The Rs 16 question: How Kerala lost Thiruvananthapuram airport to Adani

While Adani's bid was almost thrice as much as GMR's, the Kerala govt's KSIDC would still have won the airport if it had quoted Rs 16 more. Sai Manish explains how

Of the six airports bagged by the Adani group, the most controversial has been the Thiruvananthapuram airport, with its lease being challenged in courts by the Kerala government. It now emerges that the Kerala government lost out to the Adani group while bidding for the airport by just Rs 16 per passenger.

Government data show that there were three bidders for the Thiruvananthapuram airport: Adani Enterprises, the state government’s Kerala State Industrial Development Corporation (KSIDC) and GMR Airports. None except GMR, which operates the Delhi airport, had any experience in running airports. Adani’s winning bid — the amount it would pay the Airports Authority of India after taking over the airport — was for Rs 168 per passenger. This was almost thrice as much as GMR’s, and KSIDC quoted Rs 135 per passenger.

However KSIDC was to be given the right of first refusal if its bid was within 10 per cent of the winning bid. In effect, if KSIDC had quoted an amount of Rs 151 instead of Rs 135, it would have bagged the Thiruvananthapuram airport. This special concession was given after extensive political negotiations between the Kerala government and the Centre. The Communist government in Kerala, led by Pinarayi Vijayan, was ideologically opposed to the airport being privatised and wanted to run it through a special-purpose vehicle.

The Narendra Modi government gave the Kerala government two options — either be part of the competitive-bidding process or be part of the selection process. As a special privilege, the Kerala government was given the right of first refusal it its bid was within 10 per cent of the winning bidder. The Kerala government chose to enter the fray. KSIDC, its designated entity quoted almost twice of what GMR bid. But it seems to have missed, by a whisker, exercising its right of first refusal to Adani and potentially running the airport.

The issue had become a political hot potato in the state, with trade unions and the state government opposing the Modi government’s decision to hand over the airport to the Adani group. The state government even approached the Supreme Court, which asked the Kerala High Court to decide on the matter. The Kerala High Court has refused to stay the handing over of the Thiruvananthapuram airport to the Adani group for the moment. Detailed hearings in the case are underway. Irrespective of the outcome, the issue could potentially become embarrassing for the Kerala government if it fails to wrest control. With the state scheduled to go to elections in the summer of 2021 along with others like West Bengal, Tamil Nadu and Assam, it would have given the Communists something to sell to an electorate amid anti-incumbency in the state. Congress leader and Thiruvananthapuram member of Parliament (MP) Shashi Tharoor has backed the Modi’s government public-private ownership (PPP) model for running the airport in Kerala’s state capital.

While KSIDC’s bid for Thiruvananthapuram was quite competitive, other airports had witnessed closer fights. Adani won all the six airports in the auction by outbidding the other eight in the fray. Mangaluru, where it quoted a price of Rs 115 per passenger, was a cakewalk for the conglomerate. The bid was much higher than the Rs 45 quoted by its closest competitor, Cochin International Airport Limited. Ahmedabad and Jaipur were the most sought-after airports, with seven bidders vying for these. Adani’s winning bid of Rs 177 and Rs 174 per passenger for Ahmedabad and Jaipur, respectively, was much higher than the consortium of state-owned National Investment and Infrastructure Fund and Zurich Airport International AG, the next highest bidder. The closest fight Adani got was for Guwahati, where it outbid the same consortium by just Rs 5, quoting Rs 160 per passenger.  

While the legal battle for Thiruvanathapuram is not completely over yet, Adani has to sign a state support agreement (SSA) with the Kerala government for running the airport. With these six airports and Mumbai in its bag, Adani will control 26 per cent of air passenger traffic in India. The GMR group, which operates Delhi and Hyderabad, has a similar share. The Modi government has started the process of privatising six other airports in the country. While there have been demands for capping of the number of airports a single corporate entity can operate, there has been no official word from the government on the same.