CAG asks govt to review performance of MIAL

The project cost for development and upgradation work has doubled due to inordinate delays

The Comptroller and Auditor General (CAG) today asked the government to review the financing structure and performance of Mumbai International Airport Limited (MIAL) as the project cost for development and upgradation work of terminals has doubled due to inordinate delays and the funding gap is now being addressed by levying development fee on passengers.

CAG, in its audit report titled "Implementation of Public Private Partnership project at Chhatrapati Shivaji International Airport, Mumbai" tabled in Parliament today, criticized the public-private partnership (PPP) model for development of the CSI airport stating "the financing risks has not been effectively transferred to the private partner".

The auditor held that though the Airports Authority of India (AAI) had the right to penalize MIAL for delaying the project by four years, no communication urging MIAL to hasten implementation work was on record.

"There is a strong case for government to critically review the outcomes from the PPP arrangement in MIAL ... And protect the interests of government and passengers", CAG said in its report.

The delay in completion of the project has meant that the project cost has "more than doubled from Rs 5,826 crore to Rs 12,380 crore, CAG said in its audit. However, the concessionaire MIAL did not face financial vulnerability for the same. The gap in funding gap was largely addressed as the Ministry of Civil Aviation (MoCA) and Airports Economic Regulatory Authority (AERA) allowed levy of development fee on passengers. Such levy was not in the Operation, Management, Development Agreement (OMDA), CAG said.

CAG also said the revenue share of state-run Airports Authority of India (AAI), which partners private infra firm GVK in MIAL, was "set to decline with the outsourcing of activities as noticed in the case of domestic and international cargo activities and the airport hotel project".

As per the agreement with MIAL, AAI receives 38.7 per cent of the gross revenue of MIAL. With outsourcing of cargo activities, the cargo revenue will decrease as the expenditure and return of the service provider will bring down the revenue received by MIAL. According to estimates shared by MIAL, the reduction will be 40 per cent, which would in turn bring down the receipts of AAI.

Further, due to a lapse on part of the government, the quantum of commercially exploitable land available to MIAL increased by 10.23 acres.

AAI received a gross revenue share from MIAL of over Rs 2,857 crore between 2006 and 2013. "The private partner, on other hand, received gross revenues of Rs 4,526 crore during the same period on an investment of Rs 888 crore, without taking into account other potential benefits that would accrue over time from commercial exploitation of land," CAG said.