CAG raps government for allowing DIAL levy development fee

August 17th, 2012 - 5:23 pm ICT by IANS  

New Delhi, Aug 17 (IANS) India’s official auditor has rapped the government for allowing the private operator of the national capital’s IGI airport to collect a levy from passengers to finish the development work at the airport.

The Comptroller and Auditor General of India (CAG), in its report tabled in Parliament Friday, termed the decision of the civil aviation ministry to allow Delhi International Airport Limited (DIAL) to collect the development fee as a “post-contractual benefit” which violated the tendering process by which the company was selected and called for fixing responsibility.

In 2009, the government had allowed DIAL to collect development fees worth Rs.3,415.35 crore from passengers. DIAL only invested 19 percent for the funds required for development work.

The remaining project costs has come from debt, security deposits and development fees.

CAG also slammed the government for allowing DIAL to commercially exploit 240 acres of land worth Rs.24,000 crore against a lease fee for 56 years for only Rs.2,450 crore.

“The potential revenue from this land in licence fee for 58 years was calculated by DIAL at Rs.163,557 crore out of which DIAL’s share would be Rs.88,337 crore,” said the report.

The report further said that provisions allowing the extension of the concession period to the operator was detrimental to public interests and should be reviewed.

“Audit noted that provision of the concession period to be extended at the option of the concessionaire was detrimental to public interest,” the CAG said.

The contractual agreement allows DIAL to extend the initial 30-year concession period by another 30 years.

According to the auditor, a cabinet note issued in 2003 specifically envisaged an initial concession period of 30 years which could be extended by another 30 years subject to “mutual agreement and negotiation of terms”.

However, the condition envisaged in cabinet note was omitted from operation management development agreement (OMDA) which was signed in April 2006.

“This is not only a violation of the commitment in the cabinet note but is also a unilateral and unfair advantage given to DIAL which is detrimental to government interest as it does not provide the government any scope for review of any of the conditions,” the auditor said in its report.

The auditor noted that DIAL enjoyed enormous concessions on lease for additional land, while government’s own departments like Directorate General of Civil Aviation (DGCA) and Bureau of Civil Aviation Security (BCAS) have to shell out Rs.2.41 crore per annum for a land bank of 7.60 acres.

“Upfront fee was used to lease out an additional land of 190.19 acres for a paltry one-time payment of Rs.6.19 crore,” CAG said in its performance audit.

The CAG has recommended that all pre-bid for PPP projects be declared upfront and monetised, and value of all concessions, including assets transferred, be calculated well in advance before inviting any bids.

“Government should investigate all cases of such post-bid actions and fix responsibility. It is necessary to review the various provisions of OMDA (Operation Management Development Agreement) and verify to the extent provisions could not be adhered to.”

CAG further recommended that all PPP arrangements should be linked to certain basic triggers like traffic volume, return on investment and break even period.

“A long concession period without any trigger may lead to undue financial benefit to the concessionaire.”

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