CAG asks govt to review MIAL performance, monitor financing

Government auditor CAG today asked the government to review Mumbai airport operator MIAL's performance and continuously monitor its financing pattern, saying the project cost had doubled and the funding gap was being filled up by passengers through development fee.
CAG pilloried the public-private partnership (PPP) model for the airport, saying risks had not been properly transferred to the private party and castigated Civil Aviation Ministry for granting extensions to the project, delayed by four years, and not penalising GVK-led Mumbai International Airport Limited (MIAL) for it.
In a report tabled in Parliament, the Comptroller and Auditor General (CAG) said, "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."

"It is essential that a regular and well documented review of performance of MIAL by Civil Aviation Ministry is in place to safeguard the interests of the government and to get MIAL to deliver the committed outputs," it said.
According to the CAG, an examination of its audit indicated that "risks had not been appropriately transferred to the concessionaire in the development of the Chhatrapati Shivaji International Airport, Mumbai".
Though the project cost "more than doubled from Rs 5,826 crore to Rs 12,380 crore, the concessionaire did not appear to have faced financial vulnerability for the same, as the funding gap was being largely absorbed by the passengers through levy of development fee (DF), though such levy was not in the Operation, Management, Development Agreement (OMDA)", it said.

"No efforts were made to secure sources of financing for the project," it said.

It 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".
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.