Mumbai, Sep (EPC News): Aviation sector and controversies goes hand in hand. The year has seen and heard many controversies right from strikes of Air India’s staff, holding the nerves of Central Government, to tragic accident at Mangalore Airport resulting in death of 158 people, and the blame game is still on. EPC World handpicked two most controversial issues– one of them is stuck in the battle of two ministries; other in the bureaucratic process.
The highly publicized on-going controversy fueled couple of years back – the proposed Navi Mumbai International Airport, which has sky rocketed the real estate price of the region, has still not seen the light of the day. Reason, scuffle between the two important ministries - Ministry of Environment and Forest and the Civil Aviation Ministry. The recent incidents - Union Environment and Forest Minister Jairam Ramesh’s raising concern (and his only concern) over destruction of mangroves at the proposed site of Navi Mumbai International Airport, followed by Union Minister for Civil Aviation, Praful Patel’s counter attack saying, “No change of site for Navi Mumbai Airport” clearly indicates that the two different ministries or rather two different people holding an important portfolios has locked horns with each other.
The Navi Mumbai airport project, estimated to cost Rs9,970 crore, is to be completed in four phases, and will include two 4,500 metre runways a kilometre apart. The target is to tap 10 million passengers at the end of the first phase. The next three phases — to be completed in 2018, 2023 and 2028 — is expected to service 50 million passengers.
It all started in the month of April 2008 when Union Ministry of Environment and Forest declined the permission for proposed Navi Mumbai International Airport citing inefficiency in dealing problems regarding mangroves and rain/storm water drains at the proposed location by City Industrial Development Corporation’s (CIDCO) and Maharashtra government. This further led to the protest and agitation from local NGO’s against the government and in the interest of the local land holders. Patel said the objections raised by the Ministry of Environment and Forests (MoEF) over the Navi Mumbai project was beyond his comprehension. “I do not understand their objections…..We can’t be overly obsessive about environmental issues. We can’t give priority to 50-100 acres of degradation over a large infrastructure project.”
But here, the Civil Aviation Minister is actually neglecting the serious environmental issues related to the proposed airport that includes; apart from relocating of mangroves from that region, the altering the course of two rivers, Ulve and Gadhi, and construction of embankments for three rivers-Kusadi, Kalundri and Taloja, which may cause 26 July 2005 deluge situation in that region. As well as four to five hills will have to be flattened to accommodate the airport's two runways.
But a detailed exercise by conducting the mathematical and physical model study by Central Water Power Research Station (CWPRS), Pune has revealed that the same is feasible without having any adverse effect on environment. Louis Berger, which studied possible impact of emissions and sound pollution due to the airport, said there appears to be "no big shocks in store'' and the replantation of mangroves and realignment of rivers "could be taken care of without harming the environment''.
Interestingly, at the public hearing, held in the month of June 2010, it was observed that no specific environmental concerning points were raised during the public consultation meeting requiring attention in preparation of final EIA Study, instead every one raising concern over rehabilitation of villagers.
“Understandably, if the clearance get delayed, the fact remain unchanged that the project is going to get delayed,” said a source close to the development. The project cannot see further delays because the existing Chhatrapati Shivaji International Airport is under tremendous pressure of ever growing passenger traffic, the source further said.
In an interview to a business paper, G V Krishna Reddy, Chairman, GVK said that the traffic is increasing, more passengers are flying and there is a limitation on this (Mumbai airport) up to 40-45 million. After that, if Navi Mumbai airport does not come up, it is going to be a problem for the city. At present City's Chhatrapati Shivaji International Airport has been ranked fourth among airports in the world that handle more than 15 million passengers per annum. Overall, it was ranked 23rd among 146 airports.
An industry observer on request of anonymity told EPC World that the proposed project didn’t even have required clearances from MoEF, how Union Civil Minister is so confident about the location of the project? The proposed airport, which is being constructed on 1142 hectares (nearly 3000 acres) of land, the Airport Authority of India is successful in acquiring only 56% of the plot.
MOEF has also suggested that the Maharashtra state government identify another site. But with little land available in and around Mumbai and a major part of land acquisition having already been completed, scouting for another site is not an option that the state government wants to get into. As an alternative, the Environment Ministry has suggested changing the design of the airport after studying various other airports in the world. It has specifically mentioned the airport in Osaka, Japan which is constructed on stilts, and airports in the Netherlands, the whole of which falls in low-lying areas. But such design changes will involve a huge cost escalation.
Maharashtra government has sorted out land issues for another 22% of the proposed land and CIDCO is slated to get control over this land soon. CIDCO is in the process of working out a compensation package for around 20,000 people inhabiting the remaining land. CIDCO has even involved IIT Powai to conduct environment impact survey (EIS).
The MoEF has pointed out that more than 30% of the entire proposed land falls under the Coastal Regulatory Zone (CRZ). Ironically, the National Coastal Zone Management Authority (NCZMA) had given its approval to the project. The MoEF’s refusal to give environmental clearance could also create problems for CIDCO in resettlement of Project Affected People (PAPS). “So far, the PAPS and their elected representatives have been co-operative. But procedural delays could test their patience and also fuel resentment which will create an additional hurdle,” said a source from the CIDCO.
The Expert Appraisal Committee of the Environment Ministry, which had met last month, had asked project developer CIDCO (City and Industrial Development Corporation of Maharashtra) to provide additional information, including a social impact assessment as mandated under the National Rehabilitation and Resettlement Policy of the government.
Thus, City and Industrial Development Corporation (Cidco), have expedited the completion of additional terms of reference (ToRs) sought by the Ministry of Environment and Forests (MoEF). Cidco’s technical advisors, which include the Indian Institute of Technology-Bombay, University of Mumbai, Gujarat Ecological Council and Central Water Power Research Station, have already initiated exercise to prepare the additional ToRs with regard to mangroves, rivers and hills.Besides, the ministry has sought further details on the measures to rehabilitate the project-affected people.
According to the order of High Court it is mandatory for Cidco to find the double the area of 161.50 hectors of mangroves. Hence, an area of 350 hectors has been identified for plantation of mangroves at Dahanu Taluka in Thane district. The experts are working out a detailed presentation to strike a balance between environment protection and project development.
At present, Union Minister for Civil Aviation, Praful Patel has asked Prime Minister Dr Manmohan Singh and UPA Chairperson, Sonia Gandhi to intervene in this issue. Even forum of MMRDA Region Parliamentarians have come together for the urgent intervention of Prime Minister for granting environmental clearances for the proposed Navi Mumbai International Airport. The letter submitted to Prime Minister, a copy of which is in possession with EPC World, mentioned that the Navi Mumbai International Airport gets implemented on a war footing. Says Dr Sanjeev Naik, MP from Navi Mumbai, “We are also working with the Maharashtra Government to ensure that it complies with all environmental procedure, stipulated by the Government of India in relation to this project.”
“I am optimistic about the project and if there are any hurdles, I guess it can be sorted out with proper solutions. Mumbai, being an economic capital of the country, the Navi Mumbai International Airport will surely going to make difference, not only to the state’s economy but the country as a whole,” Supriya Sule, MP from Baramati told EPC World from New Delhi. “Prime Minister has assured that he will personally look into the matter,” she added.
Says Milind Deora, MP, South Mumbai, “We have conveyed our message to the Prime Minister citing the importance of the project in terms of economic gain not only to Maharashtra but to the country.”
When asked about the inter-ministerial clash, he said, “I don’t think there are any inter-ministerial clashes or any individual tiff. Since the project is dedicated to the country, which has been cleared by the highest authority of India, there should not be any further delays in it.”
Since the group of parliamentarians has managed to convince Dr Manmohan Singh for his personal attention to the project, a sigh of relief has come across to the officials of CIDCO. Says a source from CIDCO, “We are very happy with efforts the group of MP has done for the project.”
Now since the bitter war between the two ministries seems to have entered into its final stage, the expert committee of the Environment Ministry schedule to meet on 18th of August to decide the fate of proposed Navi Mumbai International Airport. At present MoEF in a mood to play ‘test cricket’, whereas the Ministry of Civil Aviation want to gain the momentum of ’20-20’, all eyes on the expert committee what it decide in about three-week’ time.
But the chapter doesn’t end here; another controversy is doing the round is the issue of Single-till and Dual-till, with another model, Hybrid-till. Single-till is a model where principal airport activities, including aeronautical (landing, parking and ground-handling charges) and non-aeronautical (duty-free shops, hotel, restaurant, among others) are taken into account to determine the airport charges. Whereas in Dual-till, earnings from the airport are divided into aeronautical and non-aeronautical category and the charges on both sides are decided on the basis of earnings from respective segment. At present, Airports Economic Regulatory Authority (AERA), under the leadership of Yashwant Bhave is looking into the matter. The purpose of setting up of AERA by government of India is, whenever there is a privatization of any market forces, then there is a need to have a regulatory body outside the government so that a consensus can be taken as to what charges the private airport operator are going to impose, especially in non-market oriented environment.
Says Yashwant Bhave, Chairman, AERA, “We have been assigned the function of determining tariffs for aeronautical services rendered at all major airports. This includes air navigation services and the fixation of Development Fees and Passenger Service Fees. So where there is a monopoly or monopolistic market the government wanted to have a regulatory authority, thus keeping mind the market competition in the aviation industry.”
When asked about his inclination as far as “till” issues get settled down, he said, “Single-till model is the most appropriate way to decide airport charges in India. In the single-till model, followed by UK airports - such as Heathrow and Gatwick, all principal airport activities including aeronautical and commercial (or retail) are taken into account to determine the level of airport charges. In contrast, only aeronautical or flying-related activities are considered under the dual-till principle.”
Says Bhave, “Airlines prefer the single-till model since airport charges are comparatively lower under it. However, private airport operators and their investors are keen to have charges decided on the basis of a double-till model because this will help them increase revenue. Currently, most Indian airports do not earn significant commercial income.”
In the consultation papers prepared by AERA, it is been mentioned that the 16% rate on investment for airports as indicative and for discussion. This has also been accepted by the Planning Commission as well as the Tariff Authority of Major Ports. Depending on the debt-equity ratio and marginal corporate tax rates, the return on equity would be different (and normally higher) but consistent with the risk profile of the airport project. In case of non-aeronautical revenue, or, double-till, AERA would review the bottom-up projections of airports, in conjunction with review of other forecasts for operating costs and traffic and capital investment plans relating to non-aeronautical investments. Further, AERA would reserve the right to determine the final forecast to be used for tariff fixation.
But, Dr. C. G. Krishnadas Nair, Managing Director of Cochin International Airport Ltd has different views from what Yashwant Bhave has said. Says Nair, “For the sustained growth of an Airport and to provide incentive to the Public Private Partnership, it is advisable to have Dual-till. Hybrid Till may be acceptable to the private airport even though that is not ideal. This is applicable even for government owned airport if we need to bring efficiency in the management of Airport particularly to develop non aeronautical income, which will also go a long way for the regional, commercial and financial development.”
“To me, Dual till give a way of encouraging and rewarding the Airport Director and his team in the respective non-metro airports. Single till will kill the enthusiasm and innovation,” he adds.
Recently the government has favored hybrid model which will restrict the airport developers – private or state owned – to increase user development fees on the pretext of not being able to make enough money to repay loans or get decent return on investment. In any case, the ADF (Airport Development fee)/UDF (users Development fee) are definitely not replacement for the non-Aeronautical income.
Says Nair, “If there is any misuse of such provision control should be exercised, thereby granting approval for such fee on the basis of capital investment incurred/ to be incurred. It should not be based on whether an Airport is running efficiently or profitably. It should be linked to the capital investments. Efficient control over UDF/ADF by linking to capital investment should be resorted rather than killing initiatives of airports by non-aeronautical income.”
Since the issue of ‘till’ in its final stage, AERA is expected to take a final call on whether to go ahead with single-till method by this month. It is true that the method of calculating airport revenue has been dispute between AERA and airport operators, with the later banking on ‘dual-till’ while the former batting for ‘single-till’. Airlines, on their part, agree with AERA and want the single-till method to be implemented. AERA chairman Yashwant Bhave said that the using of dual-till is not legally feasible. Since we have an option of using hybrid, we are waiting for the government’s view on the matter.”
By Rahul Kamat
Posted by:
epcworld
| Posted on:9/1/2010 at 1:05 PM