereby recognizes the right of JVC to sub-lease and license any
part (but not whole) of the Airport Site to third parties for the
purpose of performance of its obligations hereunder.
Source: OMDA for Mumbai and Delhi Airport
 DIAL
• Relevant OMDA Clause 2.3
– Without prejudice to the generality of Article 2.2, the JVC shall
not during the Term, without the written consent from the AAI
hold any shares, ownership participation or any other ownership
interest in any undertaking other than the Airport.
– Provided that the JVC or its subsidiaries / joint ventures may
undertake treasury operations in the ordinary course of business
and may hold shares, ownership participation or any other
ownership interest in any undertaking specifically incorporated /
created for performing any Aeronautical Services, Non-
aeronautical Services or Essential Services as contemplated
under this Agreement or engaging in designing, constructing,
financing, operating, managing, developing or maintaining a
second airport pursuant to exercise of the Right of the First
Refusal under the State Support Agreement.

Source: OMDA for Mumbai and Delhi Airport

 DIAL
Subsidiaries for Commercial
Development
• Delhi Aerotropolis Private Limited (DAPL)
– Incorporated on May 22, 2007 as a 100% subsidiary of DIAL
with an objective of commercial property development at IGIA

• DIAL Cargo Private Limited (DPCL)

– Incorporated on 28 June, 2007 as a 100% subsidiary of DIAL
with an objective to carry on the business of development,
operation, providing, export, import, maintenance of cargo
services, cargo terminals for providing cargo handling services
and cargo handling system, re-engineering systems and
procedures for hassle free cargo terminal operations resulting in
reduction of dwell time.

http://www.gmrgroup.co.in/GIL11thAnnualReport2006-07.pdf
 JV Details
Sr. No. Type of business JV Name Partner (s) DIAL Equity Revenue Share
Travel Food Services (Delhi T3) Travel Food services (Delhi) Pvt. 20 – 23 % (A)
1 F&B 40.00%
Pvt. Ltd. Ltd. 19 – 22.50 % (D)
23 % except IN22 –
2 F&B Devyani Food Street Pvt. Ltd. Devyani International Ltd. 40.00%
10 %
Delhi Select Service Hospitality
3 F&B SSP Catering India Pvt. Ltd. 40.00% 19 - 22.50 %
Pvt. Ltd.
4 Duty Free Delhi Duty Free Services Pvt. Ltd. Aer Rianta International 49.90% 32%
10 % for first 3 yrs;
Delhi Airport Parking Services Pvt. Tenaga Parking Services (India) 15 % next 2 yrs;
5 Car Park 49.90%
Ltd. Pvt. Ltd 20 % next 5 yrs;
40 % for 15 yrs.
Delhi Aviation Fuel Facility Pvt. Rs 561.75 per KL as
6 Fuel Farm IOCL , BPCL 26.00%
Ltd. Airport operator fee
Cargo – Brown Celebi Delhi Cargo Terminal
7 Celebi Hava Servisi As 26.00% 36%
Field Management India Pvt. Ltd.
Cargo – Green Delhi Cargo Service Centre Pvt.
8 Cargo Service Centre 26.00% 24%
Field Ltd.
Rs 15 Cr. over 10 yrs
(management Fee) +
5 % (on additional
9 I.T Wipro Airport IT Services Ltd. Wipro Ltd. 26.00%
business) Revenue
from IGI Airport’s
ecosystem
TIM Delhi Airport Advertising Pvt. 55 % (upto 15th yr) &
10 Advertising Times Innovative Media Pvt. Ltd 49.90%
Ltd. 61% (16th – 20th yr)

Bridge Mounted 13%

11 Delhi Aviation Services Pvt. Ltd. Celebi, Bird, Cambata 50.00%
Equipment Proposed
 DIAL
CAG’s View
(Report tabled in Parliament on 25 August, 2011)
• DIAL was to pay AAI an annual fee of 45.99 per cent of the gross
revenue earned from the airport. However, DIAL has formed 11 joint
ventures (JVs) to run non aeronautical operations and its agreement
with these JVs provided for 10 per cent to 61 per cent sharing of
gross revenue on the contracted out services. This has resulted in a
substantial reduction in the revenue share of AAI.
• Had AAI managed this contract more pro-actively, it could have
earned additional revenue from 23 to 24 per cent of the revenue that
they were earning.

Source: www.businesstoday.com
 DIAL
CAG’s View
(Report tabled in Parliament on 25 August, 2011)
• The revenue of AAI from cargo and car parking operations declined
by Rs 103.29 Crore between December 2009 to November 2010
compared to the same period of the previous year as the JVs
stepped in to manage these activities, according to the audit report.
• The fall in revenue occurred despite a substantial increase in the
amount of cargo and number of cars handled at Delhi airport during
this period. The audit reveals that though the tonnage of cargo
handled by DIAL during December 2009 to November 2010
increased by 20.88 per cent over the same period of the previous
year, the cargo revenue of DIAL decreased by 37.08 per cent. A
similar reduction in revenue from car parking operations was also
observed.
• The Ministry in consulting the AG on this matter.

Source: www.businesstoday.com
 Cargo Free Time Reduced from
Five Days to Three Days
• Trade members associated with air cargo
have expressed concern over the decision
of the Ministry of Civil Aviation to reduce
the free period for cargo clearance at
airports to three days, from five, effective
October 1.
Business Line, Oct 22, 2007
 MIAL – Encroachments,
Responsibility?
• MIAL estimates suggest that three lakh people inhabit around
65,000 hutments on the 276 acres of encroached land at the
airport. It has also worked out that roughly 176 acres of land
would be required for rehabilitating the slums. With in situ
rehabilitation already ruled out for want of land, MIAL has
invited Expression of Interest (EOI) from private developers.
Five players have responded to the EOI and bids are currently
under evaluation. Under the arrangement, the developer
would have bring in land, bear the cost of building the
tenements and pay the requisite charges to the Government.
In return, the developer would get the money through Transfer
of Development Rights and commercial rights at the airport.

September 12, 2007 (http://cities.expressindia.com/fullstory.php?newsid=255923)

Source: Presentation of Mr Sanjay Reddy, MD, MIAL
 Delhi-Duty Free Retail Deal
• DIAL had awarded the duty free shopping contract to a consortium
of US-based Alpha Airports Group Plc and Pantaloon Retail
(India) Ltd, a Future Group venture. The venture is projected to
generate sales of Rs 500 crore for DIAL in the next 39 months.

• DIAL hopes to extract maximum value from the duty-free

shopping, car park and advertising. These three businesses are
expected to grow 250%, 90% and 215%, respectively in 2007-08.

• DIAL hopes to generate Rs 470 crore from non-aeronautical

sources of business, in the first full year of operations, 2007-08.
This is a 56% jump from what AAI collected from such sources in
2005-06.

26/03/07 Atreyee Dev Roy/Financial Express

 Mumbai-Duty Free Retail Deal
• IPCL-Aldeasa’s bid was the highest at Rs 570
crore
• They were awarded the contract
• Second highest bid was from DFS at Rs 260
crores
• IPCL-Aldeasa felt bidding very high and tried
renegotiating with MIAL
• MIAL refused to do so, since it was a global
tender and renegotiating would have meant
scrapping the entire bidding process
• MIAL awarded the bid to the DFS
Economic Times, November 29, 2007
 Second Airport in Delhi
• The Union Cabinet referred the issue of building a
greenfield airport in Greater Noida to a Group of Second airport won’t hit
Ministers to decide on legal matters and look into IGI, says UP Government
the right of first refusal clause that can be exercised
by the DIAL.
IGI without TIAH
• The Rs 3,505-crore Taj International Aviation Hub 2011 47.40
(TIAH), expected to come up in the Zevar area of
Greater Noida, about 68 km away from IGI airport. 2036 326.61

• Planned through SPV (74% private party, 13% IGI with TIAH
State Govt, 13% other Govt Agencies such as AAI)
2011 45.03 (5%
• DIAL has indicated that it will seek compensation loss)
and demand a level-playing field. Cognisant of
2036 276.82 (15%
DIAL's opposition to the venture, the note to the
Cabinet points out that the central government has loss)
at no stage given any traffic guarantee to DIAL or The Financial Express, January 10, 2008
assured exclusive rights to IGI airport.

Business Line, January 04, 2008

 RIL to Move on Cargo Airport Plan
in SEZ
• A team of Mukesh Ambani’s Reliance Industries Ltd met aviation ministry
officials to kickstart the proposed cargo airport at their ambitious SEZ
project in Jhajjar. The airport and a 2,000-MW power plant were the
highlights of the Rs 40,000-crore project that will be spread over 25,000
acres in Gurgaon and Jhajjar when Ambani inked the deal with Haryana last
June.

• While the Greater Noida airport is 72 km away, the Reliance cargo one is so
close to IGI that ATC services will have to be provided from there itself.
Saying in no uncertain terms that they would oppose this airport, a senior
DIAL official said: "We are all for the growth of aviation sector but the issue
is of timing of introducing more than one airport in Delhi. There has to be
maturity in the market before one does that. Otherwise there will be two or
three week airports instead of one strong hub." The group said its stand on
greater Noida airport would hold true for the Ambani cargo plan also.
18/12/07 Saurabh Sinha/Times of India
 Second Airport in Mumbai
• The proposed Navi Mumbai airport project has been cleared by the Union
Cabinet and its technical aspects by the Indian civil aviation authorities, as well
as the International Civil Aviation Organisation (ICAO).
The project is being developed by various organisations, particularly the state
agency CIDCO.

• Rs 90 biliion Project will be spread over nearly 2050 hectares and have two
parallel runways. Out of the total area, CIDCO already possesses 1,150
hectares, around 450 hectares belongs to other government agencies and the
process of acquiring the remaining land has started.

• CIDCO expects to pick up 26 per cent equity in the project in lieu of land in the
special purpose vehicle.

• The airport is likely to become operational in 2012. It will generate traffic of

around 10 million passengers in the first year itself and the number will reach
50 million by 2030. The developer will thus have an average internal rate of
return amounting to nearly 17.5 per cent.

• CIDCO has short listed four international consultants (Scott & Wilson from
England, Maun Senn from Singapore, Louis Burger from the US and Mott
Mc'Donald from US) to prepare the roadmap
Rediff.com, January 07, 2008. (http://www.rediff.com/money/2008/jan/07air.htm)
 Second Airport in Mumbai
• Got clearance from the Environmental and coastal
Regulation Zone (CRZ) on May 18, 2009, which was the
last hurdle
• Tenders for selection of the developer will be prepared
by 30 September.
• Bids submitted by interested parties will be taken up on
15 February 2010 developer will be shortlisted on 31
March.
• The signing of the agreement and laying of foundation
stone for the project will be done in April- May 2010.
• Basic facilities at the airport are expected to be ready in
September-October 2013.
http://www.domain-b.com/aero/gov_reg/20090519_navi_mumbai_airport.html
 500 New Airports Planned
• Praful Patel said that the government has plans to touch
100 operational airports by 2008 and was working to
create at least 500 small and big airports across the
country with no spot being greater than 50 kms from
airport.
• Under Patel's tenure, the number of operational airports
in the country has gone up from close to 40 in 2004 to 81
at present. Calling aviation a sunrise economy, Patel
said around $150 billion was expected to be invested in
the aviation sector in the next few years.

November 23, 2007 (http://www.rediff.com/money/2007/nov/23air.htm)

 GMR Consortium Bags Istanbul Airport
Contract
• A joint consortium that includes the GMR Infrastructure Ltd
has bagged the contract to develop Sabiha Gokcen
International Airport in Istanbul

• The total investment is estimated at about €400 million. The

project has a debt-equity ratio of 18:20. GMR Infrastructure, a
listed company, holding a 40 per cent stake in the consortium,
would pump in around €32 million of the €80 million equity,
said Mr Madhu Terdal, Chief Financial Officer, Corporate
Strategic Finance, GMR Group

• The other consortia members are Limak Insaat Sanavi San

Ve Tic A.S. Turkey (Limak), which has a 40 per cent stake,
and Malaysia Airports Holding that has a 20 per cent stake.

Business Line, July 11, 2007

Govt Replaces Member on DIAL, MIAL
Boards
• The civil aviation ministry has removed Joint
Secretary KN Srivastava, who was on the board
of Delhi International Airport Ltd (DIAL) and
Mumbai International Airport Ltd (MIAL), as the
government’s nominee and replaced him with a
director-level official, Sandeep Prakash.

• The government felt that in view of the recent

dispute between the ministry and DIAL, it is
better to have nominees who are not dealing
with airports.
November 15, 2007 (http://www.business-standard.com)
Airport Development Fee (ADF)
vs
User Development Fee (UDF)?
 Issues
• Development fees
– User development fee (UDF) is levied in
Hyderabad and Bangalore airports soon after
they became operational
– Airport development fee (ADF) was levied at
Delhi in 2009 and later to Mumbai
– Proposal to increase the UDF and ADF
• Formation of subsidiaries by the operator
• Charge for cargo services
 UDF
• UDF at Hyderabad
– Domestic departures - Rs 375 extra per passenger
(wef August 22, 2008)
– International departures - Rs 1,000 extra per passenger
(wef March 16, 2008)

• UDF at Bangalore
– Domestic departures - Rs 260 extra per passenger
(wef January 16, 2009)
– International departures - Rs 1,070 extra per passenger
(wef July 01, 2008)

http://www.indianairlines.in/scripts/userdevelopmentfee.aspx
 Questions
• Is levying ADF/UDF justifiable if it was not
in the concession agreement? Is it not
used as an easy approach by the
operators to turn their balance sheets
from red to green? Since there are no
guidelines on the cap, period etc, there is
no end to such revisions?
• What are the incentives for operators to
exploit other non-aero revenue sources if
losses can easily be passed on to users?
 Questions
• If charges are levied, why are these
different on different airports of same
importance eg Hyderabad and Bangalore,
and Delhi and Mumbai?
• How is AERA effective in treating matters
like newly formed subsidiaries by DIAL?
• How is UDF justified on AAI run airports
without any MoU on performance
standards?
 UDF
wef August 01, 2010

http://www.thehindubusinessline.com/2010/07/31/stories/2010073152872000.htm

wef September 01, 2010

Mangalore Airport
• Domestic: Rs 150
• International Rs 825
http://www.daijiworld.com/news/news_disp.asp?n_id=83052
 ADF
• ADF at Delhi (fixed for three years)
– Domestic departures - Rs 200 extra per passenger
(wef March 01, 2009)
– International departures - Rs 1,300 extra per passenger
(wef March 01, 2009)

• ADF at Mumbai (fixed for four years)

– Domestic departures - Rs 100 extra per passenger
(wef April 01, 2009)
– International departures - Rs 600 extra per passenger
(wef April 01, 2009)

http://www.indianairlines.in/scripts/userdevelopmentfee.aspx
 No Airport Development Fee For Mumbai-
Supreme Court

•Taking domestic and international flights from the Delhi and Mumbai
airports is likely to get cheaper, with the Supreme Court Tuesday
striking down the airport development fee (ADF) being charged by
private operators.
•Meanwhile, Delhi International Airport Ltd. (DIAL), the company which
operates the Indira Gandhi International Airport here, said that it is yet to
receive a copy of the court's order and will only react after that.

• Civil Aviation Minister Vayalar Ravi had said in March that a proposal
to review the development fee at Delhi and Mumbai airports has been
received.

•'The proposal for review of development fee at IGI Airport, New Delhi
and CSI Airport Mumbai, has recently been received by AERA (Airports
Economic Regulatory Authority),' Ravi had told the Lok Sabha during
parliament's budget session.
Source: http://in.finance.yahoo.com/ April26, 2011
 Airports Economic
Regulatory Authority
•The Airports Economic Regulatory Authority (AERA) is a statutory body
constituted under the Airports Economic Regulatory Authority of India Act,
2008 (27 of 2008) notified on 5th December, 2008. The Authority was
established by the Government vide its notification no. GSR 317 (E) dated
12th May, 2009, with its head office at Delhi.

•The Authority consists of a Chairperson and two other Members (having

adequate knowledge of, and professional experience in, aviation,
economics, law, commerce or consumer affairs) to be appointed on the
recommendations of a Selection Committee set up by the Central
Government. Provided that whenever the Authority is deciding a matter
involving a Civil Enclave in a Defence airfield, there shall be an additional
Member, not below the rank of Additional Secretary to the Government of
India, to be nominated by the Ministry of Defence.

•The Chairperson is the Chief Executive of the Authority.

Source: http://aera.gov.in Downloaded on 23rd Feb 2012
 Airports Economic
Regulatory Authority
• To regulate tariff and other charges for the aeronautical services
rendered at airports and to monitor performance standards of airports
and also to establish Appellate Tribunal to adjudicate disputes and
dispose of appeals and for matters connected therewith or incidental
thereto
• Mr. Yashwant Bhave, a retired IAS officer of Maharashtra cadre, took
over as the first Chairperson of the AERA on August 01, 2009.
• The AERA bill was passed by Lok Sabha on October 22, 2008 and
received assent by the president on December 05, 2008.

Functions
• To determine the tariff for the aeronautical services
• To determine the amount of the development fees
• To determine the amount of the passengers service fee
• To monitor the set performance standards relating to quality, continuity
and reliability of service
Source: http://aera.gov.in on 27th Feb 2012
Airports Economic Regulatory Authority of India Bill, 2007
•The Bill was introduced in the Lok Sabha on 5th September, 2007 and was referred
to the Standing Committee on Transport, Tourism and Culture (Chairperson: Shri
Sitaram Yechury).
The Airports Economic Regulatory Authority of India Bill, 2007 establishes an
independent regulator to determine tariffs charged by all major airports – those
with annual passenger traffic higher than 15 lakh and any other airport notified by
the government.
• The AERA shall consist of a chairperson and two other members. An additional
member shall be nominated by the Ministry of Defence for matters involving a civil
airport in a defence airfield.
• The AERA will be responsible for determining the tariff for aeronautical services
at different airports every five years, the amount of development fees of major
airports, the passengers service fee, and monitor performance standards of
services.
•The Bill also establishes an Airports Economic Regulatory Authority
AppellateTribunal to adjudicate disputes among or between service providers
and/or consumer groups. No civil court may entertain any suit over which the
Tribunal has jurisdiction.
•Fines for non-compliance of orders of AERA or the Tribunal will be up
to one lakh rupees for a first time offence, two lakh for subsequent offences, and
up to two lakh per day for a continuing contravention.

Source:http://www.prsindia.org/uploads/media/AERA/March 07, 2008 Downloaded on 29th Feb 2012

Airports Economic Regulatory Authority of India Bill, 2007
•Key Issues and Analysis

•AERA has the purview to regulate tariffs for only major airports of the
125 airports in India, 11 had over 15 lakh passengers in 2006-07.

• AERA has the power to regulate tariffs for ‘aeronautical services’, and
not for other services. For some of these services, the airport may have
monopolistic power, which is not being regulated.

•AERA will set tariffs for airports every five years. Unlike some other
countries, the Bill does not propose a mechanism to automatically.

•Adjust tariffs in the intermediate period to factor inflation etc.

•This Bill allows the Central Government to remove the chairperson or

any member from office based on an inquiry by the government.

•AERA is given the power to determine development fees. However, the

Bill does not define the term ‘development fees’.
Source:http://www.prsindia.org/uploads/media/AERA/March 07, 2008 Downloaded on 29th Feb 2012
 Airports Economic
Regulatory Authority

Chairperson

Member Secretary Member

OSD-I OSD-II Deputy Chief Director Director(legal)

Under Under Under

DGM AGM Asst Mgr. DGM AGM Bench Officer
Secretary(F&A) Secretary Secretary

Source: http://aera.gov.in,Created On 29th Feb 2012

 Airports Economic
Regulatory Authority
• The Chairperson and other Members of the Authority shall
be appointed by the Central Government on the
recommendation of Selection Committee
• Selection Committee, to be constituted by the Central
Government, shall constitute the Following

Cabinet Secretary Chairman

Secretary, in the Ministry of Civil Aviation Member
Secretary, Department of Legal Affairs in the Member
Ministry of Law and Justice
Secretary, in the Ministry of Defence Member
One expert to be nominated by the Ministry of Member
Civil Aviation
 Airports Economic
Regulatory Authority
• Consultation papers on
• Determination of Aeronautical Tariff in respect of IGI Airport, New
Delhi for the 1st Regulatory Period (01.04.2009 – 31.03.2014) issued
on 03-01-2012
• Review of development fee levied at IGI Airport (10.09.2009)
• Draft guidelines on stakeholders consultation (08.10.2009)

• RFP, inviting proposals from consultants for

• Structuring of the AERA - designing organizational structure and
staff responsibilities including capacity building of AERA and hand
holding support in (2009)
• Determination of Aeronautical Tariffs for Major Airports – Assistance
to Airports Economic Regulatory Authority of India in (2012)

Sources: http://aera.gov.in/writereaddata/tender/43.pdf, http://aera.gov.in Downloaded on 26th Feb 2012

 Airports Economic
Regulatory Authority
• Issued Sixty orders between (January 2010) to (January 2012)
• Issued an order on ‘Review of development fee levied at IGI Airport’
(04.11.2009): Extended the date of submission by DIAL for requisite
information to January 31, 2010
• Establishment of the AERA Appellate Tribunal (February 06, 2010)
• Issued a circular listing airports that qualify as major airports as per
clause (i) of Section 2 of the Airports Economic Regulatory Authority
of India Act, 2008 (March 12, 2010)
• Issued an order on ‘10% increase in aeronautical charges requested
by DIAL and MIAL’ (May 21, 2010): Rejected the request
• Appointment of Chairman and Members to AERA Appellate Tribunal
(June 03, 2010)
• Latest order issued on ‘In the matter of Multi Year Tariff Proposal for
1st Control Period submitted by Indo Thai Airport Management
Services Pvt Ltd. For providing Ground Handling Services at Jaipur
Airport,Jaipur’ (January 25, 2012)

Source: http://aera.gov.in
 Airports Economic
Regulatory Authority
• Finance
– Grants by Central Government for salaries,
allowances, pension and administrative expenses
• Accounts
– annual statement of accounts as may be prescribed
by the Central Government in consultation with the
Comptroller and Auditor-General of India
• Audit
– By CAG
– Rights, privileges and authority same as in audit of
the Government account
 AERA Appellate Tribunal
A. Adjudicate any dispute
(i) between two or more service providers
(ii) between a service provider and a group of consumer
Nothing in this clause shall apply in respect of matters
a) relating to the monopolistic trade practice, restrictive trade practice and
unfair trade practice
b) relating to the complaint of an individual consumer maintainable before a
Consumer Disputes Redressal Forum or a Consumer Disputes Redressal
Commission or the National Consumer Redressal Commission
c) which are within the purview of the Competition Act, 2002.
d) in respect of an order of eviction which is appealable under section 28K of
the Airports Authority of India Act, 1994.

B. Hear and dispose of appeal against any direction,

decision or order of the Authority under this Act.
 Bureau of Civil Aviation Security
• The Bureau of Civil Aviation Security was initially set up as a
Cell to coordinate, monitor, inspect and train personnel in Civil
Aviation Security matters.

• The BCAS was reorganized into an independent department on

1st April , 1987 under the Ministry of Civil Aviation as a sequel to
the Kanishka Tragedy in June 1985. The main responsibility of
BCAS are lay down standards and measures in respect of security
of civil flights at International and domestic airports in India.

• BCAS is the regulatory authority for civil aviation security in India.

It is headed by an officer of the rank of Director General of
Police and is designated as Commissioner of Security (Civil
Aviation).

• Commissioner of security (CA) is responsible for the

development, implementation and maintenance of the National Civil
Aviation Security Programme.

Source : http://bcasindia.gov.in/, Downloaded on :28th Feb 2012

 Bureau of Civil Aviation Security

Source:http://bcasindia.gov.in/on 28th Feb 2012

 Bureau of Civil Aviation Security
Functions
•Laying down Aviation Security Standards in accordance with Annex 17 to
Chicago Convention of ICAO for airport operators, airlines operators, and their
security agencies responsible for implementing AVSEC measures.

•Monitoring the implementation of security rules and regulations and carrying out
survey of security needs.

•Ensure that the persons implementing security controls are appropriately trained
and possess all competencies required to perform their duties.

•Planning and coordination of Aviation security matters.

•Conducting -Surprise/Dummy checks to test professional efficiency and alertness

of security staff.

•Conducting -Mock exercise to test efficacy of Contingency Plans and operational

preparedness of the various agencies.

Source : http://bcasindia.gov.in/On 28th Feb 2012

Directorate General of Civil Aviation
Vision
• Endeavour to promote safe and efficient Air Transportation through regulation and
proactive safety oversight system.

Functions
• Registration of civil aircraft;
• Formulation of standards of airworthiness for civil aircraft registered in India and
grant of certificates of airworthiness to such aircraft;
• Licensing of pilots, aircraft maintenance engineers and flight engineers
• Licensing of air traffic controllers;
• Certification of aerodromes and CNS/ATM facilities;
• Maintaining a check on the proficiency of flight crew, and also of other
operational personnel such as flight dispatchers and cabin crew;
• Granting of Air Operator’s Certificates to Indian carriers and regulation of air
transport services including clearance of scheduled and non-scheduled flights of
such operators;
• Conducting investigation into accidents/incidents and taking accident prevention;
• Carrying out amendments to the Aircraft Act, the Aircraft Rules and the Civil Aviation;
• Coordination of ICAO matters with all agencies and sending replies to State Letters,
and taking all necessary action arising out of the Universal Safety Oversight Audit
Programme (USOAP) of ICAO;
http://dgca.nic.in/dgca/visi-ind.htm On 29th Feb 2012
 Directorate General of Civil Aviation
• Supervision of the institutes/clubs/schools engaged in flying training
including simulator training, AME training or any other training related
with aviation
• Granting approval to aircraft maintenance, repair and manufacturing
organizations and their continued oversight;
• To act as a nodal agency for implementing provisions in India and for
coordinating matters relating to facilitation at Indian airports including
holding meetings of the National Facilitation Committee;
• Rendering advice to the Government on matters relating to air
transport including bilateral air services agreements, on ICAO matters
and generally on all technical matters relating to civil aviation, and
to act as an overall regulatory and developmental body for civil aviation
in the country;
• Coordination at national level for flexi-use of air space by civil and
military air traffic agencies and interaction with ICAO for provision of
more air routes for civil use through Indian air space;
• Keeping a check on aircraft noise and engine emissions
• Promoting indigenous d e s i g n and manufacture of aircraft and
aircraft components by acting as a catalytic agent;
• Approving training programmes of operators for carriage of dangerous
goods, issuing authorizations for carriage of dangerous goods, etc.
http://dgca.nic.in/dgca/visi-ind.htm On 29th Feb 2012
 Director General of Civil
Aviation

Representative Of India on the

council of ICAO Jt. Director General Jt. Director General Jt. Director General

Air Space and Air Traffic

Management Directorate
Administration and Airworthiness
Air Transport Directorate
Finance Directorate Directorate
Aerodromes Standards
Directorate

Training and Licensing

Information Technology Directorate Central Examination Flight Standards
Division Organization Directorate

Flying Training
Directorate

Regulation and Aircraft Engineering

Air Safety Directorate
Information Directorate DGCA Training Directorate(AED
Academy

Source:http://dgca.nic.in/dgca/visi-ind.htmon 29th Feb 2012

 Ministry Of Civil Aviation
• Responsibilities
• The Ministry of Civil Aviation is responsible for formulation of national
policies and programmes for the development and regulation of the Civil
Aviation sector in the country.
• It is responsible for the administration of the Aircraft Act, 1934, Aircraft
Rules, 1937 and various other legislations pertaining to the aviation
sector in the country.
• This Ministry exercises administrative control over attached and
autonomous organizations like the Directorate General of Civil Aviation,
Bureau of Civil Aviation Security and Indira Gandhi Rashtriya Udan
Academy and affiliated Public Sector Undertakings like National Aviation
Company of India Limited, Airports Authority of India and Pawan Hans
Helicopters Limited.
• The Commission of Railway Safety, which is responsible for safety in rail
travel and operations in terms of the provisions of the Railways Act, 1989
also comes under the administrative control of this Ministry.
Source:www.civilaviation.gov.in/ On:27th Feb 2012
 Core Functions of AAI
•Development & Management of
Airport Infrastructure
•Air Traffic Management and CNS
Infrastructure

http://www.aai.aero/public_notices/aaisite_test/orign.jsp On 1st March 2012

 Span of Operations

 AAI manages 115 airports including civil enclaves as:

-19 International airports
-96 Domestic airport

In addition CNS ATM Services are provided at Delhi,

Mumbai, Bangalore, Hyderabad and Cochin;Lengpui, Diu,
Puttaparthy, Vidyanagar and Jamshedpur, Tura, Latur and
Nanded.

 AAI provides air navigation infrastructure and air traffic

services in the Designated Airspace.
http://www.aai.aero/public_notices/aaisite_test/orign.jsp on 1st March 2012
References
1. AAI, 2004. ‘Restructuring and Modernization of Delhi and Mumbai Airports –
Invitation to Register an Expression of Interest (ITREOI).’ Airports Authority of India,
February 17, 2004.
2. AAI, 2005a. ‘Information Memorandum: Indira Gandhi International Airport.’ Airports
Authority of India, April 01, 2005.
3. AAI, 2005b. ‘Restructuring and Modernization of Delhi Airport – Request for
Proposal (RFP).’ Airports Authority of India, April 01, 2005.
4. GMR, 2006. Communication from GMR.
5. Indian Infrastructure, 2006. ‘Key Statistics.’ Volume No 9 Issue No 2, September
2006.
6. Jain, Raghuram and Gangwar, 2007. ‘Airport Privatization: Bidding Process for Delhi
and Mumbai (A, B, C, D, and E).’ Indian Institute of Management, Ahmedabad.
IIMA/PSG0102.
7. MoCA, Various Years. ‘Annual Report.’ Ministry of Civil Aviation, Government of
India.
8. SC, 2006. ‘The Supreme Court Judgment: Reliance Airport Developers Pvt. Ltd vs
Airports Authority of India and Others.’ 2006 INDLAW SC 913.
http://www.indlaw.com.
9. Thakurta and Majumdar, 2005. ‘How the Airport Bids were Evaluated.’ December
30, 2005. http://inhome.rediff.com/money/2005/dec/30paran.htm.
10. http://www.hinduonnet.com/fline/fl2303/stories/20060224006913000.htm.
11. http://www.ipsnews.net/news.asp?idnews=31659.
Thank You
 Airport Traffic in India
% Change
2004-05 to 2003-04 to 2002-03 to
2004-05 2003-04 2002-03 2001-02
2003-04 2002-03 2001-02

All Airports
Aircrafts movement
(thousands)
730 639 560 510 14.2 14.1 9.8

Passenger movement (million) 59.5 48.7 43.7 40 22.2 11.4 9.3

Cargo movement (thousand
tons)
1290 1068 979 854 20.8 9.1 14.6

Delhi Airport
Aircrafts movement
(thousands)
122 106 93 86 15.1 14.0 8.1

Passenger movement (million) 12.8 10.2 8.8 8.2 25.5 15.9 7.3
Cargo movement (thousand
tons)
344 296 276 233 16.2 7.2 18.5

Mumbai Airport
Aircrafts movement
(thousands)
153 137 126 115 11.7 8.7 9.6

Passenger movement (million) 15.7 12.8 11.7 11 22.7 9.4 6.4

Cargo movement (thousand
tons)
403 326 308 276 23.6 5.8 11.6

[Source: India Infrastructure, 2006; MoCA, Various Years]

Share of Delhi and Mumbai Airports
(2003-04)

Percent

Passenger traffic 47

Cargo traffic 58

Aircraft movements 38

Revenues 33
Source: Ministry of Civil Aviation
Capital Expenditure (Mandatory)
Rs bn

2005-2010

Delhi airport 28

Mumbai airport 26

2005-2024

Delhi airport 79

Mumbai airport 59
 Scope
• Number of passengers (Mumbai): Around 50
million by 2025
• Number of passengers (Delhi): Around 46
million by 2025, 87 million by 2040
• Cargo (Delhi) : 1.5 mn tonnes 2025
• Cargo (Mumbai) : 1.4 mn tonnes cargo 2025
• Aircraft Movements (Delhi): 420,000
• Aircraft Movements (Mumbai): 525,000
 Transaction Agreement

• Transaction governed by Operations Management and

Development Agreement (OMDA)
• 30-year concessions agreement with a further 30-year
option
• A mandatory Capital Expenditure program with key
projects to be completed by March 2010
• Massive liquidated damages for non-compliance
• A series of objective and subjective service standards
to be adhered to
 Transaction Agreement
• Aeronautical charges currently as per AAI rates. In
future, an independent regulator (AERA) will decide
• Limiting the use of land for non-Aero purposes to 5% in
Delhi and 10% in Mumbai
• Minimum non aeronautical revenue 40%
• Retention of all staff initially and then of a significant
number even after 3-years
• ATC would still be under the control of AAI/DGCA
• First right of refusal, if within 10% of best bid for a
second airport within 150 km
 Airport Operator Revenue Streams

Aeronautical Non-Aeronautical

Aero Related Commercial Commercial

(Terminal)
(Other)

Landing Cargo handling Advertising Real estate

charges fee development

Revenue from Hotel, business

Parking charges Aircraft refueling
concessionaires and industrial
parks

Passenger Rental from

Aircraft
service fee airlines,
maintenance Retail and
business, shops
entertainment,
residential
Car parking,
Catering services
public
admission fee

[Source: Communication from GMR, 2006]

Pre Bid Events (May 2004 – September 2005)

May 2004 Change of Government

June 15, 2004 EGoM reconstituted. It put a cap of 49 per cent on
foreign direct investment within the 74 per cent of the
private equity in the JVC
June 25, 2004 EGoM considered and approved the appointment of
Air Plan, Australia as the global technical advisor
(GTA) and Amarchand & Mangaldas & Suresh A
Shroff & Co (AMSS) as legal consultants (LC)
July 20, 2004 Last date of submission of EOI extended
October, 2004 IMG reconstituted
April 1, 2005 RFP document and the draft transaction documents
were issued
Pre Bid Events (May2004 – September 2005)

Transaction documents consisted of

• Operation Management and Development

Agreement (OMDA)
• Lease Deed (LD)
• Shareholders Agreement (SHA)
• State Support Agreement (SSA)
• State Government Support Agreement (SGSA)
• Substitution Agreement (SA)
Pre Bid Events
Overview of Transaction Structure

[Source: AAI, 2005a]

Pre Bid Events (May 2004 – September 2005)
Original Bidders

1. Bharti-Changi
 pulled out citing stiff performance conditions in the
transaction documents

2. L&T-Piramal-Hochtief
 pulled out citing stiff performance conditions in the
transaction documents

3. Sterlite-Macquarie-ADP

4. GMR-Fraport

5. GVK-ACSA
Pre Bid Events (May 2004 – September 2005)
Original Bidders

6. Reliance-ASA

7. DS Construction-Munich
8. DLF-MANSB
 dissolved itself, MANSB was invited to join the GMR-Fraport
consortium

9. Essel-TAV

10. Videocon-Methven Corporation

 Was rejected because the group had involved an airport
consultant rather than an airport operator
 Pre Bid Events
Bid Submission (September 14, 2005)

Bidders for Delhi airport Bidders for Mumbai airport

1. Reliance-ASA 1. Reliance-ASA
2. GMR-Fraport 2. GMR-Fraport
3. DS Construction-Munich 3. DS Construction-Munich
4. Sterlite-Macquarie-ADP 4. Sterlite-Macquarie-ADP
5. Essel-TAV 5. Essel-TAV
6. GVK-ACSA
Post Bid Events
(September 2005 – January 2006)

September 14, 2005 Submission of bids

September 19, 2005 IMG met
– constitution of EC
– opening of bids on 22.09.05
– setting up of GRC
October 05, 2005 MoCA met
– constitution of GRC

November 21, 2005 EC met

– submission of report
EC’s Report (November 21, 2005)
Per cent
Management capability, Development capability,
Bidder
commitment and value add commitment and value add
Delhi Airport

Reliance-ASA 80.2 81.0

GMR-Fraport 84.9 80.1
DS Construction-Munich 72.7 69.9
Sterlite-Macquarie-ADP 57.0 61.9
Essel-TAV 39.2 40.3
Mumbai Airport
Reliance-ASA 80.4 80.2
GMR-Fraport 84.9 92.7
DS Construction-Munich 72.7 54.1
Sterlite-Macquarie-ADP 57.0 55.1
Essel-TAV 37.1 28.3
GVK-ACSA 75.8 59.3

[Source: Thakurta and Majumdar, 2005]

Post Bid Events
(September 2005 – January 2006)

December 6, 9, 12, IMG met

13, 14, 16, 2005 asked EC to strictly adhere to the RFP
documents and award marks again
EC’s Revised Scoring
Per cent
Management capability, Development capability,
Bidder
commitment and value add commitment and value add

Old New Old New

Delhi Airport
Reliance-ASA 80.2 80.9 81.0 81.0
GMR-Fraport 84.9 84.7 80.1 80.1
DS Construction-Munich 72.7 73.1 69.9 70.5
Sterlite-Macquarie-ADP 57.0 57.0 61.9 61.9
Essel-TAV 39.2 37.6 40.3 41.4
Mumbai Airport
Reliance-ASA 80.4 81.0 80.2 80.2
GMR-Fraport 84.9 84.7 92.7 92.7
DS Construction-Munich 72.7 73.1 54.1 54.7
Sterlite-Macquarie-ADP 57.0 57.0 55.1 65.1
Essel-TAV 37.1 35.5 28.3 29.4
GVK-ACSA 75.8 76.0 59.3 59.3
[Source: GMR, 2006]
Post Bid Events
(September 2005 – January 2006)

December EGoM met

21, 2005 constitution of Committee of Secretaries (CoS)
December CoS met
24, 2005 constitution of Group of Eminent Technical Experts (GETE) for
• An overall validation of the evaluation process, including
calibration of the qualifying cut-off and sensitivity analysis.
The sensitivity analysis would cover the impact of inter- se
weightages of sub-criteria as well as scoring
• Addressing the issues raised by the members of IMG about
the evaluation process
• An overall technical assessment of transparency and
fairness of the evaluation process, including steps required,
if any, to achieve a transparent and fair outcome
• Providing suggestions for improving the selection procedure
for joint venture partners in future
Post Bid Events
(September 2005 – January 2006)

January 07, GETE submitted the first report

2006 – Technical flaws in the technical evaluation process
– Assignment of marks to sub-factors was not done
– A liberal attitude was shown by the EC to the
Reliance-ASA consortium
– GETE reassessed the marks
– On reassessment, Reliance-ASA did not qualify, GMR
still scored above 80%
January 09, CoS met
2006 – endorsement of GETE recommendations
January 11, EGoM met
2006
Scoring Criteria/Factor
Criteria/Factor Weightage
Management Capability, Commitment and Value Add 100.0
Experience of the nominated airport operator 25.0
Experience of the other prime members 12.5
Commitment of airport operator 12.5
Commitment by other prime members 12.5
HR approach 12.5
Transition plan 12.5
Stakeholder management & Environmental
12.5
management
Development Capability, Commitment and Value Add 100.0
 Non-aero Revenue
Clause in RFP
Sub-Criteria: Management Capability
Criteria 1: Experience of the nominated airport operator (weightage: 25)
1.1.6 The performance of commercial operations at major airports managed by
the airport operators, covering retail, property and other commercial operations,
focusing on airports where non aeronautical revenues is 40% or more of total
revenue.

GETE Rescoring
In sub-factor 1.1.6, the assessment of performance of commercial operations of
major airports covering retail property and other commercial operations was to be
done focusing on airports having non-aeronautical revenue of 40% or more of total
revenue. Though non-aeronautical earnings of bidder ‘Reliance’ are only 37%, but
they have been given 75% marks. This is considered to be in non-conformity of
the RFP. The explanation of EC that wording of the Clause did not make the 40%
mandatory is not convincing. In any case, since the non-aeronautical earnings of
bidder A was less than the threshold limit of 40%, assigning a high score of 75%
was not justified. This should have been of the order of 40% to 50%.
 GETE Rescoring (Delhi Airport)
DS
Reliance GMR- Sterlite-
Bidder Construction- Essel-TAV
-ASA Fraport Macquarie
Munich
Pre GETE Score 80.9 84.7 73.1 57.0 37.6
Moderation due to
If equal weightage is given to sub-factor -1.09 -0.21 -0.02 -0.02 +0.96
1.2.2 and 1.2.3
If equal weightage is given to sub-factor -0.60 -0.81 +0.35 -0.32 +1.85
3.1.1 and 3.1.2
If the marks of sub-factor 1.1.6 given to A -0.70 0.0 0.0 0.0 0.0
for non-aeronautical revenue less than
40% are reduced from 75% to 50% others
no change.
If score of sub-factor 1.1.8 given for -2.1 0.0 0.0 0.0 0.0
experience in OECD country to A is
excluded – others no change.
If marking system of sub-factor 3.1.2 is -1.60 -1.98 -0.17 -3.13 0.0
modified keeping ‘0’ for 40% absorption
and ‘5’ for 100% absorption.
Total variation -6.09 -3.00 +0.16 -3.47 +2.81
Post GETE Score 74.8 81.7 73.3 53.5 40.4
GETE’s Second Report (January 17, 2006)
Per cent
Management Capability
S No Name of the Bidder Development Capability
Pre GETE Post GETE
Delhi Airport
1 Reliance-ASA 80.9 74.8 81.0
2 GMR-Fraport 84.7 81.7 80.1
3 DS Construction-Munich 73.1 73.3 70.5
4 Sterlite-Macquarie-ADP 57.0 53.5 61.9
5 Essel-TAV 37.6 40.4 41.4
Mumbai Airport
1 Reliance-ASA 81.0 74.8 80.2
2 GMR-Fraport 84.7 81.7 92.7
3 DS Construction-Munich 73.1 73.3 54.7
4 Sterlite-Macquarie-ADP 57.0 53.5 65.1
5 Essel-TAV 35.5 38.3 29.4
6 GVK-ACSA 76.0 73.0 59.3

[Source: SC, 2006]

Major Airports in India