Friday, January 15, 2021

Finance Ministry and Niti Aayog had raised red flags before Adani’s clean sweep of six airports

Bothn the Finance Ministry and Niti Aayog had put on record objections regarding the 2019 airport bidding process, which were over-ruled, clearing the way for a clean sweep of six airports by the Ahmedabad-based Adani Group, records accessed by The Indian Express show.

This assumes significance given that on August 31 last year, the Adani Group signed another deal to acquire a controlling interest in the country’s second largest airport, in Mumbai — the Airports Authority of India cleared that takeover on January 12.

Aviation is one sector the Competition Commission of India has marked for review of market dominance. From running a private air-strip Finance, Niti Aayog raised red flags before Adani’s clean sweep of 6 airports at Mundra, the Adani Group is today the country’s largest private developer in terms of number of airports handled; and the second largest, in terms of passenger traffic, over a span of just 20 months.

The seven airports — Ahmedabad, Mangalore, Lucknow, Jaipur, Guwahati and Thiruvananthapuram, alongside Mumbai — together handled 7.90 crore passengers during the last fiscal (2019-20). This translates into nearly a fourth of the 34.10-crore domestic air passenger traffic.

In addition to this, the Mundra airport, to where commercial flights started in 2018 under the government’s regional connectivity scheme, has also been cleared to be converted into a full-fledged international commercial airport. Following the GVK deal, Adani also has a controlling stake in the upcoming Greenfield airport in Navi Mumbai.

Records show that before bids were invited for the privatisation of the airports at Ahmedabad, Lucknow, Mangalore, Jaipur, Guwahati and Thiruvananthapuram – the NDA government’s biggest privatisation programme so far — the Centre’s Public Private Partnership Appraisal Committee (PPPAC) discussed the Civil Aviation Ministry’s proposal for the process on December 11, 2018.

During the discussions, according to minutes of the meeting accessed by The Indian Express, a note from the Department of Economic Affairs said: “These six airports projects are highly capital-intensive projects, hence it is suggested to incorporate the clause that not more than two airports will be awarded to the same bidder duly factoring the high financial risk and performance issues. Awarding them to different companies would also facilitate yardstick competition.”

The DEA’s note, dated December 10, 2018, to the PPPAC was submitted by a director in the department’s PPP cell.

To buttress its argument, the DEA cited the precedent of the Delhi and Mumbai airports, where GMR, despite being the only qualified bidder originally, was not given both the airports.It also referred to the privatisation of Delhi’s power distribution. “In the case of Delhi Power Distribution privatisation, the city was carved out into three zones and given to two companies,” it said.

At the PPPAC meeting, according to the minutes, there was no discussion on this red flag raised by the DEA.

On the same day as the DEA note, the NITI Aayog also raised a separate concern regarding the airport bidding. Said a memo prepared by the PPP vertical of the government’s key policy think-tank: “A bidder lacking sufficient technical capacity can well jeopardise the project and compromise the quality of services that the government is committed to provide”.

In response to this, the PPPAC, chaired by the then DEA Secretary SC Garg — the first note of objection was, ironically, from his department — said that the EGoS (empowered group of secretaries) had already decided that “Prior airport experience may neither be made a prerequisite for bidding, nor a post-bid requirement. This will enlarge the competition for brownfield airports, which are already functional”.

A year after it won the bids for the six airports, the Adani Group signed concession agreements for Ahmedabad, Mangaluru and Lucknow airports in February 2020.

A month later, the Adani Group invoked a Covid19-linked force majeure to seek a delay until February 2021 in taking over the three airports from AAI, citing difficulties in the transitioning processes, particularly with regard to the airport staff. The AAI had asked the Group to take over the three airports by November 2020. Three of these six airports — Ahmedabad, Mangaluru and Lucknow — were consequently handed over to the Adani Group in November 2020. The concession agreement for the other three airports — Jaipur, Guwahati and Thiruvananthapuram — were signed between AAI and Adani Group in September.

15/01/21  Pranav Mukul/Anil Sasi/Indian Express

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