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PPP in Indian airports

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privatization of indian airportsand its economical effects.

privatization of indian airportsand its economical effects.

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  • 1. EMERGING CHALLENGES INPUBLIC 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. 1EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 2. ACKNOWLEDGEMENTIt’s a great pleasure and privilege to be associated with prestigious universityNALSAR. I am very thankful for IAAM for taking the initiative along withNALSAR to establish Aviation law and air transport management program, firstof its kind in India. I am gratified to Dr. P. C. K. Ravindran and Dr. V. BalakistaReddy for introducing such a brilliant course.My sincere gratitude to Prof. S. N. A. Shafi for his help, guidance andrecommendations in preparing this dissertation.I am grateful to Mr. Chinnarajan my colleague who encouraged me all the wayform the beginning of this program. 2 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 3. CERTIFICATEThis is to certify that Mr. SIREESH P. Roll No __________ has submitted hisdissertation on “Emerging Challenges in Public Private Partnership”, as partialfulfilment for the award of PGDALATM degree in Aviation Law and AirTransport Management to NALSAR University of Law under my supervision. Itis also affirmed that, the dissertation submitted by him is original, bona-fide andgenuine.Dr. V. Balakista ReddySupervisorNalsar University of Law, Hyderabad 3 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 4. DeclarationThis dissertation, “Emerging Challenges in Public Private Partnership”, hasbeen prepared and submitted by the undersigned to NALSAR University ofLaw, Hyderabad. As a part of requirement for an award of PGDALATM degreein Aviation Law and Air Transport Management, under the guidance ofDr.V.Balakista Reddy. It is to declare that, this dissertation is original, bona-fideand legitimate work of the undersigned, and has been pursued purely for anacademic interest. This dissertation shall not be used for any political purposeor connotations or as a testimony against any person or communities orregime. The views and ideas expressed in this dissertation are exclusively ofthe researcher and do not represent any person, organisation or community inparticular.Signed on: _____________________________________________.SIREESH P.Roll No:Aviation Law and Air Transport ManagementNALSAR-IAAM. 4 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 5. LIST OF ABBREVATIONSPPP- PUBLIC PRIVATE PARTNERSHIPGDP- GROSS DOMESTIC PRODUCTAAI- AIRPORT AUTHORITY OF INDIANAO- NATIONAL AUDIT OFFICEPFI- PRIVATE FINANCE INVESTMENTGHIAL- GMR HYDERABAD INTERNATIONAL AIRPORT LIMITEDICAO- INTERNATIONAL CIVIL AVIATION ORGANIZATIONAMHS- AERONAUTICAL MESSAGE HANDLING SYSTEMRFID- RADIO FREQUENCY INDENTIFICATIONBOT- BUILT OPERATE TRANSFERJVC- JOINT VENTURE COMPANYVGF- VIABILITY GAP FUNDINGFDI- FOREIGN DIRECT INVESTMENTDGCA- DIRECTORATE GENERAL OF CIVIL AVIATIONTEFS- TECHNO-ECONOMIC FEASIBILITY STUDYMOD- MINISTRY OF DEFENSEPSU- PUBLIC SECTOR UNITSPV- SPECIAL PURPOSE VEHICLECA- CONCESSION AGREEMENTSHA- SHARE HOLDER AGREEMENTSSA- STATE SUPPORT AGREEMENTLLA- LAND LEASE AGREEMENTPQB- PRE QUALIFIED BIDDERSDPR- DETAIL PROJECT REPORTADF- ADVANCE DEVELOPMENT FEEUDF- USER DEVELOPMENT FEEPSF- PASSENGER SERVICE FEEBCAS- BUREAU OF CIVIL AVIATION SECURITYCNS/ATM- COMMUNICATION, NAVIGATION AND SURVEILLANCE / AIRTRAFFIC MANAGEMENTDBFOT- DESIGN, BUILD, FINANCE, OPERATE AND TRANSFERMCA- MODEL CONCESSION AGREEMENTATS- AIR TRAFFIC SERVICES 5 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 6. IMD- INDIA METEOROLOGICAL DEPARTMENTOMDA- OPERATION MANAGEMENT AND DEVELOPMENTAGREEMENTGOI- GOVERNMENT OF INDIAHIAL- HYDERABAD INTERNATIONAL AIRPORTBIAL- BANGALORE INTERNATIONAL AIRPORTDIAL- DELHI INTERNATIONAL AIRPORTCIAL- COCHIN INTERNATIONAL AIRPORTAERA- AIRPORTS ECONOMIC REGULATORY AUTHORITYRTI- RIGHT TO INFORMATION ACTKIC- KARNATAKA INFORMATION COMISSION 6 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 7. CONTENT1.0 ROLE OF AIRPORT INFRASTRUCTURE IN NATIONAL DEVELOPMENT 1.1 Economy 1.2 Social Payback by Airports 1.3 Influence of Aviation on Tourism 1.4 Environment Benefits of Airports and Aviation2. 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 Airports3 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 infrastructure in India 3.2.5 Passenger Growth 3.2.6 Cargo Growth 3.2.7 To Meet Financial Requirements to Support Such Growth and to Infuse Private Fund in the Airport Infrastructure Sector 3.2.8 To Increase the Standards of India Airports-To International Standards 3.2.9 Drivers and enablers 3.3 Present Indian scenario 7 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 8. 4. PROCEDURAL GUIDELINES FOR SETTING UP OF PPP AIRPORT. 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 Enhancement5.0 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 8 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 9. 5.16 Termination 5.17 Monitoring and supervision 5.18 Support and guarantees by the Government 5.19 Real estate development 5.20 Miscellaneous6.0 RESERVED ACTIVITIES7.0 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 Risk8.0 EMERGING REGULATORY ISSUES 8.1 Amendment of AAI Act and Aircraft Rules Act 8.2 Regulatory authority for AERA9.0 THE CHANGED ROLE OF GOVERNMENT UNDER PPP AND NEW SET OF AGREEMENTS AND NEW LEGAL FRAME WORK10 .0 PPP airports and RTI Act 10.1 PPP airports public authority or not 10.2 BAIL case 9 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 10. 10.3 In case of brown field airport –AAI act apply – the operator in AAI shoes11.0 RECOMMENDATION IN REGULATION FOR PPP12. CONCLUSION13. REFERENCES.14. ANNEXURE. 10 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 11. PREFACEOver the years, the basic infrastructure in India has been developed to anextent, which is not sufficient enough while considering India’s geographicalsize, its population and the pace of overall economic development.Infrastructure bottleneck has been a serious concern in India and basicinfrastructure like roads, railways, ports, airports, communication and powersupply are not comparable to the standards prevalent in its competitorcountries.To develop the Indian infrastructure to a world class and to remove theinfrastructure inadequacy in the country, the investment requirements aremammoth, which could not be met by the public sector alone due to fiscalconstraints and mounting liabilities of the Government. This would call forparticipation of private sector in coordination with the public sector to developthe public infrastructure facilities. In this direction, the economic reformsinitiated in the country provide forth the policy environment towards publicprivate partnership (PPP) in the infrastructure development. Sector-specificpolicies have also been initiated from time to time to enhance the PPP ininfrastructure building. While the PPP is spreading to develop basicinfrastructure world wide, in India, the participation of private sector in theinfrastructure building has not been much encouraging, despite several roundsof policy reforms.Against this setting, the rest of the paper is organized as follows. Section I andII assesses the Indian market and the need for PPP in the airport infrastructuredevelopment. Section III attempts to review the structure of PPP throughliterature survey. Section IV and V evaluates the status of private sectorparticipation in infrastructure development guidelines and concessionagreement. Section VI captures the Indian experiences in this regard. SectionVII reviews the investment requirements to bridge the infrastructure gap in thecountry. Section VIII focuses on the challenges of infrastructure projects withthe status of PPP and overall private sector participation along with sector-specific concerns. Generic issues while implementing the airport infrastructureprojects in the country with private participation and options thereon areanalyzed in Section IX, X and XI. Finally, concluding observations are drawn inSection XII. 11 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 12. 1.0 ROLE OF AIRPORT INFRASTRUCTURE IN NATIONAL DEVELOPMENTAirports are the gateway for the country; they open doors for trade, tourism.Economy of a country depends on the trade and tourism, simultaneously thetrade and tourism depends on the airports. A country without national carrierscan still trade with other countries as well catch the fancy of tourists, but thecountry without an airport will be handicapped to advance economically. So itbecomes very important for every country to have an airport.The rapid growth of the trade and tourism between the nations has chosen theair transport mode for its Quick, Reliable, Efficient and Safe services. Therecent trends in the development of free trade, globalisation, liberalization andderegulation left the mankind to race with time and air transport is found to bevery appropriate, thus propelling the aviation industry to paramount.Airports also represent a country’s window on the world. Passengers form theirfirst impressions about a nation from the state of its airports. They can beeffectively used as symbols of national pride, if we pay sufficient attention totheir quality and maintenance.In many remote, hilly and inaccessible areas of the country, air transport is thequickest and sometimes the only mode of travel available. This is especiallytrue of sensitive regions on the borders with our neighbours in the west, northand north-east.Airports need to be integrated with other modes of transport like Railways andHighways, enabling seamless transportation to all parts of the country. 12 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 13. 1.1 EconomyThe impact of air transportation on economic activity differs from othertransportation modes because of its distinctive characteristics speed, cost,flexibility, reliability, and safety. It is the only realistic long-distanceTransportation mode for high-value perishable commodities and time-sensitive.Airports being nuclei of economic activity assume a significant role in thenational economy. The quality of airport infrastructure, which is a vitalcomponent of the overall transportation network, contributes directly to acountrys international competitiveness and the flow of foreign investment. Theavailability of better air transportation services effectively increases the scopeof new business and industrial economic activity. The economy moves towardshigher value-added products, particularly in agriculture, an increasingproportion of the produce will have to move by air, both within the country andabroad. In addition, the more remote and inaccessible regions of the country,such as the North-east, can realise their true potential when such a transitionbecomes possible. Increasing economic activity in turn generates the need forpassenger travel and freight and drives the demand for air transportationservices. Cargo carried by air in India weighs less than 1% of the total cargoexported, it accounts for 35% of the total value of exports. Better cargohandling facilities lead to enhanced levels of imports, especially of capitalgoods and high-value items. Likewise, It is observed that 2% growth in aviationindustry leads to 1% growth in GDP. Export and Import Trade of India with World for Last Five Years EXPORT AND IMPORT DATA EXPORT IMPORT 160,000,000.00 140,000,000.00 120,000,000.00 100,000,000.00 INR 80,000,000.00 60,000,000.00 40,000,000.00 20,000,000.00 0.00 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 FINANCIAL YAER (See Annexure –I for export and import data) Fig.1 13 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 14. 1.2 Social Payback by AirportsAirport provides employment in the aviation sector and creates widersocioeconomic benefits through its potential to facilitate certain types ofactivities in a local development. Studies evaluate the direct, indirect andinduced employment impact of air transportation. Direct impact is employmentin the aviation industry, indirect impact is the employment in the industriesdown the aviation supply chain, and induced impact is the employmentsupported by the expenses of those directly and indirectly employed in theaviation industry, studies has been assessed that every job in the aviationindustry will create seven other jobs directly or indirectly through its catalyticimpact on tourism and business.At the macroeconomic level, airport impacts economy by providing employmentand by enabling effects including enabling access: to markets, to people, tocapital, to ideas and knowledge, to labour supply, to skills, to opportunity, andto resources.airport industry which in the past was considered to be a simple transit areasbut now the modern airports have become place where one works, eats, makespurchases, and even sleeps. The whole idea of modern airports is to provide apleasant 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 tourismand trade, it generates economic growth, provides jobs, improves livingstandards, alleviates poverty, increases revenues from taxes, and fosters theconservation 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 communitieswith the rest of the country.• The air transport network facilitates the delivery of emergency andhumanitarian aid relief anywhere on earth, and ensures the swift delivery ofmedical supplies and organs for transplantation. 14 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 15. • Air transport improves quality of life by broadening people’s leisure andcultural experiences. It provides a wide choice of holiday destinations aroundthe world and an affordable means to visit distant friends and relatives.• Air transport improves productivity, by encouraging investment andinnovation; improving business operations and efficiency; and allowingcompanies to attract high quality employees. And Cities always developtowards the airport because of its socioeconomic factor.1.3 Influence of Aviation on TourismTourism and Air Transport industry are complementing each other. Tourismdepends on transportation to bring visitors, while the transportation industrydepends on tourism to generate demand for its services. The growth in tourismindustry directly reflects onto the air transportation. Over the last 25 years, thenumber of international tourists has more than doubled. The expansion ofinternational tourism has a large impact on the discipline of transportgeography.Transport is the cause and the effect of the growth of tourism. To start with, theimproved facilities have stimulated tourism, and the expansion of tourism hasstimulated transport. Accessibility is the main function behind the basics oftourism transport. In order to access the areas that are mainly aimed, touristswill use any transportation mode. However, air transport is the main mode forinternational tourism. Air transport plays a dominant role in inter-regionalmovements of tourists, which normally entails travel over long-distance. Growthrates of international air traffic are pegged with growth rates of internationaltourism. Attractive package tours, competitive airfare attract more and moretourist day by days, therefore both the industry is expanding rapidly.Air transport is far advance than the transport mode. Air transport hasrevolutionized the geographical aspect of distances; the most remote areas cannow be attained, any journey around the world can be measured in terms ofhours of travelling. With jet that, can reach up to 1950 km/hrs, internationaltourism is no longer an on going adventure. 15 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 16. Inducement tour - Tourism now a day not only the personal influence, but it alsois group affluence as well, many company to induce their work force arrangetour 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 mostall of the above”, which basically requires good airport infrastructureAirports provide the only worldwide transportation network, which makes itessential for global business and tourism. Airport alleviate poverty and helps toimprove living standards by facilitating tourism. Air transport improves quality oflife by broadening people’s leisure and cultural experiences. It provides a widerchoice of holiday destinations around the world and an affordable means to visitdistance friends and relatives. Air transport contributes to sustainabledevelopment not only by facilitating tourism and trade, it generates economicgrowth, provides jobs, increase revenues from taxes as well as facilitates thedelivery of emergency humanitarian aid relief and swift delivery of medicalsupplies anywhere on the earth.97% of the countrys foreign tourists arrive byair and tourism is the nations second largest foreign exchange earner.1.4 Environment Benefits of Airports and AviationAs with all human activity there is an environmental impact. Aviation is widelyunderstood 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% ofaviation’s greenhouse gas emissions are related to passenger flights exceeding1,500km/900 miles for which there is no practical alternative. 16 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 17. AVIATION: ONLY 2% OF MAN-MADE CO2 EMISSION Fig.2 AIRCRAFT TODAY ARE 75% QUIETER AND 70% CLEANER THAN 40 YEARS AGOAviation’s small contribution to CO2 emissions is not a coincidence, but ratherthe result of a constant focus on innovation. Manufacturers must strive toreduce fuel consumption to remain competitive, but it is much more than justgood business. Since the start of commercial jet services in the 1950s, aircraft,engine and other related manufacturers have been driven by a number offactors. Safety is understandably considered above all others, although the costof aircraft operations for the airlines has been and remains a criticalconsideration. Much of the airlines’ and manufacturers’ focus has always beento reduce fuel costs. Today, this can account for 36% of airline operating 17 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 18. expenses, even though manufacturers have reduced the fuel consumption by37% per 100 passenger kilometres travelled, since 1987. Over the last 50years, aircraft have become increasingly efficient in terms of their individualimpact on the environment throughout their entire life cycle. This continues tobe driven by the demands of passengers and airlines, as well as bothinternational and local legislation.Today, aircraft are 20dB quieter than the closest comparable aircraft producedin the 1960s, which equates to 75% less perceived noise. Of the entirepopulation affected by transport noise, 79% live near roads, 14% near railwaysand only 7% live near airports. Similarly, everyone has seen pictures or film ofaircraft from that period taking off with plumes of black smoke billowing from theengines, which is not seen at the world’s airports today. In fact, today’s aircraftproduce 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 CO2than aircraft flying in this period. Another trend having a significant effect isimproved aircraft load factors. In other words airlines have filled their planesmore efficiently, thereby effectively reducing the need for more aircraft orfrequencies, together with their associated fuel burn. Since 1970, airlines haveimproved load factors by an average of 0.6 percentage points per year, withindustry wide load factors averaging 76% in 2006. 18 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 19. 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 andmanages 88 airports, 27 civil enclaves at defence airfields and 5 PPP airportsand provides air traffic services over the entire Indian airspace and adjoiningoceanic areas. Historically, air traffic at Indian airports has broadly followed aparticular distribution pattern, except that some airports have changed theirinter-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, annualpassenger throughput in excess of one and a half million or any other airport asthe Central Government may, by notification, specify as such”Presently twelve (12) airports in the country have annual passenger throughputin 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 19 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 20. • 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 IndiaReclassification of airports is proposed to develop the capacity of airports inaccordance 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 thoseeminently qualified to be upgraded. These would at present cover Delhi,Mumbai, Chennai, Kolkata and Thiruvananthapuram. Airports at Bangalore, 20 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 21. Hyderabad, Ahmedabad, Amritsar and Guwahati would be added to the listafter their facilities are upgraded to the desired level. International hubs wouldbe used for dispersal of international traffic to the hinterland. At these airports,the facilities would be of world-class standards, including convenientconnections for international and domestic passengers, airport-relatedinfrastructure like hotels, shopping areas, conferencing and entertainmentfacilities and aircraft-maintenance bases, among others.Regional Hubs: The government is keen to encourage the development ofregional airlines with fleets of small aircraft, to provide air-linkages witin theinterior areas of the country. Regional hubs will have to act as operationalbases for regional airlines and also have all the facilities currently postulated formodel airports, including the capability to handle limited international traffic. Theidentification of Regional Hubs will be made on the basis of origin-destinationsurveys, traffic demand and the requirements of the airlines. The stategovernment 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 traffichandled by them. Airports serving state capitals would be given priority. Thestatus of individual airports may be reviewed at five-yearly intervals, on therecommendation of a committee of experts. Grant of status as Internationalhubs would be with prior cabinet approval. It is clarified that international hubsshall have the status of an international airport for purposes of bilateralagreements.2.5 Greenfield and Brownfield AirportsGreenfield Airport means a new airport which is built from scratch in a newlocation because the existing airport is unable to meet the projectedrequirements of traffic. The word Greenfield originates from softwareengineering, meaning a project which lacks any constraints imposed by priorwork. Brownfield projects are the projects which are modified or upgraded fromexisting facilities. 21 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 22. 3 PUBLIC PRIVATE PARTNER SHIP3.1 Introduction to PPPPPP can be defined as arrangements whereby private parties participate in, orprovide support for, the provision of infrastructure, and a PPP project results ina contract for a private entity to deliver public infrastructure-based services.The mechanics of the arrangements can take many forms and may incorporatesome or all of the following features•The public sector entity transfers land, property or facilities controlled by it tothe private sector entity (with or without payment in return) usually for the termof 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 definedperiod 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 capitalworks on the attitudes and culture of the public sector, which result in timedelays and costs overruns being commonplace. Since then, more completeand damning evidence has come to hand on the extent of cost overruns andrevenue shortfalls on infrastructure investments phenomena that have come tobe known under the heading ‘appraisal optimism’.Appraisal Optimism: Optimism bias is the tendency for a project’s costs andduration to be underestimated and/or benefits to be overestimated. It isexpressed as the percentage difference between the estimate at appraisal and 22 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 23. the final outturn.National Audit Office (NAO) undertakes a rolling review of allgovernment procurement, including PFI procurement, PFI constructionoutcomes showed that in contrast to traditionally procured projects, the PFIprojects were largely being delivered on time or early (76 per cent versus 30per 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 27UK Green Book calls ‘optimism bias’ – the estimated difference between thebusiness case and the final outcome for each category of project. For allprojects, time overruns exceeded the estimated duration by 17 per cent.Differences between actual and estimated costs in large public works transportprojects. Project Type All regions Number of projects Average cost escalation (%) Transport 258 27.63.2.2 Naresh Chandra committeeThe Indian aviation industry took off on to a higher growth plane following theliberalization of the airlines industry in the late 1990s. In the decade followingliberalization, the growth was propelled further by the emergence of low-costcarriers, competition-induced decline in travel costs, and sustained economicgrowth. With that, renewed focus came to be placed on the aviation 23 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 24. infrastructure segment, in which investments by the Airport Authority of India(AAI)—till then the monopoly owner of most of the Indian airports—hadhistorically been inadequate. The emphasis on further developing the country’saviation infrastructure meant opening up of airports to private investment, aswas one of the key recommendations of The Naresh Chandra CommitteeReport on the Road Map for the Civil Aviation Sector—November 2003.3.2.4 To meet the growing needs of airport infrastructure in IndiaIndia’s airports have suffered from decades of neglect and underinvestment.When the Naresh Chandra Committee presented its report to the Ministry ofCivil 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 trafficexpanded dramatically from 2004 onwards, pushing several metro airports towell beyond their design capacity. Congestion in the terminals, on the runwaysand in the air, resulted in a deteriorating passenger experience and anincreasingly inefficient (and costly) operating environment for the airlines.3.2.5 Passenger GrowthIn the recent past, India has encountered an extraordinary growth in passengerair traffic. In India 87% of the total air traffic is generated by the 15 internationalairports (listed in annexure-I), of which a total of 84% of domestic traffic and93% of international traffic is generated from these airports.The growth of International and domestic passenger traffic is shown in theGraphs below. The statistics analysis follows the regression line of polynomialrepresenting the international and domestic passenger growth respectively. y = 95946x2 - 317907x + 4E+06 y = 464620x2 - 1E+06x + 1E+07 24 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 25. International & Domestic Passenger Traffic INTERNATIONAL PASSENGER DOMESTIC PASSENGER 2 2 y = 95946x - 317907x + 4E+06 y = 464620x - 1E+06x + 1E+07 120 100 Passenger Traffic 80 Millions 60 40 20 0 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 Calender Year (See Annexure II for the passenger data) Fig.3The estimates from the graph represent a 100 and 20 million in Domestic andinternational air traffic by 2014. While passenger traffic in metros grew by anaverage of 31%, smaller stations like Port Blair, Nagpur and Raipur registeredtraffic growths of 41.8%, 94.8% and 70.3%, respectively.According to the Airports Authority of India data, of the top 45 airports, 9airports registered a 50% growth in passenger traffic. These includeHyderabad, Pune, Coimbatore, Mangalore, Nagpur, Port Blair, Raipur, Ranchiand Jaipur. Among the four metros, Kolkata registered the highest growth of39.5%, followed by Chennai, Delhi and Mumbai at 35%, 27.1% and 22.4%respectively.3.2.6 Cargo GrowthThe air cargo market in the country has also witnessed increased activity overthe last few years especially with the entry of number of new players in cargohandling market (terminal management, development and operation).International operators like Menezies (JV with Bobba group at Bangalore andGHIAL at Hyderabad) and SATS Singapore (JV with Air India at Bangalore)have made significant investments for offering newer and better services forcargo users. International express cargo operators like FedEx and DHL arealso increasingly establishing their presence in the Indian market. y = 1615.4x2 - 10948x + 114582 y = 195.64x2 +25 14984x + 131194 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 26. International & Domestic Cargo Traffic 450000 INTERNATIONAL CARGO TRAFIC DOMESTIC CARGO TRAFFIC 400000 y = 1615.4x2 - 10948x + 114582 y = 195.64x2 + 14984x + 131194 350000 300000 Cargo in Tonnes 250000 200000 150000 100000 50000 0 1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013- 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Year (See Annexure-III for the cargo data) Fig.4Form the polynomial regression analysis and form the graph this is evident that400000 and 350000 tons of cargo is likely to reach by 2014.3.2.7. To Meet Financial Requirements to Support Such Growth and to InfusePrivate Fund in the Airport Infrastructure Sector Recognising the potential forairport infrastructure constraints to stifle the aviation industry, in 2005 theGovernment of India announced a USD10 billion airport upgrade andmodernisation programme over 5 years to 2010. A further USD20 billion ofinvestment is expected in the following 10 years. Acknowledging that itpossesses neither the expertise nor the capital to carry out such an undertakingby itself, the government has invited private sector participation in the process.3.2.8 To Increase the Standards of Indian Airports-To InternationalStandardsThe ICAO also standardizes certain functions for use in the airline industry,such as the Aeronautical Message Handling System AMHS; this probablymakes it an organization. The ICAO defines an International Standard 26 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 27. Atmosphere (also known as ICAO Standard Atmosphere), a model of thestandard variation of pressure, temperature, density, and viscosity with altitudein the Earths atmosphere. This is useful in calibrating instruments anddesigning aircraft. The ICAO standardizes machine-readable passportsworldwide. Such passports have an area where some of the informationotherwise written in textual form is written as strings of alphanumericcharacters, printed in a manner suitable for optical character recognition. Thisenables border controllers and other law enforcement agents to process suchpassports quickly, without having to input the information manually into acomputer. ICAO publishes Doc 9303, Machine Readable Travel Documents,and the technical standard for machine-readable passports. A more recentstandard is for biometric passports. These contain biometrics to authenticatethe identity of travellers. The passports critical information is stored on a tinyRFID computer chip, much like information stored on smartcards. Like somesmartcards, the passport book design calls for an embedded contact less chipthat is able to hold digital signature data to ensure the integrity of the passportand the biometric data.3.2.9 Drivers and enablersDrives Enablers • Financial need, e.g. budget deficit • Political framework: stability explicit • Aging or poor infrastructure political will or commitment, e.g. a • Search for greater efficiency and dedicated unit, ability to push schemes creativity through, creative and willing local • Desire to introduce competition government • Shortage of domestic experience • Legal frame work: no roadblocks, and or skills documentation not excessively • Desire to educate national complicated contractors and remain • Public acceptance of private sector competitive involvement and specific impacts, e.g. • Bandwagon effect 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 27 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 28. 3.3 Present Indian scenarioThe privatization initiative that followed gained traction with the award of build-operate-transfer (BOT) concessions to private players for Greenfield airports atBangalore and Hyderabad in 2004 and the privatization of the internationalairports at Delhi and Mumbai in 2006. All these airports are now being operatedby separate joint venture companies (JVCs)The details including Type of PPP, Contract Period, Project Proponent,Contract Award method, Estimated Project Cost, Amount of GovernmentSupport - (VGF), Legal Instrument, Regulatory framework, financial informationincluding Equity, Debt, Other Financial Instrument, Market Structure andCompetition of these projects are included in appendix-(3)While the award of BOT projects for two Greenfield airports and privatization ofthe Delhi and Mumbai airports are positive steps towards involving the privatesector in development of the country’s aviation infrastructure, there is also agrowing need to put together a sound regulatory framework for the aviationindustry as a whole and have a functioning and independent regulator tobalance the often opposing demands of the airlines and aviation infrastructuresectors. The regulatory factor apart, the aviation infrastructure sector iscurrently facing the challenges of a weak global economy, declining trafficlevels, and deteriorating financial health of airlines. As a result, revenuegeneration by airports has been impacted severely, which, along with thepressures on liquidity, has caused funding gaps to arise both for private playersas well as the state-owned AAI. Another development that has hit the aviationinfrastructure segment has been the downturn in the real estate sector sincethe second half of fiscal 2008-09. The downturn has forced some private airportconcessionaires to look for alternative sources of funds, given that theirbusiness models rely significantly on the development and sale of land adjacentto the airports. An important issue in all airport privatizations and projects is thedegree of risk transfer to the private sector. To what extent will theconcessionaire or sponsor bear the risk in relation to matters such as existingasset condition (if privatization), construction costs, operational costs, trafficvolumes, revenues, change of law, non-insurable risks and financing risk? Thisis nothing unique to airport concessions and projects – similar issues arise inmost other contexts. Full risk transfer to the private sector is unlikely to be 28 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 29. achievable. Certain risks, particularly those having a political dimension, willinevitably 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-6Development and use of PPPs for delivering infrastructure services has now atleast 11 years of precedence in India, with the majority of projects coming inline in the last 5 years. Policies in favor of attracting private participation as well 29 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 30. as innovation with different structures have met with varying degrees ofsuccess. Some sectors like telecommunications, power, and ports and roads,have done very good progress compared to limited success in other sectors. Asfar as current status of projects in place, there have been at least 450 PPPprojects in our main sectors of focus where a contract has been awarded andprojects are underway – in the sense that they are either operational, havereached construction stage, or at least construction/implementation isimminent. The total project cost is estimated to be about Rs. 2, 24,175.75Crore. 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 projectsand 8.52% by total value. In terms of contract award method the InternationalCompetitive Bidding yielded 39% of total investment in India followed byDomestic Competitive Bidding with 33% in PPP. However airport count 100%international competitive bidding which is mainly because of building airport tointernational 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. % of total Total number of % of totalInvestor Type Investment projects project costForeign 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 projectsForeign Investor Versus No. of % of totalSector Projects Investment project costPorts 9 416.5 24%Roads 9 256.22 15%Airports 4 1053.13 61%Total 22 1725.85 100% 30 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 31. Fig-6Foreign equity participation of 27 foreign companies in PPP projects was onlyat 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 includemodernization of Mumbai and Delhi international airports, Delhi-Noida tollbridge, Papaya port, Bangalore international airports and JNPT containerterminal etc.Airport counts 61% of total foreign investment. 31 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 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. PromotersThe Central Government, Airports Authority of India, State Government, a localself Government Institution e.g. Municipality, Corporation etc., a privatecompany, a consortium or a group of individuals can act as the promoter for theGreenfield airport either individually or jointly.4.3 Study stagesa. Pre-feasibility Study StageThe promoter, after preliminary clearance of Ministry of Civil Aviation on his 32 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 33. proposal in the first instance, will commission a pre-feasibility report to studythe overall potential of the project and see whether the project is attractiveenough to warrant detailed study. The study should cover demand, technical,manpower, financial, economic and social modules of the project. The studymay also utilize secondary research and information. The promoter shall submitthe 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 StageBased on study of pre-feasibility report, the promoter shall again approach theCentral Govt. for preliminary clearance of undertaking a detailed Techno-Economic Feasibility Study (TEFS). The Central Govt. after due examination ofall modules of pre-feasibility study will determine whether the project showspromise of meeting the financial, economic and social criteria which have beenset for public investment expenditure. In case, the Govt. find it appropriate, itmay permit the promoter to take up detailed TEFS.c. The primary promoter will commission a TEFS including simulation study forconflict free operation by a competent professional body. Cost of TEFSincluding the simulation study will be borne by the primary promoter. During thisphase, the accuracy of variables will be further improved to see if the projecthas potential for success. This may require primary research etc.d. Upon establishing the technical / financial viability through sensitivity analysisof realistic traffic and revenue projections, as emerging from the TEFS, theprimary promoter will submit the proposal to the Ministry with full justification,inter alia, enclosing the TEFS and other studies in this regard. Such proposalshall cover the respective State Government’s commitments to the proposal inrespect of acquisition of land, supply of water and power, construction ofaccess roads and other financial support. It is only after TEFS that the mostimportant decision has to be made whether the project should be approved.4.4 Site SelectionSite selection for any Greenfield airport will be undertaken by the promoters atpre-feasibility stage only in consultation with Director General of Civil Aviation(DGCA) including AAI, Ministry of Environment & Forest, and Ministry ofDefence (MOD). In case, the Greenfield airport is proposed at a location, which 33 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 34. has an existing airport, while taking the decision to accord approval for theGreenfield airport, the Government would also decide whether the existingairport would be closed down or the new airport would be a second airport withfull-fledged simultaneous commercial operations. In case, the existing airport isdecided to be closed down, the unrecovered investments of AAI in the existingairport will have to be compensated by a suitable mechanism such as share inthe concession fee to be given by the greenfield operator to the Govt. TheGovernment shall, in general, promote competition in setting up a greenfieldairport in addition to the existing one.If a Greenfield airport is established in lieu of an existing AAI airport, theexisting airport with all assets will revert to AAI. AAI may decide on the futureusage of the airport in consultation with Ministry of Civil Aviation. The issue ofproviding employment to AAI’s employees working at the AAI airport after itsclosure has engaged attention of the Govt. The JVC will absorb AAI employeessubject to merit and efficiency in operational/ management dep’t. Againstvacancies at the airport.4.5 Detailed Design Stage and ApprovalBased on the TEFS and State Government/Promoters’ recommendations, theCentral Government will consider giving approval for the airport project as perthe extant policy. The approval will be given by the Union Cabinet as per theCivil Aviation Policy. The Central Government after approval will then go aheadto develop detailed design of the project which should then result in formulationof operational plan. At this stage, the project can once again be reviewedwhether it shall meet required criteria.4.6 Project Implementation StageA Steering Committee is set up by State Govt. / promoter comprising of officialsof the State Govt. and the Ministry of Civil Aviation as this stage involvescoordination and allocation of resources. This Committee will oversee theimplementation of the project, funding proposal, and preparation of tender andother documents, bidding and selection of the preferred investor. The StateGovt./ promoter will designate an agency preferably a PSU to coordinate theactivities and assumes responsibilities and authority for moving ahead . 34 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 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 beinducted 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. 35 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 36. 4.10 Viability Enhancement: - The Greenfield airport project can be madeViable by following means:-(i) Land and external infrastructure provided by the State Government for theairport on lease through Land Lease Agreement with variety of combinationssuch as token lease, moratorium on lease, deferred payment of lease etc.(ii) The State Government may enter into a State Support Agreement inaddition to Land Lease Agreement with the greenfield airport operator providingfor State Support such as grant, infrastructure loan, interest free loan etc.(iii) Central Government may levy an Advance Development Fee (ADF) fromembarking passengers at the existing airport or for the development of newairport on terms and conditions as per ADF rules framed by the Ministry.(iv)The Greenfield airport operator may be allowed to levy a User DevelopmentFee (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 bythe Govt. / Regulator.(vi)The Passenger Service Fees (PSF) levied at all airports would be applicableto the Greenfield airports also. ADF / UDF would be charged in addition to thePSF. PSF being levied through passenger tickets will have two components viz.(a) Security charges, (b) levy for Airport Maintenance and Upkeep. The PSFcomponents collected through airline passenger tickets will be passed on bythe airline to AAI as far as security component is concerned and the Greenfieldoperator for service component.(vii) Concessions have also been given by the Union Govt. through budgetpronouncement 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 36 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 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 37 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 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 38 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 39. 5.0 CONCESSION AGREEMENT FOR PPP5.1 Need for a frameworkAccelerated economic growth, aided by expansion of air services in acompetitive environment, has manifested itself in a rapid increase in air traffic.For providing connectivity to regions hitherto not served by commercial flights, itis necessary to expand the network of air services by setting up new airports.Some of the State Governments have already taken steps for setting upGreenfield airports. Examples in the past include Cochin, Hyderabad andBangalore where Greenfield airports have been commissioned with the activesupport and participation of the respective State Governments. The policyrelating to setting up of Greenfield airports has since been liberalised by theCentral Government and several new projects are being planned in differentstates. The airport sector has been witnessing significant interest from bothdomestic as well as foreign investors following the policy initiatives taken by theCentral Government to promote Public Private Partnerships (PPP) on Design,Build, Finance, Operate and Transfer (DBFOT) basis. However, the actualinflow of investment has been less than expected, and future prospects willdepend on adoption of a comprehensive policy and regulatory frameworknecessary for addressing the complexities of PPP, and particularly forbalancing the interests of users and investors. Moreover, transformation ofrules will have to be accompanied by a change in the institutional mindset. Forbuilding and operating a Greenfield airport on DBFOT basis, a precise policyand regulatory framework is being spelt out in this Model ConcessionAgreement (MCA). This framework addresses the issues which are typicallyimportant for limited recourse financing of infrastructure projects, such asmitigation and unbundling of risks; allocation of risks and rewards; symmetry ofobligations between the principal parties; precision and predictability of costsand 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 theGovernment. The MCA also lays out a structure for commercialising airports ina planned and phased manner through optimal utilisation of resources on theone hand and adoption of international best practices on the other. The 39 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 40. objective is to secure value for public money and provide efficient and cost-effective services to the users.5.2 Elements of financial viabilityThe four critical elements that determine the financial viability of an airport areconcession period; traffic volumes; user fees and other revenues; and capitalcosts. The concession period for such capital-intensive projects is normally inthe range of 50 to 60 years. This timeframe should enable a robust projectstructure and any further extension in the concession period would improvefinancial viability only marginally as the present value of projected revenuesafter 50 years would be very low from the Concessionaire’s perspective. For aGreenfield airport, the traffic projections are likely to be conservative as it wouldtake time for traffic to build up. As a result, user fees alone may not providefinancial viability, especially since they would have to be kept at affordablelevels. Additional revenues can, however, be generated from non-aeronauticalsources and real estate development to enable some cross-subsidisation ofuser fees. Three of the four parameters stated above could be virtually taken asgiven, and as a result capital cost is the variable that will determine the financialviability of an airport project. If the potential for non-aeronautical and real estaterevenues is inadequate, bidders may seek an appropriate capital grant/subsidyfrom the Government in order to reduce their capital investment for arriving atan acceptable rate of return. As such, reduction in capital costs and phasing outsome capital expenditure can help improve project viability significantly. ThoughPPPs undertaken so far in the sector have been financially viable and self-sustaining, the government’s initiative to build Greenfield airports in remoteareas may require cost-efficient designs as well as some capital subsidy.5.3 Technical parametersUnlike the normal practice of focussing on construction specifications, thetechnical parameters proposed in the MCA are based mainly on outputspecifications, as these have a direct bearing on the level of service for users.Only the core requirements of design, construction, operation and maintenanceof the airport are to be specified and enough room would be left for theConcessionaire to innovate and add value.In sum, the framework focuses on 40 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 41. the ‘what’ rather than the ‘how’ in relation to the delivery of services by theConcessionaire. This would provide the requisite flexibility to theConcessionaire in evolving and adopting cost-effective designs withoutcompromising on the quality of service for users. Cost efficiencies would occurbecause the shift to output-based specifications would provide the privatesector with a greater opportunity to innovate and optimise on designs in a waynormally denied to it under conventional input based procurementspecifications.5.4 Performance standardsFor an airport project, the Concessionaire would not only procure the civil worksand equipment, it would also provide various passenger related services aswell as cargo handling. The efficiency of its operations would normally bereflected in the quality of service provided to the users. The MCA, therefore,identifies the key performance indicators relating to operation of theaeronautical assets, terminal building, cargo terminal etc., and specifiespenalties for failure to achieve the requisite levels of performance, especially inrelation to user services. The MCA includes a Passenger Charter that theConcessionaire should publish and implement for the benefit of users of theairport. This will add to the accountability of the Concessionaire to the users.5.5 Concession periodThe concession period should normally be long enough to enable theconcessionaire to recover its investment with a reasonable rate of return. In thecase of a Greenfield airport, the traffic build-up may be gradual and theinvestments in airport infrastructure as well as real estate may take long torecover. As such, a total concession period of 50 to 60 years has beenprovided. This would enable the Concessionaire to realise the full potential ofthe project and thus offer a competitive bid. A shorter concession period wouldrequire a greater capital subsidy and/ or higher user charges. The time requiredfor construction of the airport (about two to three years) has been included inthe concession period so as to incentives early completion that would maximisethe revenues of the Concessionaire. 41 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 42. 5.6 Selection of ConcessionaireSelection of the Concessionaire will be based on open competitive bidding. Allproject parameters such as the concession period, user fees, price indexation,real estate development and technical parameters are to be clearly statedupfront, and short listed bidders will be required to specify the concession feethat they are willing to offer to the Government. The bidder who offers thehighest concession fee should win the contract. In exceptional cases whereinstead of offering a concession fee, the bidders seek a capital grant/ subsidyfrom the Government, the bidder who seeks the lowest grant would win thecontract.5.7 Concession feeConcession fee will be a fixed sum of Re. 1 per annum for the concessionperiod. The Concessionaire shall, commencing from the 20th year of theConcession Period, pay a Premium equal to 1 per cent of the total realisablefee which shall be increased every year by an additional 1 per cent of the totalrealisable fee. Where bidders do not seek any grant and are willing to offer ahigher Premium to the Government and/or an earlier commencement of itspayment, they will be free to do so, subject to a ceiling of 40 per cent of thetotal realisable fee. In case of an exceptionally viable project, the bidders wouldbe free to offer an upfront payment in addition to a share in the fee. Therationale for the above fee structure is that in the initial years, debt serviceobligations would entail substantial outflows. Over the years, however, theConcessionaire will have an increasing surplus in its hands on account of thedeclining debt service on the one hand and rising revenues on the other.Recognising this cash flow pattern, the concession fee to be paid by theConcessionaire will be based on an ascending revenue-share.5.8 Risk allocationAs an underlying principle, risks have been allocated to the parties that are bestsuited to manage them. Project risks have, therefore, been assigned to theprivate sector to the extent it is capable of managing them. The transfer of suchrisks and responsibilities to the private sector would increase the scope of 42 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 43. innovation leading to efficiencies in costs and services. The commercial andtechnical risks relating to construction, operation and maintenance are beingallocated to the Concessionaire, as it is best suited to manage them. Othercommercial risks such as the rate of growth of traffic have also been allocatedto the Concessionaire. On the other hand, all direct and indirect political risksare being assigned to the Government. It is generally recognised that economicgrowth will have a direct influence on the growth of traffic and that theConcessionaire cannot in any manner influence the rate of economic growth.By way of risk mitigation, the MCA provides for extension of the concessionperiod in the event of a lower than expected growth in traffic. Conversely, theconcession period is proposed to be reduced if the traffic growth exceeds theexpected level. The MCA provides for a target traffic growth and stipulates anincrease of upto 20 per cent in the concession period if the growth in traffic isless than projected. For example, a shortfall of 6 per cent in the target traffic willlead to extension of the concession period by 9 per cent. On the other hand, areduction of up to 10 per cent of the concession period is stipulated in the eventof a higher than expected growth. For example, an increase of 6 per cent in thetarget traffic will reduce the concession period by 6 per cent.5.9 Financial closeUnlike other agreements for private infrastructure projects which neither definea time-frame for achieving financial close, nor specify the penal consequencesfor failure to do so, the MCA stipulates a time limit of 180 days for achievingfinancial close (extendable for another 120 days on payment of a penalty),failing which the bid security shall be forfeited. By prevalent standards, this is atight schedule, which is achievable only if all the parameters are well definedand the requisite preparatory work has been undertaken. The MCA representsa comprehensive framework necessary for enabling financial close within thestipulated period. Adherence to such time schedules will usher in a significantreduction in costs besides ensuring timely provision of the much-neededinfrastructure. This approach would also address the typical problem ofinfrastructure projects not achieving financial close for long periods. 43 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 44. 5.10 User FeeA precise mechanism for determination of user fee has been specified for theentire concession period since this would be of fundamental importance inestimating the revenue streams of the project and, therefore, its viability. Theuser fee shall be based on the rates to be notified by the Government prior tobidding for the contact. The MCA provides for indexation of the tariffs to theextent of 60 per cent thereof linked to WPI. Since repayment of debt would besubstantially neutral to inflation, the said indexation of 60 per cent is consideredadequate. A higher level of indexation is not favoured, as that would require theusers to pay more when they should be receiving the benefit of a depreciatedasset. A higher indexation would also add to uncertainties in the financialprojections of the project. In respect of non-aeronautical services, however, theConcessionaire shall be free to determine the charges thereof.5.11 ConstructionHanding over possession of at least 90 percent of the required land as well asprocuring the environmental clearances are proposed as conditions precedentto be satisfied by the Government before financial close. The MCA defines thescope of the project with precision in order to enable the Concessionaire todetermine its costs and obligations. Additional works may be undertaken withina specified limit, but only if the entire cost thereof is borne by the Government.Before commencing the collection of fees, the Concessionaire will be requiredto subject the airport to specified tests for ensuring compliance with thespecifications and standards relating to safety and quality of service for theusers. The Schedules would include the master plan of the airport. The MasterPlan should specify the land use and other restrictions on development of theairport and should also earmark vacant land for future expansion of the airport.5.12 Operation and maintenanceOperation and maintenance of the airport is proposed to be governed by strictstandards with a view to ensuring a high level of service for the users, and anyviolations thereof would attract stiff penalties. In sum, operational performancewould be the most important test of service delivery. The MCA provides for anelaborate and dynamic mechanism to evaluate and upgrade safety 44 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 45. requirements on a continuing basis. The MCA also provides for trafficregulation, security and rescue operations.5.13 Reserved ServicesCertain services at any airport are to be provided by government agencies. TheMCA specifically details the obligations of the Concessionaire in respect of thereserved services with a view to ensuring that the respective agencies are ableto provide such services without any obstacles from the Concessionaire.5.14 Right of substitutionThe project assets may not constitute adequate security for lenders. It is theproject revenue streams that constitute the mainstay of their security. Lenderswould, therefore, require assignment and substitution rights so that theconcession can be transferred to another company in the event of failure of theConcessionaire to operate the project successfully. The MCA accordinglyprovides for such substitution rights.5.15 Force MajeureThe MCA contains the requisite provisions for dealing with force majeureevents. In particular, it affords protection to the Concessionaire against politicalactions that may have a material adverse effect on the project.5.16 TerminationIn the event of termination, the MCA provides for a compulsory buy-out by theGovernment, as neither the Concessionaire nor the lenders can use the airportin any other manner for recovering their investments. Termination paymentshave been quantified precisely as compared to the complex formulations inmost agreements relating to private infrastructure projects. Political forcemajeure and defaults by the Government are proposed to qualify for adequatecompensatory payments to the Concessionaire and will thus guard against anydiscriminatory or arbitrary action by the Government. Further, the project debtwould be fully protected by the Government in the event of termination, exceptfor two situations, namely, (a) when termination occurs as a result of default bythe Concessionaire, 90 per cent of the debt will be protected, and (b) in the 45 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 46. event of non-political force majeure such as Act of God (normally covered byinsurance), 90 per cent of the debt not covered by insurance will be protected.However, no termination payment will be due to payable if the Concessionairefails to commission the project owing to its own default. A different method ofvaluation has been adopted for the real estate. It will enable a more transparentand predictable valuation of real estate in the event of termination.5.17 Monitoring and supervisionDay-to-day interaction between the Government and the Concessionaire hasbeen kept to the bare minimum by following a ‘hands-off’ approach, and theGovernment shall be entitled to intervene only in the event of a material default.Checks and balances have, however, been provided for ensuring fullaccountability of the Concessionaire. Monitoring and supervision ofconstruction, operation and maintenance is proposed to be undertaken throughan Independent Engineer (a qualified firm) that will be selected by theGovernment through a transparent process. Its independence would provideadded comfort to all stakeholders, besides improving the efficiency of projectimplementation. If required, a public sector consulting firm may discharge thefunctions of the Independent Engineer. The MCA provides for a transparentprocedure to ensure selection of well-reputed statutory auditors, as they wouldplay a critical role in ensuring financial discipline. As a safeguard, the MCA alsoprovides for appointment of additional or concurrent auditors. To provideenhanced security to the lenders and greater stability to the project operations,all financial inflows and outflows of the project are proposed to be routedthrough an escrow account.5.18 Support and guarantees by the GovernmentBy way of comfort to the lenders, loan assistance from the Government hasbeen stipulated for supporting debt service obligations in the event of a revenueshortfall resulting from political force majeure or default by the Government.Guarantees and/ or compensation have also been provided to protect theConcessionaire, though for a limited period, from construction of competingairport which can upset the revenue streams of the project. 46 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 47. 5.19 Real estate developmentProvision for development of real estate by the Concessionaire has been madein the MCA. The Concessionaire can grant sublicenses for the real estate andthe 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 alsobe provided for improving project viability. While allowing sufficient flexibility tothe Concessionaire with respect to exploitation of commercial space at theairport, the MCA stipulates some limits and restrictions to prevent excessivecommercialisation.5.20 Miscellaneousa) 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. 47 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 48. 6.0 RESERVED ACTIVITIESOn any Greenfield airport to be developed under these Policy Guidelines,activities relating to Air Traffic Services (ATS), security, customs andimmigration would be reserved for central government agencies. Provision ofthese services would be governed by the policy to be laid down by the CentralGovernment from time to time. Prior to grant of license, an applicant for licenseshall 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 48 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 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 servicesNOTE: MEMORANDUM OF UNDERSTANDING CAN BE CHANGED FROMTIME TO TIME 49 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 50. 7.0 EMERGING CHALLENGES AND RISKS IN PPP7.1 General Issues1. 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 50 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 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 mechanism5. 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 costescalation 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 51 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 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 andfinancing costs;• Force majeure risk, involving war and other calamities and acts of God.• Regulatory/political risks, resulting from planning changes, legal changes andunsupportive 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 anyof the above.7.2 Financial Challengesa) 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 aPPP project. From the public sector side, PPPs require little or no upfrontcapital expenditure but involve a larger operating expenditure over time topurchase the services. By contrast, the public asset approach requires a large 52 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 53. Fig 7.1 Comparison of public funding and partnerships on cash flowUpfront capital funding commitment and relatively lower operating expenditureover time. Thus the PPP route may on these grounds hold some attractions toa government with a backlog of infrastructure projects and facing an uncertainfiscal climate. But the major merit is in terms of the predictability of costs andfunding. A PPP ensures that whole-of-life costing and budgeting areconsidered, providing infrastructure and related ancillary services tospecification for a significant period, and including any growth or upgraderequirements. This provides budgetary predictability over the life of theinfrastructure and reduces the risks of funds being diverted (for example, awayfrom scheduled refurbishment) during the life of the project, impacting onresidual value risk to the asset.b) Financial RiskUnder this heading there are a number of risks. First, the financial parametersmay change prior to the private party fully committing to the project, adverselyaffecting price. Second, the financiers (debt and equity) may not continue toprovide funding to the project. Third, the financial structure may not besufficiently robust to provide fair returns to debt and equity over the life of theproject, calling into question its continuing viability. In evaluating these risks, thegovernment is mindful of the fact that private sector entities and their financiersmust be confident of the stability of the revenue stream, and the continuedinvolvement of the financiers in the project provides some comfort to it that the 53 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 54. consortium has incentives to deliver the contracted services. Nonetheless,many of the problems begin at the outset, and what is needed is forgovernment to undertake a reality check and not to encourage underbidding.Experience has shown that if the partnership does not work financially for theprivate sector – where, for example, the consortium has materially under pricedits bid to win the project – it is unlikely that the project will work for thegovernment either. Where a private party drives a bad bargain for itself (the‘winner’s curse’), which it may do when under intense competitive pressure orunder internal pressure because of the loss of other contracts, the project canset off along a wrong trajectory which is likely to result in continuing difficulty, ifnot commercial failure. Also to be watched are situations in which the sponsoris dependent on refinancing at more favourable rates to make the contractcommercially viable in the longer term. While ordinarily this may be possiblewhen the project enters a lower risk phase, if an event materializes and risk isassessed as remaining at comparatively high levels, the private party may finditself in an untenable commercial situation, prompting default or walk away.c) Project Finance and Revenue StreamsCharacteristic 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 aharder-nosed approach to project evaluation, risk management and projectimplementation. Project-financing techniques are employed and a mixture ofinstruments 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 borrowingscan be serviced from these proceeds. Future income from the investment isearmarked for the service of the borrowings, providing security to the financiersby decoupling the servicing of the loans from the financial fortunes of theowners or sponsors of the investment. A fairly standard approach is for thesponsors of a project to establish a special purpose vehicle company (SPV) inwhich they are principal shareholders. Each sponsor holds a sufficiently smallshare of the equity in the joint venture so that for legal and accounting purposesthe SPV cannot be construed as a subsidiary. Funding of the project is thenrouted through the SPV. 54 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 55. Revenue StreamsWhen private financiers commit funds under PPPs for infrastructure, they needto be convinced that a viable revenue stream can be tapped. In a public–privatearrangement, revenues to the private firm can come from two sources, namelyconsumer payments, or public entity payments (or from some combination ofboth). 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 economicregulatory framework which provides clarity and certainty to investors on thecommercial potential of any specific airport operation. The absence of a clearset of guidelines for airport operators ensures that their revenue models remainsubject to national debate and controversy. Resources are allocatedinappropriately; further reducing investor confidence in future projects, denyingIndia access to critical expertise and capital. The end result is likely to beunder-construction – and, ultimately, continued suppression of economicexpansion and consumer benefits.7.3 Legal Challengesa) The absence of a reliable commercial and legal framework.Legal framework: Ideally a robust system of commercial laws needs to be inplace. Private sector interests have to be protected under the existing laws.Government agencies have also to facilitate the involvement of the privatesector in infrastructure projects or public utilities. Restrictions on publicprocurement may adversely affect the implementation of PPPs. PPP projectsusually require a number of permits, consents and administrative decisions.The partners of the public entity are often foreign companies, the operations ofwhich sometimes face additional restrictions in the host country.b) Taxation. A good appreciation of the taxation ramifications is needed in anydealings with private sector entities. The very complexity of PPPs creates many 55 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 56. points where an unhelpful taxation system can impose itself. For example, aredirect grants from the public sector to pay for a portion of the PPP assettaxable? Is the hardback of the asset to the public sector assessed for tax? Isproperty used in the PPP exempt from taxation? Can infrastructure assets bedepreciated for taxation purposes? The existing taxation system, like the legalsystem, may be ill-equipped to deal with PPPs.c) Accounting. Determining the appropriate accounting treatment of PPPs hasproven to raise complicated and controversial issues. The main problemconsists of providing a correct answer to the question: in whose books shouldthe assets covered by a given agreement be reported? Recognizing a givenasset in the balance sheet also means recognizing a related liability in theaccounts. Assets covered by a given agreement should be recognized in theaccounting records of the party which is not only exposed to the greatest extentto the economic risk associated with using those assets, but which is also ableto make use of related economic benefits to the greatest extent. A detailedanalysis of each individual case must be conducted in order to determine this,focusing on the variability over time of the revenue and costs connected withusing a given asset and the parties exposed to the greatest risk. Evolvinginternational standards largely accept this point, but not all national systems do,creating ambiguities as to the conditions under which PPP payment obligationscan be treated as off-balance sheet transactions by the public sector7.4 Public RiskGovernment has a duty to insist that facilities are constructed, operated andmaintained in accordance with relevant legislation and codes of practice inorder to ensure the safety and well-being of consumers and workers. It mayneed to exercise its rights to ‘step in’ in order to prevent or mitigate a seriousrisk 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 itsstatutory duties. Step-in rights ordinarily exist as part of a package of remediesthat the government can take for project company default. They may also needto be exercised simply because the private body is unable to deal with aparticular situation appropriately, for example, in an emergency, necessitatinggovernment intervention. In certain cases government has a duty to ensure the 56 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 57. continuity of the contracted services to the public and needs to retain the abilityto assume control of themTemporarily if the public interest is jeopardized. This will include stepping in tocontracted services on which the quality of its own delivery of core servicesdepends.Determining the circumstances in which government should exercise its step-inrights involves balancing the private sector’s desire to limit step-in instancesand government’s need to ensure that it has the ability to protect the provisionof the contracted services and, where relevant, core public services. Where thatbalance is struck depends on the nature of the project and the sensitivity of thepublic service involved. A step-in clause usually includes provisions for agovernment ‘step-out’ when the relevant situation has been resolved. Thatdecision also needs careful assessment.7.5 Asset RiskMost infrastructure facilities have a physical life measured in decades. Onexpiry of the concession, the government may be expecting to take possessionof an asset that still has a considerable working life at an acceptablemaintenance cost. Asset risk can arise for a number of reasons: the facilitydesign life or technical life may prove shorter than anticipated; the maintenanceand upgrade costs of keeping the facility serviceable might exceed expectation;the asset may be damaged or destroyed through a force majeure event; theproject company may lose the asset through default and early termination; andthe facility may not have the value which the project financial structure hasascribed to it.These risks can be mitigated in part through agreed maintenance andrefurbishment schedules, combined with a right to survey the asset and compelperformance if the maintenance obligations are not being met. The contractmay also need to allow for some flexibility to upgrade the infrastructure overtime, along with incentives to do so. There may also be some non-insurableforce majeure events which come under material change in circumstancesclauses, with some government risk-sharing with the SPV. 57 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 58. 7.6 Operating RiskThis is the risk that the processes for delivering the contracted services will beaffected in such a way as to prevent the private party from delivering theseservices according to the agreed specifications and/or within the projectedcosts. Operating risks relate to production and operation procedures,availability and quality of inputs, quality and efficiency of project managementand maintenance and upgrade requirements, with the consequence that thecosts of operating the facility will exceed projections and therefore diminishprojected 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 thoseoperating 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 withoutthe services for which it has contracted. If the contract is breached and theprivate party is not highly capitalized, the subcontractors may seek to walkaway, limiting government’s ability to obtain redress. For this reason,guarantees from the sponsors or the private party’s parent companies orperformance bonds may be required to cover performance obligations duringthe operational phase of the contract. If the contract is correctly structured andthe sponsors have invested a large amount of capital, the low risk of themwalking away may not warrant the costs to government of requiring operatingguarantees. However, this is not always the case, leaving sponsor risk that hasto be evaluated and managed.7.7 Sponsor RiskTypically, when a project structure is put together, the SPV that contracts withthe government is simply an entity created to act as the legal manifestation of aproject consortium, and it has no historical financial or operating record thatgovernment bodies can assess. It is supported by external equity contributionsoften provided by portfolio investors with no relationship to the project beyondtheir commitment of equity and expectation of financial return. Governmenttherefore relies on the reputation of the consortium members to fulfil the projectobligations. Sponsor risk usually arises when the SPV and/or its subcontractorsare unable to meet their contractual obligations, and the government is unableto enforce those obligations against the sponsors or recover some form of 58 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 59. compensation or remedy from them for the losses sustained by it as a result ofthe SPV’s breach. In addition, it may occur when the sponsor(s) is, for securityor other probity reasons, unsuitable to be involved in, or connected with, thedelivery of the project, and consequently may harm the project or bring it intodisrepute. Should, after financial close, the SPV not be regarded as adequatelycapitalized, the government could seek security from the sponsors or parentguarantees or performance bonds, to ensure that the body is fully committed todelivering the required outputs. These sureties are particularly significant in theoperational phase when construction guarantees under the constructionsubcontracts are no longer in place and the sponsor may seek to walk awayfrom the contract rather than address operational difficulties – leaving the SPVto be liquidated in circumstances where it lacks the resources to compensategovernment for the contract breach. The sponsor may also want to sell itsinterest in the SPV, and the government needs to make sure that it retainssufficient control over any changes to the ownership of the private party, inorder to mitigate sponsor risk.In some circumstances, parent guarantees may be a poor method of providingsecurity to government, inconsistent with the preference of many sponsors forinfrastructure projects to be of a non-recourse or limited recourse nature. It maybe more efficient to use performance bonds. One way of keeping down the costof the guarantees or performance bonds is to have the value at the minimumrequired to cover necessary costs (such as the cost of installing a newoperator). Again, these issues necessitate careful management over time, andmay require ongoing tests of probity, continued tests of capability, and topped-up letters of credit or performance bonds to meet claims or to underpinoperational performance obligations.7.8 Default RiskDefault (breach of the contract) occurs when the contracting enterprise isunable to perform its contractual obligations, including the inability to meetdeadlines, to perform to a specified standard, and to continue loan repayments.Invariably, the contract will recognize the differing scale and consequences ofcontractual breaches by accepting some defaults (material defaults) as givingrise to a right of termination, and others (non-material defaults) as attracting an 59 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 60. obligation to rectify but not on their own allowing the other party to terminate thecontract. However, a non-material default may become a material default if it isnot rectified within the period allowed and progress is unsatisfactory, or if thedefault recurs. In these circumstances the remedies available to governmentmay include the right of step-in, as well as a right to terminate the contract. Inextreme cases, government can have the underlying infrastructure assetstransferred to it, subject to a predefined valuation mechanism. Before looking toterminate the contract in the event of a default, government generally seeksother avenues of redress (e.g. abatement of service charge). Termination isviewed as an option of last resort, and can have very real ramifications andcosts for government (if, for example, it is unable to find alternative services oris unable to deliver its own services). Contracts generally provide for adequateresolution periods and distinguish between – and provide different regimes for –material and non-material defaults. The presence of a reasonable resolutionregime for defaults is important for financiers, and one that imposes harshpenalties without a reasonable opportunity to remedy defaults is likely to makethe project difficult to finance and increase the cost of finance, leading to a lessattractive value-for-money outcome. Good contract management aims to keepthe contract in operation for the benefit of both parties, not to seek occasionsfor it to end, if circumstances are propitious. On the other hand, if the projecthas little possibility of becoming viable under the present operators, it may bebetter to cut losses quickly. The real issue becomes one of developing a goodmonitoring 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; 60 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 61. 7.9 Risk matrix for public private partnership airportType of Risk Source of Risk Risk taken bySite conditions Ground condition, supporting Construction contractor structuresSite preparation Site redemption, tenure, Operating company / pollution/discharge, obtaining project company permits, community liaisonLand use Native title, culture heritage fault Governmenttechnical risks in tender specifications contractor design fault Design contractorConstruction risk Inefficient work practice and Construction contractorcost overrun wastage of materialsDelay in Changes in law, delay in Project company/completion approval etc, lack of coordination investors construction of contractors, failure to obtain contractor standard planning approvalsFailure to meet Quality shortfall/ defects in Insurer constructionperformance construction / commissioning contractor / projectcriteria test failure companyOperating risk Project company request for Project company /operating cost change in practice investorsoverrun Industrial relation, repairs, occupational health and safety, Operator maintenance, other costs government change to output specifications GovernmentDelays or Operator fault Operatorinterruption inoperationShortfall in Government delays in granting Governmentservice quality or renewing approvals, providing contracted inputs Operating faults Operator 61 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 62. Revenue risk Contractual violations by Governmentincrease in input government owned supportprices network Contractual violations by private Private supplier supplier other Project company/ investorsChange in taxes, Fall in revenue Project company/tariffs demand Decreased demand investorsfor outputFinancial risks Fluctuations with insufficientinterest rates hedging payments eroded by Project company/inflation inflation floods, earthquake, governmentForce majeure riots, strikesriskRegulatory/political risk Construction period operating Construction contractorChange in law period project company, with government compensation as per contractPolitical Breach / cancellation of licence Governmentinterference expropriation Insurer, project Falure to renew approvals, company/ investor governmentProject default Discriminatory taxes, import Equity investors followedrisks restrictions combination of risk by bank, bondholders and institutional lenders governmentAsset risk Sponsor suitability risk technical Project company/ obsolescence termination operator Residual transfer value Government, with compensation for maintenance obligation 62 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 63. 7.10 PRESENT PPP AIRPORT AND RISK STRUCTURE Modernization of Mumbai International Airport Risk RISK DESCRIPTION Allocation 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. 63 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 64. 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. 64EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 65. 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. 65EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 66. 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 RISK DESCRIPTIONAllocation 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. 66 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 67. 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. 67EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 68. 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. 68EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 69. Bangalore International AirportRiskAllocation RISK DESCRIPTION Pre- • The Ministry of Civil Aviation shall endeavor that all Construction 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. 69 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 70. 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 RISK DESCRIPTIONAllocation Pre- • The Ministry of Civil Aviation shall endeavor that all Construction 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 70 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 71. 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. 71EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 72. 8.0 EMERGING REGULATORY ISSUES8.1 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 AERAThe Parliament of India enacted an Act called “The Airports EconomicRegulatory Authority of India Act, 2008”. the establishment of a statutoryauthority is to regulate tariff for the aeronautical services, determine otherairport charges for services rendered at major airports and to monitor theperformance standards of such airports.As per the Act, AERA is to perform the following functions in respect of majorairports:• 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 passengerthroughput in excess of one and a half million could come under AERA’spurview for tariff determination and monitoring of set performance standards. Inother words, an airport where actual passenger throughput is not in excess of1.5 million but which has a designated capacity of 1.5 million or above wouldqualify to be a major airport. 72 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 73. 9.0 THE CHANGED ROLE OF GOVERNMENT UNDER PPP AND NEW SETOF AGREEMENTS AND NEW LEGAL FRAME WORKA switch from traditional public procurement methods to infrastructure providedunder a PPP signals a changed role for the public sector. This sectionexamines the different role for government occasioned by the PPPprocurement 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) andpay for services (government funding), define performance outcomes andstandards (government as customer), undertake detailed procurement planning(government as project manager), ensure facilities are constructed, used andmaintained satisfactorily (government as inspector), require compliance withstandards and specifications (government as overseer), monitor business andfinancial viability (government as contract manager), assess environmentalimpacts (government as protector of the environment),and guaranteecommunity access and achieve social policy objectives (government asrepresentative of the public interest).The table below sets out the major stages involved in developing a typical PPPproject and indicates the different perspectives that the government must applyin each stage. At the same time, a very different obligation are placed on theprivate sector entity because the government is not acquiring and takingimmediate ownership of infrastructure assets but, rather, is contracting to buyinfrastructure and related ancillary services from the private sector over time. 73 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 74. Stages Main Tasks Government Role • identify service needs customer, • determine outputs network plannerDefine service • consider network effects, corridor need planning • allow scope for innovation • examine various alternatives • network planner, (refurbishment, protector of • reconfiguration, new assets) environment, Appraisal • representative of • evaluate financial consequences, public risks and otherimpacts interest • quantify risks and costs, establish • network planner, net benefit fundingBusiness case • cost–benefit analysis, PSC• obtain funding and project approval • assemble project resources Project (steering committee, project director, • project managerdevelopment probity auditor,procurement team) • create a project plan • develop and issue expression of interest invitation • concession grantor • evaluate responses and preparea Bidding shortlist process • issue Project Brief • evaluate bids • confirm value for money and • network planner, achievement of policy intent • representative of public interest Project, • establish negotiation • concession finalization grantor, funding review Final • probity review negotiation • execute contract • financial close • handover to contract • inspector, • Management overseer, contract • Team • formalize management Contract responsibilities • managermanagement • finalize project delivery • handle variations to contract • monitor the service outputs • maintain the integrity of the contract 74 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 75. 10 .0 PPP airports and RTI Act10.1 PPP airports public authority or notBecause of the government’s equity stake and a range of tax, cess and otherexemptions granted the PPP may be considered as public authority. Undersection 2(h) of the RTI act, public authority includes non-governmentorganisations substantially financed, directly or indirectly by funds provided bythe appropriate government. The crucial point examined was whether or not thePPP is “substantially financed” directly or indirectly through government.10.2 BAIL caseThe State promoters have 26 per cent stake in Bangalore International AirportLimited (BIAL), the company developing the airport. Yet, the ordinary citizencannot ask for information about the airport from its promoters apparentlybecause the BIAL is “a company in the private sector,” is not a “public authority”and “provisions of the Right to Information Act 2005 and KarnatakaTransparency in Public Procurements 1999” are not applicable.As defined by the RTI Act, is any body or institution that is controlled orsubstantially financed, directly or indirectly by funds provided by the appropriategovernment. The 26 per cent stake by State promoters in the BIAL, is enoughto consider the BIAL a public authority and all rules and regulations of the RTIact are applicable to it.On 14 may the Karnataka information commission (KCI) ruled that theBangalore international airport limited (BAIL) can be constructed as “publicauthority” and therefore it would be within the purview of the RTI act. This issuearose out of an RTI application regarding suo motu disclosure by BAIL soughtBenson Isaac, a citizenWhile refusing to entertain Isaac’s RTI application, BAIL took the stand that itwas not a public authority as defined under the act and as such was not underany obligation to make disclosures under RTI. 75 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 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 thepurpose of public audit of the accounts of a body or authority.It noted that apart from equity by the private promoters and governmentpromoters, financing for BIAL includes rs. 350 crores interest-free debt from thegovernment of Karnataka under a state support agreement, exemption fromentry taxes, exemption of property taxes for 5 years, lease of land onconfessional rent, wavier of stamp duties and registration charges, exemptionfrom 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 cessexemptions, total government funding of BIAL is Rs.434 crores, which is higherthan the total share of the private promoters- Siemens, unique Zurich andLarsen & toubro. If the indirect support is also taken into account, thegovernment support would be much higher, noted the KIC.Observing this and more, the KIC came to the conclusion that “the BIAL is abody substantially financed by the government is therefore a public authority asdefined under section 2(h) of the act.”The implication of this landmark judgment is that citizen will now be able toaccess information through RTI in respect of many public private partnership(PPP) infrastructure projects which often are vital concern to the people atlarge.10.3 In case of brown field airport –AAI act apply – the operator in AAIshoes 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. 76 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 77. Government will have no role in the management of such private sectorairports except for security and Air Traffic Control. The amendment alsoprovides for levying ‘Advance Development Fee’ at existing airports tofinance new airports in lieu of the existing one and ‘Users Fee’ at the newairports.Government of India formulated a new national policy on airportinfrastructure in 1997 to provide a broad framework for development ofairport infrastructure with public and private sector participation.This Policy provides for foreign equity participation in airport projects upto74 % with automatic approvals and 100% on case-to-case basis. Foreignairports authorities can also participate. Private sector participation isencouraged in the development of cargo infrastructure including satellitefreight cities.The policy permits development of Greenfield Airports where an existingairport is unable to meet the projected requirements of traffic or a new focalpoint of traffic emerges with sufficient viability. It can be allowed both asreplacement for an existing airport or for simultaneous operations. 77 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 78. 11.0 RECOMMENDATION IN REGULATION FOR PPPa) 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 78 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 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. 79 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 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. 80 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 81. o) Risk and managementsp) 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; andt) 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. 81 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 82. CONCLUSIONFor the sector as a whole, progress is still slow. In the first two years of theVGF scheme the government granted approval to 23 proposals with estimatedfunding of just US$683 million while IIFCL has so far approved 64 creditproposals worth US$3.8 billion. In March 2006 IIFCL has disbursed onlyUS$105 million against approvals for 57 projects amounting to US$3.2 billionalthough disbursals will pick up in the latter part of these long-gestationinfrastructure projects. For their part, government officials argue that the lowerexpected VGF disbursals are because projects are more robust than previouslyanticipated.Limited access to long-term financing from non-government resources due tothe absence of a well-developed debt market is also constraining the increasein PPP projects. However, most private sector participants believe that theavailability of money is not the problem; too much money chasing too fewprojects is the main issue. Other factors hindering the growth of PPP in Indiainclude the absence of a regulatory and policy framework governing PPPprojects. There is a great deal of contractual ambiguity and over reliance onprotracted legal procedures to handle any conflicts that may arise between theconcerned authorities and private sector partners, a problem compounded bythe lack of independent regulators and adjudication authorities. Contractenforcement is another cause for concern, even orders by the Supreme Courtsometimes proving hard to implement on the ground. However, the relativelyprogressive Ministry of Civil Aviation managed to push the Airports EconomicRegulatory Authority (AERA) bill through the Cabinet in May 2007. Although theparliament has passed the bill, its eventual implementation will lead to thecreation of an independent regulator to set tariffs and other charges foraeronautical services and monitor performance standards of airports as well asto the establishment of an appellate tribunal to adjudicate disputes. The generalabsence of such strong institutions has resulted in messy disagreementsbetween the government and private sector participants in some prominentPPP projects. The Delhi airport privatization programme, for instance, landedup in controversy after the Delhi International Airport Ltd (DIAL) - a consortium 82 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 83. led by the GMR Group - decided to form a subsidiary to develop the landaround the airport. DIALs new arm plans to charge private builders a highdeposit (totaling around US$700 million) and treat it as a cost while loweringthe rent, thereby reducing the revenue due to AAI (which is supposed toreceive 45.9 per cent of DIALs revenue). A disapproving Ministry of CivilAviation finally referred the dispute to Indias attorney general, who recentlygave a judgment in favour of DIAL. Although the airport modernizationprogramme had already hit air pockets due to political opposition to privatizingmore airports, such disputes could make the government even more hesitant toinvite more private developers into public projects. The process of obtainingapprovals from various ministries and government departments iscumbersome, and private investors have faced long delays in acquiring land forthe projects and getting regulatory clearances. However, the government has toget its act together on this front by clearly allocating responsibility for individualprojects to different agencies. 83 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 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/ 84 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 85. ANNEXURE Annexure-IEXPORTS.No. Country 2004-2005 2005-2006 2006-2007 2007-2008 2008-20091 AFGHANISTAN TIS 74,333.46 63,164.15 82,227.81 100,192.14 182,344.162 ALBANIA 2,349.56 2,485.12 2,020.77 2,804.38 5,589.703 ALGERIA 103,889.54 120,152.38 151,952.64 151,747.96 299,636.274 AMERI SAMOA 568.51 130.55 124.09 80.59 58.265 ANDORRA 80.61 39.59 58.16 53.26 412.376 ANGOLA 32,751.82 67,146.25 90,717.60 106,027.64 170,381.687 ANGUILLA 123.32 51.49 404.86 70.27 39.048 ANTARTICA 4.08 20.58 168.479 ANTIGUA 471.02 500.44 636.89 748.05 1,314.8210 ARGENTINA 83,714.57 88,327.70 95,798.55 116,569.32 160,966.7111 ARMENIA 3,253.57 3,184.55 3,908.03 7,988.56 9,221.8012 ARUBA 199.13 274.59 661.99 270.88 900.8613 AUSTRALIA 323,617.14 363,586.27 418,457.01 463,013.06 657,633.3914 AUSTRIA 52,635.44 58,649.35 59,705.70 73,725.43 232,281.0215 AZERBAIJAN 13,836.39 12,753.60 11,105.75 10,370.55 15,910.2016 BAHAMAS 2,492.85 4,141.54 27,690.31 7,068.34 1,034.5417 BAHARAIN IS 70,301.55 85,114.86 83,071.38 101,333.63 131,407.4918 BANGLADESH PR 732,887.76 736,872.18 736,596.95 1,174,321.30 1,131,721.4719 BARBADOS 780.28 1,024.38 1,206.23 1,013.76 1,761.6520 BELARUS 4,766.12 5,409.66 6,504.93 8,526.90 16,350.9521 BELGIUM 1,127,648.32 1,271,195.60 1,572,170.46 1,694,309.84 2,030,939.5922 BELIZE 451.53 1,180.94 710.38 2,467.02 1,312.2523 BENIN 21,173.80 42,775.13 68,554.93 110,842.92 93,677.5024 BERMUDA 284.91 146.86 339.92 503.94 351.1725 BHUTAN 38,004.47 43,905.27 26,018.73 34,885.74 50,927.2626 BOLIVIA 1,780.09 2,902.06 2,469.47 3,063.56 4,382.3327 BOSNIA-HRZGOVIN 1,229.58 587.92 1,646.85 2,024.38 2,449.1728 BOTSWANA 3,552.48 4,771.83 4,916.37 6,814.12 11,704.0429 BR VIRGN IS 49.79 295.42 397.13 171.99 17,119.2630 BRAZIL 304,711.88 482,853.41 657,677.17 1,013,178.34 1,187,440.98 85 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 86. 31 BRUNEI 2,275.46 19,010.55 3,759.13 4,206.74 7,994.5232 BULGARIA 11,124.42 10,655.39 18,192.93 28,690.97 33,011.7633 BURKINA FASO 9,480.82 8,824.91 6,785.93 13,006.24 21,960.1534 BURUNDI 3,253.90 4,749.77 3,586.04 3,238.25 6,494.2835 C AFRI REP 392.65 616.24 1,090.57 525.45 1,122.7336 CAMBODIA 8,148.07 10,710.02 23,603.66 21,510.37 21,507.7137 CAMEROON 11,995.56 15,366.28 37,555.03 29,232.00 42,335.7538 CANADA 389,467.70 452,287.04 502,450.46 509,400.52 624,678.7939 CANARY IS 45.37 18,323.59 35.78 17.1140 CAPE VERDE IS 270.28 66.89 96.22 169.85 175.7641 CAYMAN IS 303.09 173.63 145.02 258.38 265.8542 CHAD 1,580.65 1,861.89 12,740.30 5,267.52 7,188.9743 CHANNEL IS 66.02 48.29 162.43 87.41 22.1844 CHILE 49,965.75 67,361.05 169,826.43 100,443.79 177,677.1345 CHINA P RP 2,523,296.90 2,992,491.28 3,752,978.03 4,359,741.59 4,266,133.3646 CHRISTMAS IS. 163.98 36.68 16.91 926.01 96.5647 COCOS IS 183.84 84.06 113.76 34.82 0.7248 COLOMBIA 148,590.78 201,451.27 260,923.11 304,907.57 168,762.5649 COMOROS 1,095.77 2,257.83 7,030.69 3,917.99 11,732.0150 CONGO D. REP. 1,268.91 898.08 546.48 1,686.01 7,048.2651 CONGO P REP 41,902.23 49,418.63 61,657.14 60,803.20 96,329.6452 COOK IS 37.56 40.8 2.14 49.83 6053 COSTA RICA 7,403.17 7,110.03 9,280.20 12,743.20 15,711.4354 COTE D IVOIRE 45,393.32 46,989.80 64,099.13 104,142.84 43,288.0655 CROATIA 10,264.76 12,841.95 24,747.91 29,155.85 39,161.6656 CUBA 3,341.95 5,274.66 12,148.67 7,702.08 17,075.9157 CYPRUS 13,198.64 14,348.77 15,108.63 19,278.70 114,200.8958 CZECH REPUBLIC 39,537.63 42,887.59 46,336.11 72,580.62 83,299.38 86 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 87. 59 DENMARK 137,374.13 181,647.03 207,161.34 199,651.29 267,651.5560 DJIBOUTI 57,793.27 101,989.22 139,207.94 184,276.22 160,806.3961 DOMINIC REP 9,901.64 14,074.42 16,754.46 17,110.95 23,514.0062 DOMINICA 910.62 1,161.01 1,287.59 1,184.19 1,197.1863 ECUADOR 10,206.10 11,598.16 23,652.76 22,293.27 58,350.3264 EGYPT A RP 199,824.37 297,706.24 344,350.86 562,131.18 759,464.4465 EL SALVADOR 3,993.94 5,311.52 7,993.01 4,881.17 7,676.4266 EQUTL GUINEA 1,724.19 2,850.43 2,152.15 4,445.17 2,969.0667 ERITREA 3,792.58 3,621.44 3,008.65 44,531.43 7,354.6368 ESTONIA 4,599.55 6,136.90 12,710.98 28,089.71 22,455.8769 ETHIOPIA 24,939.38 33,089.99 52,384.09 79,579.55 114,291.8970 FALKLAND IS 20.85 13.14 114.04 24.14 42.6771 FAROE IS. 64.18 97.83 149.04 96.89 27.2972 FIJI IS 12,843.97 12,864.33 20,101.12 19,426.76 39,679.9873 FINLAND 64,495.58 90,625.54 87,924.24 96,419.44 120,559.4374 FR GUIANA 36.14 21 34.9 890.02 17,546.6175 FR POLYNESIA 239.5 337.3 927.82 825.78 587.0176 FR S ANT TR 63.97 5,700.00 36.78 4.01 0.7877 FRANCE 755,271.75 920,707.57 950,601.41 1,045,415.11 1,377,671.1578 GABON 4,653.10 7,341.37 7,531.04 10,405.17 9,922.0079 GAMBIA 6,691.74 7,437.41 12,459.87 12,184.62 14,067.8480 GEORGIA 12,039.46 15,131.79 18,533.07 37,405.02 33,414.7181 GERMANY 1,269,875.33 1,587,701.77 1,800,723.12 2,059,892.83 2,919,475.3582 GHANA 82,262.34 88,909.82 208,633.62 324,961.98 249,717.4883 GIBRALTAR 291.31 149.64 7,884.05 518.7 4,025.9384 GREECE 137,642.42 249,743.87 304,306.09 213,659.96 406,323.8285 GREENLAND 19.48 1,492.73 1.18 23.7 38.4186 GRENADA 105.18 386.06 353.62 502.22 207.1887 GUADELOUPE 610.82 496.42 773.97 625.39 684.8388 GUAM 171.19 154.98 1,215.51 234.19 248.38 87 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 88. 89 GUATEMALA 16,999.96 20,337.09 33,502.31 30,041.40 36,984.1190 GUINEA 23,056.59 23,138.03 36,223.70 52,546.00 35,446.3891 GUINEA BISSAU 416.59 326.15 307.79 1,796.93 16,491.5792 GUYANA 3,082.18 4,937.72 5,951.67 5,475.73 5,555.4193 HAITI 4,576.25 7,228.63 9,822.70 10,746.83 20,342.0494 HEARD 19.66 24 5.31 5.43 0.09 MACDONALD95 HONDURAS 9,572.94 15,317.73 51,204.17 38,322.31 31,588.4396 HONG KONG 1,658,790.01 1,979,610.39 2,117,937.83 2,538,525.32 3,039,069.3997 HUNGARY 48,568.73 37,261.30 46,846.21 92,466.11 199,667.9398 ICELAND 5,800.97 5,779.27 5,200.01 5,541.14 5,708.8899 INDONESIA 598,756.65 611,063.22 917,696.77 869,277.93 1,157,782.95100 IRAN 553,282.72 526,123.79 656,482.05 784,482.83 1,156,517.42101 IRAQ 58,944.80 69,041.06 92,066.55 109,130.26 198,127.14102 IRELAND 95,249.84 123,864.37 102,184.09 126,414.59 203,497.12103 ISRAEL 451,902.26 531,944.06 597,937.21 645,339.92 658,430.72104 ITALY 1,027,129.27 1,115,267.10 1,621,242.79 1,574,812.54 1,736,487.94105 JAMAICA 6,033.65 11,447.67 9,111.92 9,931.50 10,342.24106 JAPAN 956,101.81 1,098,539.39 1,295,361.13 1,551,559.21 1,380,771.30107 JORDAN 57,622.91 81,891.55 80,881.48 143,802.45 196,036.40108 KAZAKHSTAN 36,581.85 40,228.56 37,710.02 45,034.32 60,244.72109 KENYA 191,693.99 255,254.87 595,254.94 635,609.27 614,088.18110 KIRIBATI REP 177.82 37.92 1,520.00 71.5 980111 KOREA DP RP 55,675.01 24,143.62 47,742.02 342,420.51 403,661.57112 KOREA RP 468,043.69 808,970.14 1,137,900.98 1,148,153.52 1,835,359.19113 KUWAIT 189,357.35 227,447.64 277,989.71 274,490.59 362,840.57114 KYRGHYZSTAN 22,271.78 12,438.38 16,852.48 12,706.31 10,385.08115 LAO PD RP 1,190.39 2,422.73 1,076.38 1,542.58 4,445.31116 LATVIA 7,826.98 12,571.09 18,010.54 23,920.68 20,389.30117 LEBANON 30,311.51 31,804.06 30,307.41 38,869.00 61,349.66118 LESOTHO 6,026.37 5,655.79 2,470.46 3,431.63 15,730.64119 LIBERIA 8,224.40 9,363.53 10,916.54 9,242.05 13,483.02120 LIBYA 77,970.65 45,731.67 39,011.82 54,517.18 59,829.60 88 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 89. 121 LIECHTENSTEIN 213.07 148.68 315.25 70.69 2,109.99122 LITHUANIA 13,747.13 14,807.99 18,362.14 23,778.95 27,293.60123 LUXEMBOURG 5,227.82 4,722.13 7,748.71 4,694.13 5,138.89124 MACAO 940.78 1,088.84 732.04 1,797.56 2,580.30125 MACEDONIA 1,167.39 1,739.46 2,578.95 3,345.98 4,755.99126 MADAGASCAR 16,231.29 18,881.92 20,650.42 23,013.25 111,534.40127 MALAWI 26,176.12 19,318.59 19,277.43 25,848.02 40,906.58128 MALAYSIA 487,084.68 514,398.01 590,192.56 1,033,728.54 1,578,036.20129 MALDIVES 21,393.88 29,918.78 31,096.43 36,055.22 59,028.43130 MALI 9,746.31 12,353.24 28,891.37 12,982.88 17,907.49131 MALTA 14,151.69 53,707.45 27,413.19 13,861.52 48,608.92132 MARSHALL ISLAND 23.72 93.45 8,634.20 36.02 49.56133 MARTINIQUE 239.01 372.72 952.31 797.58 19,097.74134 MAURITANIA 11,104.07 19,986.30 9,827.12 11,588.90 16,367.53135 MAURITIUS 116,012.77 88,296.78 333,275.80 437,245.94 439,831.09136 MEXICO 165,606.49 196,160.66 242,437.53 238,204.69 301,051.91137 MICRONESIA 153.34 3.19 14.68 20.09 41.97138 MOLDOVA 2,518.52 2,403.24 2,497.39 2,981.03 3,065.25139 MONACO 332.57 167.72 381.14 195.91 158.76140 MONGOLIA 605.66 516.14 1,066.79 3,051.03 7,059.86141 MONTSERRAT 177.78 112.42 70.59 28.66 93.28142 MOROCCO 50,540.04 56,452.49 74,343.33 83,745.29 110,544.19143 MOZAMBIQUE 36,530.66 56,466.45 86,753.70 179,489.16 191,948.96144 MYANMAR 50,859.74 49,009.52 63,374.59 74,619.38 101,776.52145 N. MARIANA IS. 12.71 24.01 9.05 34.93 205.42146 NAMIBIA 3,245.03 6,484.58 8,363.95 16,519.08 41,920.85147 NAURU RP 6.52 4.83 8.33 29.84 52.67148 NEPAL 333,903.93 380,738.81 420,138.23 606,348.08 715,577.12 89 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 90. 149 NETHERLAND 721,088.56 1,095,671.92 1,208,248.30 2,103,846.13 2,888,996.20150 NETHERLANDANTIL 2,369.95 4,843.32 5,811.37 4,085.12 8,633.71151 NEUTRAL ZONE 28.54 10,198.75 4.39152 NEW CALEDONIA 374.34 526.83 1,464.80 899.57 2,055.12153 NEW ZEALAND 41,886.64 62,823.84 227,770.60 63,819.20 85,696.81154 NICARAGUA 5,111.90 4,708.16 6,758.94 21,517.23 9,447.83155 NIGER 18,103.82 9,850.76 6,481.71 19,104.29 11,834.18156 NIGERIA 289,662.55 386,964.68 408,822.31 436,162.10 706,530.56157 NIUE IS 7.87 1.71 50 2.99 3.66158 NORFOLK IS 43.41 39.37 245.06 195.04 181.99159 NORWAY 46,642.97 57,646.14 82,972.37 106,308.47 172,119.42160 OMAN 120,268.74 180,827.06 285,267.87 377,358.31 354,968.47161 PAKISTAN IR 6.76 610,688.43 782,736.66 0.01162 PALAU 234,117.76 305,146.68 73.1 65.22 653,206.80163 PANAMA C Z 23.27 28.78 227.61 266.63 99.66164 PANAMA REPUBLIC 214.12 2,004.22 74,525.03 27,542.67 439.19165 PAPUA N GNA 25,139.56 27,914.97 4,861.40 5,930.75 55,942.32166 PARAGUAY 6,416.07 4,078.29 12,348.18 18,727.93 8,950.52167 PERU 5,396.48 7,252.12 56,836.89 115,487.41 17,636.87168 PHILIPPINES 30,922.00 37,303.49 263,596.76 249,073.46 139,324.62169 PITCAIRN IS. 185,219.60 219,005.40 30.88 14.01 337,935.11170 POLAND 9.13 0.43 138,582.66 179,961.34 12.57171 PORTUGAL 79,212.50 100,481.31 165,721.87 199,155.96 234,698.64172 PUERTO RICO 100,273.81 115,503.36 12,920.87 14,185.79 199,195.84173 QATAR 6,591.19 8,529.00 149,939.95 216,550.06 30,438.24174 REUNION 94,095.16 114,817.02 9,839.44 13,422.15 307,192.44175 ROMANIA 4,132.44 6,581.92 76,637.48 105,996.30 17,487.09176 RUSSIA 47,608.79 37,364.53 408,548.71 378,346.96 228,655.44177 RWANDA 283,636.04 324,589.03 6,219.23 5,199.71 495,824.21 90 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 91. 178 SAHARWI A.DM RP 3,758.26 4,709.91 2.62 13,672.29179 SAMOA 6.47 4.69 93.93 171.64 27.77180 SAO TOME 123.4 159.69 393.17 596.63 317.69181 SAUDI ARAB 45.22 182.49 1,171,137.11 1,492,255.46 459.77182 SENEGAL 634,460.47 801,248.19 68,895.23 79,689.56 2,294,014.13183 SEYCHELLES 31,110.81 41,395.16 5,844.40 28,888.77 66,069.08184 SIERRA LEONE 4,772.59 4,703.44 9,403.73 12,122.08 41,355.12185 SINGAPORE 5,895.68 8,207.53 2,746,160.82 2,966,223.24 21,858.39186 SLOVAK REP 1,797,534.89 2,401,965.25 16,307.16 19,205.70 3,775,688.18187 SLOVENIA 10,719.19 9,477.38 40,193.43 48,080.91 16,430.93188 SOLOMON IS 28,472.47 33,913.35 132.91 11,223.92 73,298.14189 SOMALIA 115.4 98.8 38,941.73 48,892.80 408.87190 SOUTH AFRICA 21,165.93 17,558.25 1,016,527.68 1,069,875.52 30,883.97191 SPAIN 442,142.40 676,000.35 849,693.12 922,504.63 899,429.11192 SRI LANKA DSR 624,263.18 710,883.44 1,020,638.25 1,137,428.97 1,138,792.36193 ST HELENA 634,964.97 896,391.21 750.46 653.6 1,089,497.01194 ST KITT N A 47.14 343.35 175.92 216.29 85.81195 ST LUCIA 219.96 182.17 298.14 217.88 322.13196 ST PIERRE 210.42 325.1 10,115.02 2,204.48 494.83197 ST VINCENT 1,116.17 709.4 155.49 189.15 1.31198 SUDAN 112.68 181.19 182,686.19 164,172.97 371.07199 SURINAME 142,633.84 130,449.92 7,531.83 4,530.49 221,794.09200 SWAZILAND 7,897.87 6,935.48 2,133.88 4,164.50 6,364.85201 SWEDEN 10,006.03 2,318.72 175,293.03 218,818.23 20,585.39202 SWITZERLAND 108,643.69 144,505.28 211,095.95 247,593.88 257,963.42203 SYRIA 243,027.94 212,300.92 184,818.20 270,911.07 352,525.70204 TAIWAN 113,759.19 122,492.04 413,348.74 698,497.17 166,657.08205 TAJIKISTAN 277,907.23 278,500.66 3,374.67 4,997.12 668,173.16 91 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 92. 206 TANZANIA REP 2,961.79 2,763.18 130,694.35 236,454.70 7,630.08207 THAILAND 78,127.12 107,783.96 653,562.38 727,877.20 472,958.89208 TIMOR LESTE 405,008.07 476,076.01 240.46 162.04 872,399.50209 TOGO 703.43 174.31 55,147.25 92,333.02 422.42210 TOKELAU IS 118,337.65 40,331.73 68.71 18.17 65,620.17211 TONGA 65.06 32.62 225.83 135.63 15.8212 TRINIDAD 316.06 196.37 48,903.89 54,763.53 148.77213 TUNISIA 12,995.28 29,504.28 49,486.13 49,992.79 143,698.43214 TURKEY 33,454.86 36,554.99 598,311.51 704,338.53 96,789.44215 TURKMENISTAN 325,168.46 447,197.82 15,309.07 14,517.51 637,029.19216 TURKS C IS 6,854.40 8,336.26 238.02 335.13 19,145.32217 TUVALU 142.36 182.48 42.85 2,625.27 236.38218 U ARAB EMTS 86.26 61.57 5,444,497.47 6,291,503.22 2,959.92219 UK 3,301,512.11 3,803,884.65 2,542,129.00 2,696,748.35 11,022,907.95220 USA 1,653,971.05 2,239,920.89 8,536,848.54 8,338,806.93 3,034,457.97221 UGANDA 6,185,157.56 7,682,808.04 48,609.62 61,857.99 9,645,841.97222 UKRAINE 34,138.18 41,017.22 131,061.29 160,480.30 100,749.23223 UNION OF SERBIA 93,336.06 114,308.73 5,428.86 5,371.72 180,771.03 & MONTENEGRO224 UNSPECIFIED 4,156.12 3,699.82 109,508.10 146,773.93 6,382.94225 URUGUAY 167,963.42 84,939.82 16,695.75 20,441.67 2,031,903.63226 UZBEKISTAN 11,011.87 12,364.57 13,432.07 16,224.15 29,728.79227 VANUATU REP 9,590.91 10,819.55 1,014.48 868.96 20,927.32228 VENEZUELA 743.09 813.23 57,234.92 57,782.33 2,409.86229 VIETNAM SOC REP 32,337.83 41,800.54 444,623.84 645,128.09 84,764.70230 VIRGIN IS US 249,800.55 305,786.46 711.75 455.82 794,947.72231 WALLIS F IS 697.21 278.13 274.57 19.1 621.12232 YEMEN REPUBLC 41.87 41.54 536,639.08 409,668.74 70.51233 ZAMBIA 110,717.19 123,440.62 49,037.69 53,225.19 353,281.31234 ZIMBABWE 22,647.10 29,448.45 14,444.58 12,841.47 49,058.39 Indias Total Export 37,533,952.62 45,641,786.15 57,177,928.52 65,586,352.18 84,075,505.87 92 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 93. IMPORTS.No. Country 2004-2005 2005-2006 2006-2007 2007-2008 2008-20091 AFGHANISTAN TIS 21,120.40 25,866.13 15,613.31 43,976.20 59,245.852 ALBANIA 14.35 85.62 16.76 224.63 81.463 ALGERIA 2,836.78 6,485.22 339,488.55 496,169.26 451,753.954 AMERI SAMOA 24.38 128.92 38,119.73 467.23 114.025 ANDORRA 10.19 12.43 4.08 40.86 ANGOLA 407.66 1,438.17 111,098.32 409,608.66 653,900.057 ANTIGUA 2.88 50.99 5.36 17.518 ARGENTINA 242,448.07 333,837.75 506.13 25.61 35.389 ARMENIA 348.6 919.42 398,459.26 364,530.43 234,594.2610 ARUBA 8.36 34,480.40 1,515.24 1,276.4011 AUSTRALIA 1,718,418.00 2,190,614.78 18.17 8.312 AUSTRIA 117,873.85 152,310.25 3,171,090.05 3,155,208.44 5,049,651.7113 AZERBAIJAN 3,464.81 2,595.41 206,156.66 235,735.88 320,738.1814 BAHAMAS 20,397.65 95.08 30,339.88 69,510.92 86,416.9515 BAHARAIN IS 54,758.43 83,925.72 5,485.80 98.28 19,754.7416 BANGLADESH PR 26,676.51 56,240.09 213,109.67 333,881.62 636,671.9917 BARBADOS 4.47 15.58 103,390.55 103,468.16 141,846.0718 BELARUS 5,537.57 16,761.77 65.82 13.07 37.4619 BELGIUM 2,061,865.48 2,091,983.27 42,248.92 50,410.47 125,541.1120 BELIZE 4.45 13.8 1,874,160.28 1,754,571.92 2,605,788.6621 BENIN 35,849.35 34,299.65 2,670.88 5,408.71 48.1922 BERMUDA 585.64 19.91 36,563.01 28,987.66 49,119.5723 BHUTAN 31,902.98 39,301.99 250.24 155.04 31,262.3924 BOLIVIA 96.06 417.16 64,000.12 78,260.06 68,786.1825 BOSNIA-HRZGOVIN 54.87 173.4 1,332.79 1,427.16 3,421.2126 BOTSWANA 187.57 63.13 190.71 4,922.60 632.4127 BR VIRGN IS 0.97 82.48 26.01 0.25 9,778.74 93 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 94. 28 BRAZIL 356,035.76 395,386.84 8,712.27 70.95 147.8629 BRUNEI 242.27 389.35 448,731.16 381,813.84 544,949.6930 BULGARIA 8,067.64 10,653.70 129,068.31 90,868.70 188,194.3731 BURKINA FASO 3,792.39 1,191.19 35,181.48 48,163.66 27,187.6432 BURUNDI 194.24 16.21 2,517.05 7,793.52 18,889.8733 C AFRI REP 115.4 162.24 2.03 742.95 323.1334 CAMBODIA 108.27 343.61 200.71 461.53 1,149.0335 CAMEROON 5,262.64 5,413.18 714.94 1,155.25 1,197.3336 CANADA 348,543.47 407,258.01 3,443.26 7,571.91 14,390.4137 CAPE VERDE IS 0.78 804,269.25 794,017.51 1,129,675.5338 CAYMAN IS 1.77 10.87 93.05 1.07 159.8539 CHAD 701.81 32.14 26,533.75 65,058.47 58.6740 CHILE 155,270.24 192,368.44 74.65 394.76 1,883.4741 CHINA P RP 3,189,230.68 4,811,665.23 867,814.22 741,939.94 666,443.0742 CHRISTMAS IS. 29.72 7,900,860.72 10,911,607.12 14,760,559.5043 COLOMBIA 6,365.48 4,142.25 6,971.82 284.11 260.8144 COMOROS 67.03 1,719.72 6.37 18.6345 CONGO D. REP. 1,140.61 6,289.91 34,668.60 33,756.81 8,104.2446 CONGO P REP 9,872.98 19,454.58 3,142.49 834 143.4447 COOK IS 3.38 7,709.94 5,547.29 47,379.7548 COSTA RICA 15,935.09 16,761.49 27,036.17 41,967.83 218,453.3749 COTE D IVOIRE 71,928.94 85,857.23 12.14 0.250 CROATIA 924.25 13,055.71 19,875.75 35,584.56 33,977.7551 CUBA 776.21 1,468.98 82,202.22 80,217.68 145,197.2452 CYPRUS 2,170.99 11,302.38 25,813.10 7,430.87 7,137.3253 CZECH REPUBLIC 78,782.03 115,279.09 503.61 5,735.42 616.2554 DENMARK 121,414.00 228,424.71 50,082.04 58,529.75 68,127.2255 DJIBOUTI 1,399.82 1,484.60 160,068.12 179,893.01 218,371.15 94 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 95. 56 DOMINIC REP 1,239.80 2,365.81 153,925.59 186,886.22 218,073.4757 DOMINICA 152.92 75.77 970.07 1,830.79 1,685.3958 ECUADOR 10,306.65 9,000.59 822.3 1,135.27 4,763.8759 EGYPT A RP 68,585.21 97,598.66 169.39 425.35 291.460 EL SALVADOR 823.33 913.79 22,318.80 87,230.92 15,004.5761 EQUTL GUINEA 325.15 32.45 788,705.58 798,278.20 976,506.1962 ERITREA 446.46 438.36 1,127.53 2,358.84 2,665.8563 ESTONIA 322.46 3,992.64 47.2 66,050.25 88.4264 ETHIOPIA 4,609.62 3,770.97 154.38 600.78 2,740.5465 FAROE IS. 10.36 11,869.63 4,328.14 7,138.3266 FIJI IS 135.18 376.92 5,136.59 5,482.41 5,127.4567 FINLAND 174,699.15 258,326.33 6.4 0.93 436.6368 FR GUIANA 175.42 12.99 71.34 11.6469 FR POLYNESIA 3.27 7.04 8,413.10 103.55 325.9970 FR S ANT TR 33.72 1.23 275,924.79 373,001.40 557,769.6771 FRANCE 851,046.97 1,821,101.32 72.38 770.25 2,527.8272 GABON 19,231.65 18,636.77 12.42 9.17 44.7873 GAMBIA 5,175.57 5,712.52 0.73 1.9274 GEORGIA 6,926.24 8,798.20 1,905,933.21 2,517,563.53 2,116,519.6575 GERMANY 1,804,156.35 2,666,872.86 52,302.36 48,520.64 76,962.5376 GHANA 23,038.66 34,943.93 8,104.79 6,079.55 12,492.6077 GIBRALTAR 1.75 158.56 33,956.51 4,304.82 7,409.2478 GREECE 10,701.24 24,958.04 3,414,674.94 3,973,603.74 5,492,241.6179 GREENLAND 5.64 0.02 46,701.35 56,554.48 77,856.2180 GRENADA 15.98 69.22 5.43 98.4981 GUADELOUPE 318.04 115.73 94,867.89 51,029.76 31,933.8482 GUAM 96.35 523.21 21.95 0.06 1.4283 GUATEMALA 476.89 809.54 29.77 7.43 33.4284 GUINEA 12,398.74 9,852.01 72.08 79.64 33.2485 GUINEA BISSAU 31,841.07 42,558.57 87.68 142.9 34.0786 GUYANA 3,220.54 9,408.89 949.4 1,433.91 1,322.06 95 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 96. 87 HAITI 458.39 129.26 154,934.34 281,951.86 120,995.2588 HONDURAS 102.08 138.24 22,503.52 25,706.44 46,596.1689 HONG KONG 777,373.79 977,107.64 6,676.82 6,373.60 5,024.9090 HUNGARY 14,165.84 13,999.00 513.22 790.51 817.1891 ICELAND 1,031.48 2,796.90 48.13 13.6292 INDONESIA 1,176,190.06 1,331,795.58 766.01 857.93 2,197.0693 IRAN 184,313.68 311,004.87 1,123,930.26 1,086,707.05 2,973,253.5194 IRAQ 503.45 908.11 52,452.66 45,600.43 88,152.5395 IRELAND 82,289.84 71,681.09 1,689.17 1,522.92 1,620.7096 ISRAEL 443,972.70 456,543.75 1,886,485.99 1,942,053.15 3,075,129.4097 ITALY 616,955.00 821,552.51 3,451,547.40 4,394,593.48 5,582,184.4798 JAMAICA 1,189.96 945.52 2,500,501.79 2,749,466.41 3,428,501.2199 JAPAN 1,453,593.31 1,797,990.11 130,633.23 104,550.82 110,214.16100 JORDAN 159,905.54 195,836.23 488,558.03 574,633.67 949,903.46101 KAZAKHSTAN 6,915.21 11,642.77 1,210,171.66 1,569,445.00 1,998,356.25102 KENYA 20,994.42 21,480.40 272.95 9,327.01 506.38103 KOREA DP RP 4,191.67 25,046.69 2,079,487.72 2,545,779.99 3,583,282.46104 KOREA RP 1,576,541.54 2,020,577.01 213,223.53 275,738.00 800,087.81105 KUWAIT 137,465.04 204,478.80 39,910.77 30,915.45 73,352.81106 KYRGHYZSTAN 280.93 652.81 25,556.87 34,829.71 37,619.20107 LAO PD RP 23.24 46.34 17.49 0.59 29.45108 LATVIA 495.95 4,484.86 222,471.06 64,852.28 24,147.79109 LEBANON 9,194.92 8,196.83 2,174,699.81 2,430,790.74 3,965,818.96110 LESOTHO 0.04 2,711,417.52 3,095,993.03 4,319,944.55111 LIBERIA 20,227.22 56,073.33 348.4 364.42 451.63112 LIBYA 6,112.33 5,284.61 162.52 45.69 214.92113 LIECHTENSTEIN 229.86 351.56 14,163.44 16,575.32 53,692.34114 LITHUANIA 7,924.61 12,820.68 5,026.93 3,790.52 6,248.27115 LUXEMBOURG 4,354.22 7,129.41 21,347.30 96,487.68 120.55116 MACAO 0.06 71.34 61,029.12 501,066.51 63,531.98 96 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 97. 117 MACEDONIA 37.86 1,701.17 172.92 1,495.16 307,213.58118 MADAGASCAR 3,580.30 7,243.57 9,116.41 3,900.94 34.64119 MALAWI 2,282.80 796.94 14,413.56 14,420.78 262,067.29120 MALAYSIA 1,032,979.47 1,069,473.44 88.27 152.39 11,413.46121 MALDIVES 274.94 876.34 116.18 112.04 113.09122 MALI 5,874.24 1,137.20 8,704.09 6,733.17 320.23123 MALTA 16,561.31 7,006.95 2,269.47 6,217.63 8,538.00124 MARSHALL ISLAND 0.3 79,234.68 2,395,876.10 2,417,613.44 3,355.31125 MARTINIQUE 1.21 15.67 1,382.76 1,669.73 3,259,156.48126 MAURITANIA 575.83 453.19 1,260.34 1,611.17 1,793.35127 MAURITIUS 3,228.42 3,245.36 90,477.91 3,144.03 4,303.65128 MEXICO 37,124.07 43,216.90 6,611.80 26.89 2,332.29129 MICRONESIA 4.11 0.86 2.2 62.15130 MOLDOVA 65.29 93.59 290.21 473.6 185.33131 MONACO 421.83 41.91 6,565.80 4,055.79 2,039.52132 MONGOLIA 92.4 717.45 357,648.55 476,543.09 6,557.86133 MONTSERRAT 10.62 24.79 9.7 6.12 799,801.38134 MOROCCO 162,725.56 202,051.99 206.13 157.74 0.21135 MOZAMBIQUE 18,673.96 22,406.53 79.75 385 3,044.07136 MYANMAR 182,382.99 232,862.77 1,015.88 3,742.61 159.29137 NAMIBIA 22 9,195.00 21.13 41.88 8,358.64138 NAURU RP 758.1 81.65 222,309.64 200,747.26 5.81139 NEPAL 155,385.77 168,173.09 12,811.14 19,078.92 429,263.55140 NETHERLAND 355,613.52 464,673.27 354,094.52 325,928.14 14,824.63141 NETHERLANDANTIL 24.44 151.99 424,076.82142 NEW CALEDONIA 4,125.68 1,375.50 1,546.76 8,441.50 32.24143 NEW ZEALAND 57,493.70 95,909.48 343.21 163.13 1,596.75144 NICARAGUA 89.55 2,430.90 138,450.90 252,725.72 12,396.21145 NIGER 324.52 337.29 523,286.18 772,866.39 225,567.56 97 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 98. 146 NIGERIA 21,746.00 32,081.93 488.25 504.88 866,962.05147 NORFOLK IS 39.54 56.8 9,656.09 4,094.35 639.92148 NORWAY 105,626.95 128,101.62 120,266.43 135,305.78 4,754.70149 OMAN 9,259.82 117,584.07 34.13 153.59 195,096.15150 PAKISTAN IR 42,673.53 79,498.02 2,448.30 269.33 290.43151 PANAMA C Z 3,929.95 211.81 3,179,651.97 3,066,290.73 74.33152 PANAMA REPUBLIC 40,830.45 109,549.31 131.63 15.95 3,999,547.98153 PAPUA N GNA 42,773.49 28,389.94 7.35 166.53154 PARAGUAY 1,245.16 1,863.38 345,727.77 654,444.76 392.55155 PERU 16,331.74 10,208.86 208,233.76 456,384.48 512,341.29156 PHILIPPINES 84,199.37 104,260.26 146,272.82 115,871.88 546,437.92157 PITCAIRN IS. 0.46 0.92 4.65 166,838.70158 POLAND 40,602.95 47,733.33 13.73 4.48159 PORTUGAL 8,511.83 13,392.17 138,370.13 100,570.33 4.37160 PUERTO RICO 2,231.29 3,235.98 126,685.82 78,154.92 64,680.01161 QATAR 302,323.52 399,179.06 1,286.33 183.06 103,976.04162 REUNION 1,547.88 1,467.17 58,097.01 63,269.74 263.91163 ROMANIA 75,684.48 119,592.32 75,737.13 82,387.82 121,693.97164 RUSSIA 594,328.52 895,294.01 2.33 1.96 116,542.91165 RWANDA 324.52 17.04 53,032.94 76,179.69 0.01166 SAMOA 25.61 13,790.83 14,373.07 121,491.09167 SAO TOME 7.51 3,084.79 3,509.00 25,510.32168 SAUDI ARAB 584,626.77 722,693.17 935,908.92 988,889.45 4,721.84169 SENEGAL 81,414.15 129,525.86 2,490.47 5,025.66 1,589,469.10170 SEYCHELLES 259.93 507.37 132,011.66 168,123.18 11,354.13171 SIERRA LEONE 1,022.07 1,578.07 1,090,283.53 993,832.96 152,425.37172 SINGAPORE 1,191,311.70 1,484,833.35 741.45 267.38 1,978,742.31173 SLOVAK REP 10,285.90 17,645.53 500.1 2.13 1,080.42174 SLOVENIA 9,637.32 10,454.25 1.59 9.36 98 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 99. 175 SOLOMON IS 132.36 1,227.80 6,056,149.96 7,811,031.38 27.18176 SOMALIA 3,356.92 5,116.33 32,924.24 60,376.01 8,974,703.51177 SOUTH AFRICA 987,443.96 1,094,352.70 338.66 379.31 99,452.94178 SPAIN 175,029.46 253,891.51 1,058.77 20,183.12 536.35179 SRI LANKA DSR 170,019.05 255,768.08 2,483,996.69 3,268,217.81 3,588.12180 ST HELENA 19.02 215.09 8,958.71 17,886.42 3,456,141.62181 ST KITT N A 4.85 16,426.37 23,185.33 20,913.92182 ST LUCIA 4.05 883.49 2,645.81 34,414.52183 ST PIERRE 42.83 1,575.69 8,209.58 3,112.44 235.78184 ST VINCENT 1,033.23 32,867.49 1,118,413.70 1,454,655.62 2,741.46185 SUDAN 10,280.03 14,440.92 283,669.65 400,097.68 2,488,228.72186 SURINAME 430.01 2,870.94 212,955.68 254,091.64 466,128.41187 SWAZILAND 1,412.66 10,460.10 103.04 1.97 162,367.62188 SWEDEN 421,156.65 518,974.60 2.07 35.7 11.38189 SWITZERLAND 2,668,898.37 2,902,482.09 1.6 1,540.71190 SYRIA 1,715.00 2,270.64 7,900.77 11.71 12,484.21191 TAIWAN 490,685.00 612,284.48 1,066.39 14,468.76 11.08192 TAJIKISTAN 1,835.92 2,607.04 40,424.61 173,722.03 3,007.23193 TANZANIA REP 59,152.95 53,019.98 496.17 343.79 183,956.05194 THAILAND 389,050.73 536,409.91 25,750.29 14,958.46 535.08195 TIMOR LESTE 6.71 19.3 874,623.00 857,810.52 17,439.11196 TOGO 20,682.40 35,089.60 4,128,316.92 3,957,082.02 888,754.71197 TOKELAU IS 0.98 13.24 35,995.02 8,155.82 5,270,320.98198 TONGA 49.88 759,424.86 966,396.61 76,397.86199 Trade to 1,969,299.95 8,621,800.16 3,644.23 3,899.27 1,294,132.16 Unspecified Countries200 TRINIDAD 6,268.35 807.65 44,392.18 66,221.28 8,066.21201 TUNISIA 42,657.98 44,783.94 789,880.06 926,400.41 91,817.54202 TURKEY 60,621.87 85,800.78 270.17 19.89 1,235,265.25 99 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 100. 203 TURKMENISTAN 4,882.40 5,468.81 34,509.81 24,509.51 99.76204 TURKS C IS 1,550.19 109.6 30.66 63,404.96205 TUVALU 0.97 72.14 16.61 6.37206 U ARAB EMTS 2,085,317.23 1,927,703.35 23,012.34 70,164.39 80.31207 UK 1,602,345.39 1,740,081.50 65,256.00 62,845.56 46,896.84208 USA 3,145,813.32 4,185,945.49 150,630.51 680,148.98 276,172.05209 UGANDA 2,966.86 1,255.84 5,457.35 3,454.20 664,242.24210 UKRAINE 242,030.80 350,817.85 144.94 163.39 5,537.56211 UNION OF SERBIA 1,910.44 862.17 639.12 769 & MONTENEGRO212 UNSPECIFIED 11,672,714.29 10,983,028.66 3,917,494.34 5,423,319.30 169.64213 URUGUAY 1,820.26 1,788.98 1,888,929.92 1,994,151.94 10,592,643.31214 UZBEKISTAN 14,135.89 11,570.74 5,310,541.44 8,462,542.31 2,676,770.80215 VANUATU REP 91.54 21,293.72 2,137.74 6,086.68 8,481,827.99216 VENEZUELA 1,806.11 4,228.41 451,866.00 356,346.79 8,804.17217 VIETNAM SOC REP 38,865.36 58,169.04 785.18 1,707.55 703,995.74218 VIRGIN IS US 31.67 164.54 307,679.87 715,187.06 6,173.83219 WALLIS F IS 71.78 0.86 3,292.52 5,330.22 654,700.57220 YEMEN REPUBLC 13,848.03 4,428.49 15,330.50 6,470.69 6,510.27221 ZAMBIA 10,318.29 17,957.69 4,173.63 418.33 32,924.00222 ZIMBABWE 12,197.03 11,311.17 336,257.42 159,794.62 3,396.47 Indias Total Imports 50,106,454.03 66,040,890.33 84,050,631.33 101,231,169.93 137,443,555.45 100 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 101. Annexure-IIANNUAL - TOTAL DOMESTIC TRAFFIC AND OPERATING STATISTICS OF INDIAN CARRIERS FOR LAST TEN YEARS AIRCRAFT FLOWN PASSENGERS CARGO CARRIED (TONNE) TONNE KMS PERFORMED (MILLION). PAX AVAILABLE WEIGHT KMS AVAILABLE load TONNE LOAD HOURS KMS CARRIED PERFORMED SEAT KMS factor KMS FACTORYEAR (NO) (000) (no) (MILLION) (MILLION) (%) FREIGHT MAIL TOTAL PAX FREIGHT MAIL TOTAL (MILLION) (%)1999-00 231173 128637 12711139 11419 19089 59.8 137670 21209 158879 977 142 22 1141 2042 55.92000-01 250470 136928 13712215 12283 19897 61.7 143541 23127 166668 1052 152 19 1223 2127.2 57.52001-02 267329 147113 12853918 11572 20849 55.5 137983 22573 160556 989 143 23 1155 2212.8 52.22002-03 295173 165827 13951034 12848 22833 56.3 156254 23331 179585 1086 164 23 1273 2380.8 53.52003-04 343795 189336 15676948 14566 24936 58.4 176611 20879 197490 1257 191 19 1467 2551.3 57.52004-05 398714 213618 19445043 18030 27790 64.9 218004 27147 245151 1558 229 29 1816 2840.2 63.92005-06 475352 252668 25204988 23709 35077 67.6 224958 31523 256481 2067 238 35 2340 3488 67.12006-07 648408 347912 35792747 33519 48702 68.8 245652 20769 266421 2910 252 23 3185 4750 67.12007-08 805934 439378 44384302 41718 60590 68.9 282288 20277 302565 3637 272 21 3930 5984 65.72008-09 808442 426099 39467072 37704 59160 63.7 252971 24637 277608 3260 236 24 3520 5908 59.6 101 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 102. ANNEXURE-IIIANNUAL-TOTAL INTERNATIONAL TRAFFIC IN CARGO AND OPERATING STSTICTICS OF INDIAN CARRIERS FOR LAST TEN YEARS AIRCRAFT FLOWN CARCO CARRIED (TONNE) PAX AVAILABLE LOAD AVAILABLE WEIGHT KMS.PERFORMED SEAT KMS FACTOR TONE KMS LOADYEAR HOURS(NO) KMS(000) CARRIED(NO) (MILLION) (MILLION0 (%) FRIEGHT MAIL TOTAL PAX FRIEGHT MAIL TOTAL (MILLION) FACTOR(%)1999-00 94796 64454 3656642 13186 17956 73.4 98743 1555 100298 1226 390 12 1628 2311 702000-01 97961 65965 3827701 13928 18318 76 99832 1519 101351 1294 404 11 1709 2346 732001-02 110652 74547 3698442 13408 19311 69.4 95587 1942 97529 1248 371 12 1631 2457 662002-03 129091 84513 4200765 15819 21406 73.9 102089 1640 103729 1473 401 10 1884 2678 702003-04 146019 97687 4492576 18108 24972 72.5 95420 2278 97698 1680 399 13 2092 3154 662004-05 175368 119497 5326221 22272 31126 71.6 110157 2000 112157 2058 509 12 2579 3919 662005-06 237506 161848 6547185 27858 40452 68.9 110196 1983 112179 2561 562 14 3138 5143 612006-07 268672 186221 7561226 30355 44624 68 121991 1703 123694 2803 609 11 3422 5734 59.72007-08 338325 241006 9108469 36129.6 54465 66.3 140221 2680 142901 3389 769 21 4179 7588 55.12008-09 403323 286582 10049361 40740.8 62172 65.5 170732 3360 174092 3953 960 25 4938 8812 56 102 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 103. SCHEDULED DOMESTIC PASSENGER TRAFFIC AND PASSENGER LOADFACTOR OF ALLSCHEDULED AIRLINES FOR LAST TEN YEARS. PAX. LOAD % CHANGE IN FACTOR SCHEDULED (%) DOMESTIC SCHEDULED DOMESTIC PASSENGERSSL. NO. YEAR PASSENGER CARRIED (IN LAKHS) CARRIED1 1999-00 127.1 59.8 -2 2000-01 137.1 63.7 7.93 2001-02 128.5 55.5 -6.34 2002-03 139.5 56.3 8.65 2003-04 156.8 58.4 12.46 2004-05 194.5 64.9 247 2005-06 252 67.6 29.68 2006-07 357.9 68.8 429 2007-08 443.8 68.9 2410 2008-09 394.7 63.7 -11.1ANNUALISED GROWTH RATE OVER LAST TEN YEARS = 13.42 103 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 104. Annexure-IV Sector Wise Contract Award Method Total Number of Projects based on Contract Award Method Total Domestic International Value of Number of Competitive Competitive Negotiated Contracts (Rs. Sectors projects Bidding Bidding MOU 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 224175.8 104 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 105. Annexure-V Sector-wise Based on Between More than Sector-wise Total Number 100 Between 100 251 to 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 224175.8 105 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 106. Annexure-VI State-Wise Total Number of Based on Between 100 Between 251 to More than 500 State Projects 100 crore to 250 crore 500 crore 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 224175.8 106 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 107. Annexure-VII DETAILED PROJECT INFORMATIONBangalore International AirportProject Bangalore International AirportNameState KarnatakaLocation 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 / Ultimate design capacity of 50 mppa (million passengers per annum).Size 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 BOOTType of CentreNodalDepartmentContracting Ministry of Civil Aviation, Government of IndiaAuthorityContract 30 yrs.Period 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 AgreementProject ProponentProject Bangalore International Airport Limited (BIAL)Company/Developer/OperatorLegal Status Joint Venture Companyof ProjectCompany 107 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 108. EPC SiemensContractor Larsen and Toubro (L&T) Skytanking-Indian Oil ConsortiumO&M Unique ZurichContractor 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) Skytanking-Indian OilContract International Competitive BiddingAwardMethodEstimated Rs. 1930 Cr.Project CostProject First Phase-Benefits and Airport to cover an area of 3800 acres Construction of a passengerOutcomes 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 108 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 109. Performance BIAL shall design, procure, construct, complete, test and commissionMonitoring 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 BOOTInstrumentMarket BIAL has the exclusive right and privilege to carry out theStructure development, design, financing, construction, commissioning,and maintenance, operation and management of the Airport (but excludingCompetition 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. 109 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 110. Regulatory At present there is no Independent Regulatory Authority for airports toFramework 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.FINANCIAL INFORMATIONEquity:INVESTOR COUNTRY % HOLDING AMOUNT (Rs. Crore)Karnataka State Investment India 13 40.95and Industrial DevelopmentCorporation (KSIIDC)Airports Authority of India (AAI) India 13 40.95Siemens Project VenturesGmbH Germany 40 126 110 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 111. Unique Zurich Airport(Flughafen Zeurich AG) Switzerland 17 53.55Larsen & Toubro Ltd. India 17 53.55Total Equity : Rs. 315 Cr.Debt :INVESTOR AMOU TENO MORATO TYP COMMENTS NT R RIUM E (YEA (YEAR) R)State Rs. 10 10 1 Interest FreeSupport 350.00 Loan CroreICICI led Rs. 3consortium 735.00 CroreOther Rs. 3Lenders 461.50 CroreTotal Debt : Rs. 1546.5 Cr.Other Advance Security Deposits received from third party service providersFinancialInstrumentTotal Others Rs. 68.5 Cr.Debt : Equity 83 % : 17 %Government 26 % : 74 %Equity :Private EquityGovernment VGF by Sponsoring Authority : Rs. 0 Cr.Support VGF under VGF scheme of DEA : Rs. 0 Cr. 111 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 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 Rs. 1930 Cr.(atFinancialClose)Cochin International AirportProject Name Cochin International AirportState Kerala Nedumbassery (Cochin) Located 25 KMS North East of Cochin, with NH 47, the main Railway line and MC road to Trivandrum in closeLocation vicinity. 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 lakhCapacity / sq.ft., integrated cargo complex capable of handling perishable/nonSize perishable and dangerous cargo.Type of PPP BOO 112 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 113. Type of NodalDepartment CentreContractingAuthority Airport Authority of IndiaContractPeriod Additional Information : : Greenfield ProjectProjectProponentProject Company/Developer /Operator Cochin International AirportLegal Status of Project Company Limited (CIAL) Public LimitedEPC Contractor CompanyO&M ContractorInvestments inFacilities/Govt.Assets Estimated Project Cost Rs. 303 Cr.EstimatedProject Cost Rs. 303 Cr.Legal BOOInstrumentEquityF i n a n c i a l INVESTOR:Information over 10,000 shareholders (NRIs, mainly of Keralite origin) from 29 countries Government of Kerala Total Equity : Rs. 85 Cr.Other Interest free security deposits of Rs. 12 crore from various airportFinancial service ProvidersInstrumentDebt : Total Debt : Rs. 218 Cr.Project Cost Rs. 303 Cr.(atFinancialClose)Modernization of Delhi International AirportProject Name Modernization of Delhi International AirportState DelhiLocation DelhiSector AirportsCapacity / Ultimate design capacity of 100 mppa (million passengers per annum)Size Phase 1 to have capacity of 37 mppa by 31 March 2010 for Commonwealth Games 113 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 114. Type of PPP LDOTType of Nodal CentreDepartmentContracting Airports Authority of India (AAI)AuthorityContract 30 yrs. Additional Information : : Brownfield (Lease Develop OperatePeriod 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 ConstructionProject ProponentProject Company/Developer /Operator Delhi International Airport Limited (DIAL) - GMR-Fraport ConsortiumLegal Status of Project Company Joint Venture Company (JVC)EPC Contractor Larsen & Toubro (L&T) Limited BL Kashyap Private LimitedO&M Contractor Fraport AG Frankfurt Airport Services Worldwide Alpha-PantaloonContract International Competitive BiddingAwardMethodInvestments Estimated Project Cost Rs. 86 billion (Phase 1) Total land areain available at IGI airport is 5106 acres (current operational areaFacilities/Govt constitutes of about 1907 acres).. Assets 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 DelhiAmount of Amount : Rs. 0 Cr.Government Description : Not ApplicableSupport - Support Payment Compliance : Not Applicable(VGF) 114 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 115. Project Phase 1 includes renovation of Terminals 1A, 1B, 1C and Terminal 2,Benefits and construction of 4.43km CAT IIIB and Code F compliant runway,Outcomes 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. 115 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 116. Performance For the duration of the Transition Phase (3 months from EffectiveMonitoring 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 LDOTInstrument 116 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 117. Market The JVC has exclusive right and authority during the Term toStructure and undertake the functions of operation, maintenance, development,Competition 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 At present there is no Independent Regulatory Authority for airports toFramework 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 The Parties shall use their respective reasonable endeavors to settleResolution any Dispute amicably. If a Dispute is not resolved within sixty (60)Mechanism 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.FINANCIALINFORMATIONEquity : 117 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 118. INVESTOR COUNTRY % HOLDING AMOUNT (Rs. Crore)GMR Infrastructure Ltd. India 31.1 373.2Airports Authority of India (AAI) India 26 312Fraport AG Frankfurt Airport Germany 10 120Services WorldwideEraman Malaysia (Malaysia Malaysia 10 120Airports (Mauritius) PrivateLimited)India Development Fund India 3.9 46.8GVL Investments Pvt. Ltd. India 9 108 GMR Energy Ltd. India 10 120Total Equity : Rs. 1200 Cr.Debt :INVESTOR TYPE OF AMOUNT TYPE INSTRUME NTICICI Bank as Lead Arranger None Rs. 3 4,400.00 CroreTotal Debt :Rs. 4400 Cr.Other Trade and Upfront Deposits for Land Bank DevelopmentFinancialInstrumentTotal Others Rs. 3000 Cr.Debt : Equity 79 % : 21 %Government 26 % : 74 %Equity :Private EquityGovernment VGF by Sponsoring Authority : Rs. 0 Cr.Support VGF under VGF scheme of DEA : Rs. 0 Cr. Guarantee : Not ApplicableProject Cost Rs. 8600 Cr.(atFinancialClose)Hyderabad International AirportProject Name Hyderabad International AirportState Andhra PradeshLocation Shamshabad in Ranga Reddy District of Andhra Pradesh About 20 km south of the present Hyderabad airport at Begumpet.Sector Airports 118 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 119. Capacity / Initial phase (1A) to have capacity of 5 mppa (million passengers perSize annum). Ultimate development as per Master Plan caters for 40 mppa.Type of PPP BOOTType of Nodal CentreDepartmentContracting Ministry of Civil Aviation, Government of IndiaAuthorityContract 30 yrs.Period 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 AgreementProjectProponentProject Hyderabad International Airport Limited (HIAL)Company/Developer/OperatorLegal Status Joint Venture Companyof ProjectCompanyEPC China State Construction Engineering (Hong Kong) Ltd (CSCEHK)Contractor Larsen & Toubro (L&T) LimitedO&M Menzies & Bobba Aviation and SATS ConsortiaContractor Nuance-Shoppers Stop Indian Airlines and Air India Consortia Menzies Aviation Public Limited Company LSG Sky Chef, Sky Gourmet 119 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 120. Reliance Industries Accor GroupContract International Competitive BiddingAwardMethodInvestments The proposed outer ring road for Hyderabad will provide an alternatein means of connectivity to major suburbs like the Hitech City.Facilities/Govt. Assets Rail connectivity from the city centre is expected to be ready by the time the airport is operational.Estimated Rs. 2478 Cr.Project CostAmount of Amount : Rs. 107 Cr.Government Description : Cash Grant by Government of Andhra PradeshSupport -(VGF)Project The new airport will leverage the multiple advantages of HyderabadBenefits and city. The airport’s strategic location will help significantly reduce travelOutcomes 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 120 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 121. Performance Phase, and remedy any defects in respect thereof, in accordance withMonitoring 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 BOOTInstrumentMarket HIAL has the exclusive right and privilege to carry out theStructure and development, design, financing, construction, commissioning,Competition 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 121 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 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. 122EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 123. Dispute 1. Negotiation and ConciliationResolution The Parties shall use their respective reasonable endeavors to settleMechanism 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 Initial Estimated Project Cost Rs. 17.6 Bn (USD 409.3 Mn)andDisputes Project Cost revised to Rs. 24.78 billion on account of construction ofwithin Project additional facilities including a common fuel farm and business hotel.FINANCIALINFORMATIONEquity :INVESTOR COUNTRY % AMOUNT(Rs. HOLDING Crore)Airports Authority of India (AAI) India 13 49.14Government of Andhra Pradesh India 13 49.14GMR Group India 63 238.14Malaysian Airport Holding Malaysia 11 41.58Berhad (MAHB)Total Equity : Rs. 378 Cr.Debt :INVESTOR AMOUNT TENOR MORATORIU TYPE COMMENTS (YEAR) M (YEAR)State Support - Rs. 5 16 1 Interest free loanInterest Free 315.00 refundable in 5Loan Crore equal installments commencing from 16th year.Allahabad Bank Rs. 16 3 Repayment of the 120.00 loans Commence Crore from the opening of the new airport. 123 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 124. Bank of Baroda Rs. 16 3 Repayment of the 110.00 loans commence Crore from the opening of the new airport.Canara Bank Rs. 16 3 Repayment of the 100.00 loans Crore Commence from the opening of the new airport.Industrial Rs. 16 3 Repayment of theDevelopment Bank 100.00 loans commenceof India (IDBI) Crore from the opening ofLimited the new airport.Infrastructure Rs. 16 3 Repayment of theDevelopment 200.00 loans commenceFinance Crore from the opening ofCompany (IDFC) the new airport.Limited - LeadlenderOriental Bank of Rs. 16 3 Repayment of theCommerce 110.00 loans commence Crore from the opening of the new airport.State Bank of Rs. 16 3 Repayment of theHyderabad 120.00 loans commence Crore from the opening of the new airport.Vijaya Bank Rs. 16 3 Repayment of the 100.00 loans commence Crore from the opening of the new airport. Rs. 3Additional debt (on 718.00account of revision Crorein project cost)from Abu DhabiCommercial Bank,Andhra Bank andVijaya BankTotal Debt : Rs. 1993 Cr.Debt : Equity 84 % : 16 %Government Equity 26 % : 74 %:Private Equity 124 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 125. Government VGF by Sponsoring Authority: Rs. 107 Cr.Support VGF under VGF scheme of DEA : Rs. 0 Cr. Guarantee : Not ApplicableTotal VGF/ Rs. 107 Cr.GovernmentSupportOther 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.Project Cost (at Rs. 2478 Cr.Financial Close) 125 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 126. Modernization of Mumbai International AirportProject Name Modernization of Mumbai International AirportState MaharashtraLocation MumbaiSector AirportsCapacity / 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 LDOTType of Nodal CentreDepartmentContracting Authority Airports Authority of IndiaContract 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 ProponentProject Mumbai International Airport Limited (MIAL)Company/Developer GVK-Airports Company of South Africa/Operator (ACSA) ConsortiumLegal Status of Project Joint Venture Company (JVC)CompanyEPC Contractor Larsen & Toubro (L&T) HDILO&M Contractor ACSA Global Limited Aldeasa-ITDCContract Award Method International Competitive BiddingInvestments in Estimated Capital Investment Rs. 70 billion (USDFacilities/Govt. Assets 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. 126 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 127. Amount of Government Amount : Rs. 0 Cr.Support - (VGF) Description : Not Applicable Support Payment Compliance : Not ApplicableProject Benefits and The first phase (to be completed byOutcomes 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. 127 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 128. 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. 128 shall ensure that at termination the JVC environmental condition of the Airport meets allEMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS statutory and regulatory requirements. To establish mechanisms to review and assess
  • 129. Legal Instrument LDOTMarket Structure and The JVC has exclusive right and authority duringCompetition 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. 129 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 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.Dispute Resolution The Parties shall use their respective reasonableMechanism 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.FINANCIALINFORMATIONEquity : 130 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 131. INVESTOR COUNTR % AMOUNT Y HOLDING (Rs. Crore)ACSA Global Limited (Airports Mauritius 10 160Company South Africa Limited)GVK Airport Holdings Pvt. Ltd. (GVK India 37 592Industries Limited)Bid Services Division (Mauritius) Mauritius 27 432Ltd. (The Bidvest Group Limited)Airports Authority of India (AAI) India 26 416Total Equity : Rs. 1600 Cr.Debt : AMO TENO MORATO TYP COMMENTS UNT R RIUM E (YEA (YEAR)INVESTOR R)IDBI led Rs. 17 7 1 The loan covers aconsortium 4,200. seven-year drawlcomprising of 00 period. MIAL hasAndhra Bank, Crore procured anBank of Baroda, interest rate,Bank of India, which isCanara Bank, benchmarked toCentral Bank of three yearsIndia,India GovernmentInfrastructure Security plus aFinance Company margin of 215Ltd. (IIFC), Indian basis points. TheBank, IDBI, loan will be repaidOriental Bank of in 120 monthlyCommerce, payments. ThePunjab National loan is flexibleBank, Syndicate and GVK couldBank, United Bank replace it withof India, UTI Bank foreign currencyLtd. and Vijaya borrowings.Bank Total Debt :Rs. 4200 Cr.Debt : 72 % : 28 %Equity 131 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS
  • 132. Governm 26 % : 74 %ent Equity:PrivateEquityGovernm VGF by Sponsoring Authority : Rs. 0 Cr.ent VGF under VGF scheme of DEA : Rs. 0 Cr.Support Guarantee : Not ApplicableOther Equity contribution by AAI capped at Rs. 500 croreSupportProject Rs. 5800 Cr.Cost (atFinancialClose) 132 EMERGING CHALLENGES IN PUBLIC PRIVATE PARTNERSHIP IN AIRPORTS