Supersonic Journey into Aviation Space

The Adani group won the bids to upgrade and operate six airports in Ahmedabad, Jaipur, Thiruvananthapuram, Lucknow, Mangalore and Guwahati. While the Cabinet clearance is required to takeover control from Airports Authority of India (AAI), it is perceived that Government had violated laws and procedures and ignored the recommendations of Department of Economic Affairs (DEA) and National Institution for Transforming India (NITI) Aayog on the legal, financial and technical aspects of the bidding process.

Without any prior experience in aviation sector, the firm cracked the bid within a very short span. Let us have a closer look.

Chronology of events:

22-Apr-2018

Prime Minister’s Office (PMO) directs DEA and NITI Aayog to hand over certain airports from AAI control to private players, despite the existence of the Ministry of Civil Aviation (MoCA)

18-July-2018

Government attempts to amend the Airports Economic Regulatory Authority (AERA) of India Act, 2008 and change the way tariffs are determined which may enable private firms to exercise monopoly

8-Nov-2018

Union Cabinet gives an in-principle approval to PMO’s proposal to lease the six airports in Public Private Partnerships (PPP) mode.

17-Nov-2018

Empowered Group of Secretaries (EGoS) and Public Private Partnerships Appraisal Committee (PPPAC) decides on eligibility criteria of bidders during the first meet itself

No upper limit for awarding number of airports to a single entity
Bidders need not have prior airport experience
Demonstrate minimum seven years of construction experience in eligible projects
Development of airports would be uniform irrespective of actual vs projected passenger volumes
Eligibility linked to Total Project Cost (TPC) and is same for all six airports.

4-Dec-2018

EGoS submits the project report, PPPAC memorandum, draft Request for Proposals (RFP) and Draft Concession Agreement (DCA).

11-Dec-2018

DEA specifies that project costs break-up, KPI, development plan, capital WIP, deviation statements of bid documents were not submitted by AAI or MoCA to the PPPAC without which technical evaluation of bidders becomes difficult. Recommendation of restricting a single entity not to have control more than two airports and implementing license model instead of lease model were ignored.

14-Dec-2018

Government invites private bidders to declare tariffs and passenger charges based on which bids will be evaluated. This violates the extant law while the bill is still pending in Parliament.

Nightmare Target for Bidders:

Impossible to calculate TPC for the proposed lease period of 50 years
Perusal of voluminous project reports and RFP within short time
Bidder’s net worth on technical & financial capacity should be twice & four times the TPC respectively
Tight timelines in getting data room access, Q&A by AAI, pre-bid conference, sale of bid documents, detailed due diligence, while techno-commercial, legal, contractual and regulatory complexity analysis to be completed by 14-Feb-2019

The Supersonic Entry

On 16-Feb-2019 & 25-Feb-2019, technical and financial bids were conducted respectively, by which Adani group emerged as successful bidder on the basis of “per passenger fee”.