BUSINESS

Bumpy ride for India airport projects

By Raphael Minder, Joe Leahy
May 01, 2008 15:33 IST

When the private consortium in charge of building and operating Bangalore's airport inquired last year about what was happening with the state government's road construction projects, it got some mixed news.

There was little progress on a planned express highway but, after a long delay, the government confirmed it had finally selected a company to build a crucial access way to link the airport to the existing road.

The bad news, however, was that the winner of the government tender had never built even a simple bridge, let alone the "trumpet flyover" needed to channel drivers to an airport fit to handle 12m passengers in its first year. It was chosen simply because it had put in the cheapest tender.

"We got scared. We knew that if we left it to them it would not happen - as simple as that," says Albert Brunner, the Swiss chief executive of Bangalore's new airport.

The Siemens-led airport consortium took over the project and finished it in record time. But the fact that the consortium was forced to shoulder the unscheduled Rs1.2bn ($30m, euro 19m, pound 15m) cost of building the overpass shows the level of investor frustrationaccompanyingIndia's efforts to overhaul its creaking infrastructure.

Bangalore's airport, scheduled to open next month, and a sparkling new facility in Hyderabad, which opened in March, are at the forefront of a nationwide drive to upgrade India 's obsolete airports.

Bangalore and Hyderabad have been among India 's fastest-growing cities, each now home to 7m people and many of the outsourcing companies that have spearheaded India 's economic boom.

But their old airports have been a source of public embarrassment. Bangalore's existing facility is a former air force base designed to handle 3m passengers a year, rather than the present 10m. Instead of internet access, Bangalore's wooden phone boxes offer humming fans to combat the sweltering heat. Recently a jet liner was sent careering down the runway after hitting a stray dog.

In Hyderabad, the old airport was handling almost 7m passengers a year, double the intended capacity. Unregulated housing development and rubbish dumps around the runway attracted flocks of scavenging birds. On average, the old airport was recording two bird strikes a month.

"The existing airports are just not safe, whether in Bangalore or Hyderabad," says A Viswanath, chief commercial officer of GMR, the group leading the construction of the new Hyderabad facility.

The contrast between the city's old and new airports could hardly be greater. Hyderabad's gleaming new facility was completed in three years, slightly ahead of schedule - a rarity in India . The project cost $600m rather than the $350m earmarked in 2002, but largely because its owners had to more than double the original capacity of 5m passengers a year to take account of the city's astounding growth.

"You literally have to pinch yourself to remind yourself this is India," says Ishaat Hussain, a senior executive of the Tata industrial group, of Hyderabad's new airport.

Bangalore's new airport is similarly impressive but building it was more painful. Mr Brunner recalls how, when he arrived eight years ago, he was promised he would be home within three.

But he is adamant that rewriting the terms of that tender, as is now being considered, would send a damaging message to other private infrastructure investors in India and could jeopardise the second phase of the airport project, which envisages adding a runway to handle 50m passengers a year.

Both Hyderabad and Bangalore have become entangled in legal disputes over whether they will be allowed to apply the domestic passenger charges included in their original contracts.

Although they have agreed to suspend the charges for three months while state and federal authorities review the issue, executives insist that forfeiting that revenue altogether would bankrupt them.

Adding to Bangalore's problems is a dispute over whether to close the old airport or allow both to co-exist, as a powerful cohort of Bangalore software executives are demanding; the new airport lies further from Electronics City, the information technology hub.

Asked why the new airport was built far from Bangalore's answer to Silicon Valley, Mr Brunner flips the question around: "Why did the software hub not take account of an airport project that dates back to 1994?"

It is a chicken-and-egg situation that suggests co-ordinated planning has yet to feature in India 's economic and infrastructure development.

Raphael Minder, Joe Leahy
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