An analysis prepared by the Airports Authority Employees’ Union alleges that the proposed privatisation has not been done in consonance with laid down rules, policies and guidelines.

Gautam Adani
news Airport Saturday, August 29, 2020 - 17:30

There are serious anomalies in leasing out six airports in the country through Public-Private-Partnership to Adani Enterprises, alleged the Airports Authority Employees’ Union, an independent union of Airports Authority of India (AAI). A 98-page analysis prepared and compiled by the union stated, “On the basis of information gathered through RTI, various records uploaded in respective Organizations’ websites, we got ample evidences to prove that the proposed privatization is not in consonance with the laid down rules, policies and guidelines of PPPAC (Public Private Partnership Appraisal Committee), giving room for the private partner to earn a windfall profit at the cost of Airports Authority of India.”

The Union Cabinet on August 19 approved the proposal for leasing out three airports -- Thiruvananthapuram, Jaipur and Guwahati -- to be operated under PPP.  In February 2019, Adani Enterprises had won bids to operate and manage development of six airports: Ahmedabad, Lucknow, Mangaluru, Jaipur, Guwahati and Thiruvananthapuram. It entered into a Concession Agreement (CA) with three airports on February 14, 2020 to operate, manage and develop them for a period of 50 years. 

In its analysis, the union raises a number of allegations over the leasing of the airports. 

For starters, the union alleges that no criteria was disclosed by the Civil Aviation Ministry, or by AAI on how it selected these six airports to be privatised.

“Though we applied several yard sticks such as Passenger Volume, Profitability, Existing Revenue, ASQ Rating on quality of services, Net worth of the airports, Future Traffic Growth etc, none of them could be able to take all the selected six airports together,” it said in its report.

The union has also alleged that the Request for Proposal, which is the document that provides details of the project while inviting bids, was vague and lacked transparency. The selection process too, they alleged, was kept vague and this information was also denied to the union when requested through an RTI.

Speaking to TNM, an office bearer of the union in Kerala alleged that the detailed project report wasn’t “well-studied” or “well-prepared”. “The process of approving the project report for Adani was done in a hasty manner to favour only one bidder,” he alleged.  

The union has also questioned why the entire process was done in such haste, skipping several steps that the bidding process for a PPP (Public Private Partnership) involves. For example, any PPP project has a two-stage bidding process, which includes publishing a Request for qualification before calling for proposals. However, this was changed to a single step only - a Request for Proposal.

The per passenger fee, which was the basis for the bid, was not analysed, the union alleged. An RTI filed by the union in February 2019, reveals that there was no study conducted to ascertain the existing per passenger fee of these six airports and as a result no minimum fee was fixed to ensure there isn’t a loss to revenues.

The union compared the rate existing per passenger income of airports with the rate quoted by Adani Enterprises and allegedly found that AAI's revenue will be reduced by 50% post privatization.

“The percentage loss for Lucknow airport would be 60.66%, Jaipur airport would be 51.31% and Guwahati airport would be 41.02%. This loss in revenue is only for one month and it will go up to Rs 50,000 crore, if we consider all six airports for 50 years,” the union alleged.

Deviations from guidelines

The union alleged that there were several deviations from the guidelines framed for PPP projects (Called PPPAC guidelines) in awarding bids for privatisation of these airports.

For example, PPPAC guidelines state that ‘in-principle’ approval should be granted within three weeks from submission of the proposal, and another 3 weeks are given after submission of final documents for the ‘final approval’. However, in the case of privatisation of the six airports, ‘in-principle’, and ‘final approval’ were given together.

As per records of discussions of a PPPAC meeting held on December 11, 2018 regarding the PPP for the six airports, the proposals for these projects were considered in a limited time considering the “nature of project, tight time-table which Ministry of Civil Aviation is pursuing this case and as decided in the meeting of Empowered Group of Secretaries (EGOS).” 

The union questioned why such deviations were made from stipulated guidelines, specifically for privatisation of the six airports. 

The Empowered Group of Secretaries EGoS) was constituted by the Cabinet Committee held on November 8, 2018, under the chairmanship of Prime Minister Narendra Modi, to decide on issues beyond the scope of PPPAC. The union alleged that several decisions were taken by the EGoS, overriding existing norms and guidelines. The union also alleged the powers of the PPPAC were disregarded by the EGoS.

“The EGoS is only supposed to look into matters that is beyond the scope of PPPAC, but why did it intervene and make all the decisions for this project. Who gave those powers to the EGoS?” the office bearer of the union questioned.

The union also raised concerns on why the requirement of a bidder having prior experience in operation and management of airports, which is important for the successful running of an airport, was removed by the EGoS.

Among other deviations made from original guidelines, the union said that because airports are highly capital-intensive projects, the Department of Economic Affairs (DEA) suggests that not more than two airports be awarded to the same bidder to minimise the financial risk.

However, EGoS decided to not put a cap on the number of airports a bidder can get, which the union alleged was done to favour one single bidder (Adani).

In fact, the term sheet of the proposed concession agreement, the Request for Proposal (RFP) document and the project report for each of the six airports was shared with several stakeholders including the NITI Aayog, DEA, the aviation ministry, and Department of Legal Affairs, among others, all of whom were part of the PPPAC.

Records of discussions of the meetings and comments from NITI Aayog show that different parties raised concerns and made suggestions with respect to the RFP, project report, etc. However, since most decisions in this regard were already taken by the EGoS, most of these concerns weren’t addressed by the PPPAC.

“It was on December 8, 2018 that the PPPAC gave the documents to the members. On December 10, the Department of Economic Affairs and NITI Aayog sent back the documents with comments. On December 11, it was decided to give the ad hoc in principle approval in a limited timeframe,” an office bearer of the union told TNM.

The union has also written letters raising these concerns to the Prime Minister’s Office in February and July of 2019 and the Chairman of AAI, and claims that it has received no response.

With inputs from Shilpa Ranipeta

Also Read: With six airports in its kitty, a look at Adani Group’s airport ambitions

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