The government of Karnataka has proposed to the ministries of civil aviation and finance that they consider granting "the first right of refusal" to the Bangalore International Airport Ltd.
This will come into effect after BIAL completes 60 years of operations, and includes the first 30 years of the contract to run the airport as well as automatic renewal for another 30 years.
Speaking to Business Standard on the review of the airport project by chief minister S M Krishna in Bangalore on Tuesday, S Krishna Kumar, additional chief secretary, infrastructure, government of Karnataka, said: "The ministries of finance and civil aviation, at the last meeting of the working committee on August 6, agreed for extending the contract from 25 years to 30. They have also agreed to the automatic renewal for another 30 years. Beyond this term, we have proposed that they consider granting of the first right of refusal to BIAL."
With the passing of the Airports Authority Act in the Rajya Sabha last week, the ongoing talks for the commencement of work on the airport seem to have got a fresh lease of life.
Kumar said the state government was hoping to sign the concessional agreement by the end of this month.
"If the other agreements are also concluded in September, we can go for a financial closure by November. The actual signing of the agreement will, however, happen during financial closure. For now, we will only have a negotiated draft. The chief minister is confident that the November timetable is achievable," he said.
On the step-in right of the Karnataka government in the event of default, Kumar said the working group, on August 6, had also considered the final formulation.
"So far, in the event of default, the formulation was that the Centre should take over the airport. We have now said that the government of Karnataka has to have a step-in right as we are the largest stake holder. We had raised this in the PMO and the ministries of finance and civil aviation wanted a formulation as to how and when we would get the step-in right. Once we give the formulation, it will be discussed. We think it will be accepted," Kumar explained.
Kumar added that the ministry of finance was still stuck on the payment of concession fee in the event of default.
"We have tried to explain to them that it is improper to ask for such a fee when work is about to start. It was never part of the agenda," he said.
The concession agreement involves payment in the form of an upfront fee or a percentage of the revenue generated from the airport operations like air traffic, landing rights and aircraft parking charges from domestic and international airlines, passenger fee, customs tariffs, cargo and other services.
The concession agreement also seeks liquidated damages if the airport fails to commence operations on schedule, that is, from 2006 onwards.
Step-in demands
- The ministries of finance and civil aviation, in the last meeting of the working committee on August 6, agreed to extend the contract from 25 years to 30 years
- They have also agreed for automatic renewal for another 30 years
- With the passing of the Airports Authority Act in the Rajya Sabha last week, the ongoing talks for the commencement of work on the airport seem to have got a fresh lease of life
- The actual signing of the agreement will, however, take place during financial closure
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