Kerala writes to Airport Authority of India seeking to withdraw addendum

The sources in the Chief Minister’s office made it clear that a formal letter has been sent to the AAI requesting to withdraw the addendum, which is against the interest of the state.

Published: 14th January 2019 03:43 AM  |   Last Updated: 14th January 2019 03:43 AM   |  A+A-

Express News Service

THIRUVANANTHAPURAM: The state government has asked the Centre to reconsider the addendum issued by the Airport Authority of India (AAI) in connection with privatisation of Trivandrum airport. The addendum issued by the AAI  clarified Kerala will have to take part in the bidding as per the request for proposal (RFP) issued by the AAI and can have a Right of First Refusal only if its bid is matched within a range of 10 per cent of the highest bid.

The sources in the Chief Minister’s office made it clear that a formal letter has been sent to the AAI requesting to withdraw the addendum, which is against the interest of the state. However, the state is simultaneously moving ahead with the process of taking part in the bidding in case the Centre turns down the state’s request. 

Meanwhile, the state government would pay a sum of `1.45 crore as consultancy fee to the Netherlands-based KPMG, which was roped in by the state government as a consultant for rebuilding the state free-of-cost, for assisting the consortium of companies formed by the state to bid for the Trivandrum International Airport, at a time when there is only little chance for the state to win the bid. An order issued by the state government said in view of tight time schedule for the bidding, it was decided to invite quotes from major consultants in the field. 

High-level committee headed by the Chief Secretary scrutinised the quotes received in details and KPMG which quoted `1.45 crore was selected as general consultant (technical & financial consultant). KSIDC is authorised to execute agreement with the KPMG at the earliest and start the process for participation in the bid. According to experts, the state is almost gambling for the airport by competing with global giants after forming a fledgling consortium of companies. 

The KPMG’s role involved suggesting a rate to be quoted for per domestic passenger by the state in the bidding after analysing the traffic data and business of the airport in the past, present and future. 
The rate it to be suggested should come within the 10 per cent range of highest bid, if only the state will have the chances to win the bid by using ‘right for first refusal’ provision granted by the Centre, said Jacob K Philip, an aviation expert.

 Further, the consultant would help the state to strengthen the consortium of companies by including international partners. So winning the bid by competing with global giants, who have enough expertise and experience, is almost like a gambling as there are a lot of provisions in favour of private players. In the last time, the RFP has suggested revenue sharing model for the private players who won the bid. They will have to pay a stipulated percentage of the total revenue with the Airport Authority of India. 
But this time, the RFP has suggested paying a specified fee for each domestic passenger for the AAI. But curiously, the RFP is silent on paying a fee for per international passenger to AAI. 

It means, in Kerala, especially in Trivandrum airport, where international passenger volume is higher than domestic passenger volume, this method will help the private player make huge windfall. Further, there is a chance for the private player who wins the bid to promote international  passenger traffic than domestic flying as they will have to pay a fee for per domestic passenger handled by the airport service provider as per the contract, he said. 

Considering this prevailing growth pattern of the airports in Kerala, the private players have more interest in taking part in the bid for the Trivandrum airport, although the land is scarce in Thiruvananthapuram. 
Since there are a lot of risk factors in the process, the state government should abstain from the gambling of bidding for the airport and announce it would not sign the ‘state support agreement’ (SSA) with the private player, which is mandatory for the private player to run the airport. The West Bengal airport has forced the Centre last time to drop Kolkata airport from the list announcing it would not sign the (SSA), said experts. 

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