Delhi, Mumbai air travellers pay for unrendered services

The airport development fee that private developers in Delhi and Mumbai have been allowed to charge without tough strings attached, and concessions given to Hyderabad Metro, show that there is no sanctity to contracts in public-private partnerships, reports CNBC-TV18's Economic Policy Editor Vivian Fernandes.
You do not pay toll for a highway on the assumption that someday it will be an expressway and you will have a smooth ride. Why then should you pay for flying out of Delhi and Mumbai airports which are still works in progress? Over the next three years passengers from Delhi and Mumbai will be paying Rs 3,370 crore for a service they are not getting. The private consortia led by GMR and Reliance respectively cannot arrange enough funds, so passengers have been roped in as investors, without the rights of investors. In the Civil Aviation Ministry's definition, public-private partnership seems to be all about private gain at public expense.
Jamshyd Godrej, Chairman, Godrej & Boyce, said, "The main problem is that when contracts are written they are not written in a way that prevents this from happening."
Public greed might have been the original sin, as both the GMR and Reliance combines had won the airport contracts by offering the government a 46% share of the revenue. Officials connected with the privatisation process say the government could not have rejected these offers, even if unrealistic, without provoking an outcry, but the experience holds a lesson for future auctions of such contracts.
Ajit Gulabchand, CMD, HCC, said, "When we structure a project it must remain economically viable through a range of weathers."
The airport development fee could have been treated as government equity or even as an interest-bearing loan, and not a grant - as that amounts to changing the terms of the contract after the event.
27/03/09 CNBC-TV18/Moneycontrol.com

To Read the News in full at Source, Click the Headline

Categories: Airports Mar 2009