GMR's move on deposit money hits PMO hurdle

New Delhi: Some bits of financial engineering in the public-private partnership project under which the GMR Group-led Delhi International Airport (DIAL) is modernising the capital’s airport have come in for objections from the prime minister’s office (PMO).
This, in turn, offers some lessons for structuring the incentives in public-private partnership deals.
The bone of contention is DIAL’s plan to collect substantial sums of money from commercial developers of airport land as deposits, refundable as well as non-refundable. Officials in the PMO feel that such deposits would reduce the commercial rental that would accrue to DIAL and, therefore, to the government-GMR won the bid to modernise Delhi Airport offering to share 46% of revenues with the government.
On its part, GMR says that its proposal to collect deposits from developers was very much part of the bid documents. “The fact that we will be going for security deposit was part of the bidding process of the airport as well as subsequent interaction with the government,” DIAL said in a response to an ET query.
18/10/07 Subhash Narayan & Nirbhay Kumar/Economic Times

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Categories: Airports Oct 2007