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CAG report says JVs are leading to Airports Authority losing out on its share

Delhi International Airport Private Limited (DIAL) is not giving the Airports Authority of India (AAI) its full share of revenue from the operations at Indira Gandhi International Airport, according to the latest report of the CAG.

S.P.S. Pannu | August 26, 2011 | Updated 08:46 IST

Delhi International Airport Private Limited (DIAL) is not giving the Airports Authority of India (AAI) its full share of revenue from the operations at Indira Gandhi International Airport, according to the latest report of the Comptroller and Auditor General of India (CAG) tabled in Parliament on Thursday.

The CAG has pointed out that DIAL was to pay AAI an annual fee of 45.99 per cent of the gross revenue earned from the airport. However, DIAL has formed 11 joint ventures (JVs) to run nonaeronautical operations and its agreement with these JVs provided for 10 per cent to 61 per cent sharing of gross revenue on the contracted out services. This has resulted in a substantial reduction in the revenue share of AAI.

AAI eyes funds for expansion

The CAG states that the formation of these JVs violates the Operation, Management and Development Agreement signed between DIAL and AAI in April 2006, on the basis of which the private sector company took over the running of the airport. The report points out that "AAI is bound to suffer further losses during the currency of concession agreements with the JVs in their present form". It also observed that there was a delay in getting reimbursements for payments made by AAI to contractors on behalf of DIAL.

"Had AAI managed this contract more pro-actively, it could have earned additional revenue from 23 to 24 per cent of the revenue that they were earning," the report adds.

The revenue of AAI from cargo and car parking operations declined by Rs 103.29 crore between December 2009 to November 2010 compared to the same period of the previous year as the JVs stepped in to manage these activities, according to the audit report.

The fall in revenue occurred despite a substantial increase in the amount of cargo and number of cars handled at Delhi airport during this period. The audit reveals that though the tonnage of cargo handled by DIAL during December 2009 to November 2010 increased by 20.88 per cent over the same period of the previous year, the cargo revenue of DIAL decreased by 37.08 per cent. A similar reduction in revenue from car parking operations was also observed.

DIAL informed the CAG in March this year that "car parking and cargo concessions involved investment in infrastructure by the concessionaires, which was factored in the revenue share and the company had entered into concession arrangements with bidders who quoted the highest revenue share".

However, the CAG has not accepted this argument as the agreement clearly provides for payment of 45.99 per cent of gross revenue to AAI in consideration of exclusive rights to DIAL to undertake some of the functions that were earlier carried out by AAI.

Courtesy: Mail Today 

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