|HOME | BUSINESS | INTERVIEWS|
|December 6, 1999||
The Rediff Business Interview/V J Kurien
'The three airports in Kerala can be in business without affecting each other'
The Cochin International Airport is India's first aviation venture owned by public: all the other airports and other infrastructural facilities are owned, managed and operated by the government (read civil aviation ministry, the Airports Authority of India and the Directorate General of Civil Aviation).
The project, mooted in 1993, was executed with massive public
participation in a record time. President K R
Narayanan inaugurated the airport in May this year.
The airport is owned by Cochin
International Airport Limited, a public limited company in which the Kerala government has the single largest stake. CIAL is managed by a
board of directors comprising political leaders,
industrialists, NRIs and representatives of financial
institutions. Besides the Kerala government, CIAL's shareholders include the
Federal Bank, State Bank of Travancore, Bharat Petroleum, Air-India, Housing and Urban Development Corporation and nearly 10,000 Non Resident Indians from 30 countries.
Built on a 1300-acre plot surrounded by a lush
green landscape, the new airport boasts India's second
longest runway (3400 metres). Its parking space can accommodate some
1,500 cars. Its domestic terminal has a 100,000
square feet of built-in area and the international
terminal occupies 140,000 square feet.
Commercial operations began in June 1999.
The Karunakaran government acted fast by
acquiring a 1300-acre plot at Nedumbassery, some 27
kilometres from Cochin. Soon Kurien was divested
of his collector's posting and made the managing
director of CIAL. The Rs 2.3 billion project became functional in a record time of six years.
The first half-year in business, Kurien told
The project, mooted in 1993, was executed with massive public participation in a record time. President K R Narayanan inaugurated the airport in May this year.
The airport is owned by Cochin International Airport Limited, a public limited company in which the Kerala government has the single largest stake. CIAL is managed by a board of directors comprising political leaders, industrialists, NRIs and representatives of financial institutions. Besides the Kerala government, CIAL's shareholders include the Federal Bank, State Bank of Travancore, Bharat Petroleum, Air-India, Housing and Urban Development Corporation and nearly 10,000 Non Resident Indians from 30 countries.
Built on a 1300-acre plot surrounded by a lush green landscape, the new airport boasts India's second longest runway (3400 metres). Its parking space can accommodate some 1,500 cars. Its domestic terminal has a 100,000 square feet of built-in area and the international terminal occupies 140,000 square feet.
Commercial operations began in June 1999.V J Kurien, widely considered the moving force behind CIAL, is an Indian Administrative Service officer. He was the district collector of Ernakulam in 1982, when the demand for a new airport was made. Wasting no time, Kurien got into the act and met the then Kerala chief minister K Karunakaran with a project report.
The Karunakaran government acted fast by acquiring a 1300-acre plot at Nedumbassery, some 27 kilometres from Cochin. Soon Kurien was divested of his collector's posting and made the managing director of CIAL. The Rs 2.3 billion project became functional in a record time of six years.
The first half-year in business, Kurien toldGeorge Iype in an exclusive interview, has strengthened the company's plans for the future. Excerpts:
How was the CIAL project born?
For many years now, there has been a demand from Non Resident Indians from Kerala to build an international airport in Cochin. Many of them had to take a detour via Bombay to reach Kerala for their vacations. The old airport of Cochin, at the Willington Island, belonged to the Indian Navy. It was suitable for operations of 8737 aircraft with load restrictions due to limited length of runway, obstructions and other geographical and natural constraints. The Airport Authority of India has been examining the feasibility of expanding the airport for the last two decades, but finally it came out with the recommendation that construction of a new airport at a new location was the most ideal solution for air safety.
Although the AAI suggested the construction of a new airport, both the Director General of Civil Aviation and the AAI expressed their inability to invest the kind of funds needed to build a new international airport.
The government of Kerala did not have the finances to construct the airport on its own. Thus the government asked me to prepare a project report recommending various financial feasibilities to implement the project.
I suggested in my report to register a society under the Travancore Cochin Literary Scientific and Charitable Societies Registration Act and seek interest-free loans from Non Resident Indians, donations and loans from major industrial undertakings, small scale units, exporters, banks, financial institutions and the state government.
What was the government's response?
Of course, the government approved the recommendations and I began my work in a small one-room office with one peon.
As a first step towards knowing the minds of the NRIs, we issued an advertisement in local newspapers telling the public about the airport project and asking those interested to fill in a coupon and mail it to us.
Many people, most of them NRIs, responded positively. I wrote to all of them explaining more about the proposed project. Soon I travelled to many Gulf and European countries to enlist financial support for the project from NRIs. Their response was enthusiastic and thus started the work on the new airport.
How many NRIs invested in CIAL?
There are nearly 10,000 shareholders from about 30 countries that include Australia, Austria, Botswana, Brunei, Canada, Uganda, Egypt, Germany, Hong Kong, Indonesia, Iran, Italy, the United States, Japan, Saudi Arabia, Kuwait, Kenya, Kuwait, Malaysia, Mexico, Nigeria, Oman, Qatar, South Africa, Singapore, Sweden, Swtizerland and the United Kingdom. It is amazing that NRIs working in remote parts of the world evinced keen interest in the airport project. I think this is the only major project in India with maximum number of NRI shareholders. Our strength was that without a public issue, we managed to raise the money needed for the airport.
How many shares did you issue, and at what price?
(We issued shares) at Rs 10, but we insisted that an individual shareholder should apply for at least 250 shares worth Rs 2,500. Many NRIs have invested lots of money in the airport. There is a rich NRI who has invested Rs 80 million. The inflow of NRI funds to the new airport showed that our project had credibility. If you go ahead with a project with credibility that convinces the people, then it is easy to execute it.
How much did the state government and other financial institutions invest?
The total project cost worked out to be Rs 2.3 billion. The Kerala government's contribution was Rs 280 million. We went for a long term component of Rs 140 million from the State Bank of Travancore, Federal Bank and HUDCO. The remaining financial part was met by the NRIs and the equity coming from airport service providers and financial institutions.
Do you plan to go in for a public issue?
Yes, certainly, but a little later.
Are all the NRI shareholders Keralites?
Most of them are Keralites. But there are non-Keralite shareholders too.
What is the investment-return equation like?
We look at it like this way. Right now we are operating only 12 flights daily. Soon we will operate 17 flights and then we will break even.
Our cargo complex is one of the biggest in the country. We are now building a separate Cargo Village on the lines of of Dubai Cargo Village. All cargo activities of private and government agencies will be situated for easy booking, storing and clearing in the Cargo Village. We have earmarked 80 acres of land for this project.
We hope to have direct international flights from European countries. I'm sure that in two-three years, CIAL will turn profitable. Moreover, we have lots of land which we are leasing out to hotel chains and other establishments to ensure that Cochin's new airport becomes the hub of all commercial activity in south India.
Did you face opposition from local residents during the acquisition of land for the airport?
Yes, we faced lots of opposition from the local people initially. We had to acquire 1,300 acres of land from around 2,600 land-owners. Some 822 families had to be rehabilitated. There were over 400 court cases against the land acquisition. Cases were filed against our proposed project, from the district court to the Supreme Court. But the final verdict was in our favour.
We managed to rehabilitate all the residents to their complete satisfaction. We paid Rs 20,000 each per family to shift their personal belongings from the houses. We gave six cents of land free of cost to each family. The valuation of their houses was made without deducting any depreciation. The rehabilitation areas were provided with good quality roads, street lighting, electricity and water connections. We also gave jobs to many young local people in CIAL. Now that the airport has become operational, the local economy has dramatically improved. The land prices have gone up and the infrastrcuture of the area has improved.
Does a small state like Kerala really need a fourth airport?
Kerala’s nearly 30 million population is much more than that of many European countries. The population of Dubai is over 600,000, it has airports in as small a distance as 120 square kilometers. Sharjah, Abu Dhabi and many other places in the Gulf have many airports that are self-sustaining.
More than 2.5 million Keralites work abroad. Even if they come home for vacation once in two years, that should be sufficient for the existing three airports in the state to run smoothly and make profits. It is not a question of whether a state is small or big but one whether the airports can operate flights in full capacity. I think the three airports (one more is coming up) in Kerala can survive without affecting each other.
What are the future plans of CIAL?
The traffic surveys conducted by the Airport Authority of India and CIAL have indicated great growth potential for the airport. Cochin is ideally located in the international air route. So we hope to service a large number of international flights through refuelling and other facilities.
A number of foreign airlines especially from Europe have already evinced keen interest in Cochin airport. Soon we will also start operating tourist and cargo charters.
Tell us what you think of this interview
SHOPPING HOME | BOOK SHOP | MUSIC SHOP | HOTEL RESERVATIONS
EDUCATION | PERSONAL HOMEPAGES | FREE EMAIL | FEEDBACK