Mumbai: The privatisation of duty-free trade, conducted at specific points in airports, has evoked mixed responses from private parties.

Though four private players - Weitneur of Switzerland, Aer Rianta of Bahrain/Ireland, King Power of Thailand and Arme Impex of Chennai - had bid documents, they failed to submit the bids within the stipulated period, say International Tourism Development Corporation (ITDC) sources. Therefore, it has been decided to give these parties more time to submit their bids and put in their technical and financial offers.

ITDC had recently floated tenders to invite private participation in duty-free businesses in 12 airports. The volume of these businesses is estimated to grow anywhere between Rs 1,000 crore and Rs 1,500 crore in the next five years. The strategy of privatising has been thought of because of the fact that ITDC has not been able to exploit the potential of the business.

In the first seven months of the current fiscal, ITDC has actually made a small loss of Rs 2.40 crore. However, ITDC is not prepared to assume the responsibility of this loss, citing two major reasons:
1) High-lease rentals paid to the Airport Authority of India.
2) A sharp dip in international traffic.

The poor performance of this business in India is in sharp contrast to the trend in other cities like London, Frankfurt, Singapore and Kuala Lumpur where it is the highest revenue earner.

In order to avoid monopolisation and cartelisation by any given one party, ITDC has split the activity into three regions and has decided not to allow one party to handle more than one region. These regions are North, West and South.

The North region comprises Delhi, Kolkata and Varanasi airports; the West comprises Mumbai, Ahmedabad and Goa airports; and the South region consists of Chennai, Bangalore, Hyderabad, Kozhikode and Thiruvananthapuram airports. ITDC expects the parties to undertake procurement, pricing, renovation of stores, marketing and institutional sales on its behalf.

The private party will have to guarantee:
1) A minimum turnover as well as profits from the duty free store.
2) Share with ITDC in equal proportions, any incremental profit generated over and above the guaranteed revenue.
3) The parties will have to guarantee minimum revenues of Rs 138 crore from all the three regions taken together in the first year of operations. Over the next five years, the minimum guarantee would of Rs 1,100 crore.