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GMR, Tatas to stay away from Navi Mumbai airport project

news
04 January 2017

The GMR Group and Tata Realty will not bid for the Navi Mumbai airport project, citing ''onerous'' bid conditions, among other reasons.

''We are not bidding on account of project implementation and execution challenges as well as onerous timelines and bid conditions,'' a GMR Group spokesperson said.

This means there will be only two companies - the GVK-led Mumbai International Airport (MIAL) and the Hiranandani Developers-Zurich Airport consortium - in the race for the Rs16,000-crore project.

This is the second recent instance of qualified companies not participating in financial bids. Last August, the GVK Group and Hiranandani Developers did not submit financial offers for the Goa airport and the GMR Group won the bid.

Financial bids for the much-delayed project will open next Monday. The Navi Mumbai airport will be developed through a public-private partnership and the planning authority, the City Industrial Development Corporation (Cidco), will hold 26 per cent stake in the project. MIAL, which operates the Mumbai airport, has the right of first refusal and it can revise its bid if it is 10 per cent below the highest offer.

Four shortlisted bidders included GMR Delhi, GVK-led Mumbai International Airport, Tata Realty and the Hiranandani-Zurich Airport consortium.

The airport project in various phases will cost Rs16,704 crore. It requires 2,268 hectares of land, of which 1,160 hectares will be utilised for aeronautical purposes

To be developed through public-private partnership by way of setting up a special purpose vehicle wherein Cidco of Maharashtra and its nominees would have a 26 per cent stake

The first phase will have capacity of 10 million passengers annually. The airport will be able to host new-generation aircraft like the A380 and Boeing 747-8 .

While the GVK Group declined to comment, sources at Tata Realty said the company would not participate in the bids unless there was a revision of bid terms or submission deadlines.

Cidco vice-chairperson Bhushan Gagrani said the agency was expecting financial offers from all the companies. In case only one company submits bid, the state cabinet will have to take a decision on the award of the bid.

In their submission to the government last month, the GMR Group pointed out the challenges in pre-development work, delay in land acquisition and rehabilitation, and absence of stage-II environmental clearance as key concerns for meeting project deadlines. GMR also raised issues regarding conflict of interest in award of pre-development work. Tata Realty too is said to have raised concerns in a letter to the government.

The GMR Group runs Delhi and Hyderabad airports. Last August, it won the bid for a second airport in Goa and has participated in a dozen airport bids around the world. The group has a total debt of Rs49,000 crore and it is divesting stakes in its road and energy projects to pare down its debt. The group's financials, too, have been impacted due to stress in their road and energy business.

In his letter, Kapur also raised the issue of capping Cidco's equity contribution at Rs430 crore irrespective of the project cost, saying it will complicate the financing of project and impact long-term viability. The company has also raised issues regarding the terms of repayment of soft loan for the pre-development work. Funds spent by Cidco on pre-development work will be deemed as soft loan according to bid conditions.

The main issue of the bidders pertains to project timeline and bidders think the completion date of December 2019 is unrealistic, a government official said. All the issues that bidders have raised were discussed with them before finalisation of the concession agreement, the official added.

The Maharashtra government's project monitoring and implementation committee will have to take a call whether to amend the bid conditions and that would mean further delays in the project.





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