Centre nod for Kerala's Kannur airport

The Government today has given ‘in principle’ approval to the Government of Kerala (GoK) for setting up of a Greenfield International Airport through the PPP route at Kannur in relaxation of the Policy on Airport Infrastructure relating to Greenfield Airports.
The proposed Kannur airport is located in Kannur district and falls outside the municipal limits of Kannur. The site is at about 80 km aerial distance from Calicut airport, about 229 km from Cochin airport and 125 km from the Mangalore airport.
GoK has strongly recommended the project since this would promote tourism and trade in Northern Kerala. The proposed airport will also act as a cargo hub for perishable cargo like cut flowers, vegetables, fruits, sea food etc. Ministry of Tourism, GoI has also supported the setting up of the airport since it has potential to open up tourism for North Kerala, which has not seen sufficient tourism development.
As per a study conducted by AAI, major impact of the proposed Kannur airport will be felt at Calicut airport. With the commissioning of Kannur airport, 55% traffic of Calicut airport is expected to get diverted. The estimated loss of revenue due to the diversion of traffic on account of the proposed Kannur airport will be to the extent of 27.6% at Calicut airport, 5.1% at Cochin airport, 3.0% at Bangalore airport, 1.5% at Trivandrum airport and 0.75% at Mumbai airport. Since airports at Calicut and Trivandrum are AAI airports, the proposed airports could impact the revenue of AAI. The remaining are private airports.
Certain activities at the airport like Security, Air Traffic Control, Customs, Immigration, MET etc. would be reserved for GOI entities. These would be performed by the relevant central government agencies. Provision of these services would be on cost recovery basis and the airport operator would enter into agreement with the respective agencies.
The salient features of the project are as follows:
The airport will be built over 2000 acres of land and will have a single runway, sanction has been accorded for acquisition of the land.
The project would be implemented through the Pubic Private Partnership (PPP) route with an estimated project cost of Rs. 929.5 crores, excluding costs pertaining to land acquisition, resettlement and rehabilitation which would be borne by the GoK.
A Joint venture Company (JVC) between KINFRA, a GOK entity with 26% equity participation and a private strategic partner with 74% equity participation would be set up to implement the project.
The selection of the strategic partner would be done by GoK.
Airport Operator would invest 30% of the total required capital investment and the balance would be through debt financing. There is no equity participation sought from AAI.
GOI/GOK would not be signing any concession agreement with JVC. However, since the underlying assets belong to the State Government, GOK could give concession to the JVC in respect of land indicating its terms and conditions as well as such other conditions which the State Government would wish to impose on the JVC. GoK may also consider grant of any other concessions to the JVC.
Traffic projections have been made but since Kannur airport is a PPP project, the traffic risk would be borne by the private developer who would undertake his own due diligence in the matter.
Since the project is a State Sector project, the primary responsibility of project implementation rests with the State Government. GOI would guide the State Government regarding the method for selection of the strategic partner. GoK would be advised to follow a transparent bidding process to select the strategic private partner. GOI has also issued a Model RFQ and RFP for PPP projects and GoK would be advised to adopt it.
17/01/08 Press Information Bureau (press release)

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Categories: Airports Jan 2008, New Jan 2008