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No all-clear for DIAL yet

December 19, 2007 10:28 IST
The Delhi International Airport Limited's (DIAL) ongoing tussle with the Airports Authority of India/Ministry of Civil Aviation (AAI/MoCA) isn't likely to get resolved in a hurry, though things appeared settled when, a few weeks ago, Aviation Minister Praful Patel said at a press conference that the government would go by the Attorney General's (AG) opinion on the dispute.

This is because the agreements entered into by DIAL with various subsidiaries (DAPL and DCPL) do not conform to the pre-conditions mentioned in the AG's opinion.

An email to DIAL officials detailing the problem areas was sent on Thursday last week but remained unanswered. AAI, meanwhile, sent a letter to DIAL on December 13 saying that the ministry was examining the AG's opinion with respect to whether DIAL could accept deposits for land sub-leased by it for commercial development and whether it could form various subsidiary companies to carry out business.

AAI has written that till there is another letter from it specifically giving DIAL the go ahead, it must not take any action in these areas.

At the heart of the DIAL-AAI disagreement is the deposits-for-land which DIAL insists are not part of the revenue-share agreement and the two subsidiaries that DIAL wishes to form for developing the infrastructure on the land to be used for commercial purposes and for cargo operations – the MoCA/AAI are of the view all these will reduce the AAI's revenue share amount and are prohibited under the Operations Management and Development Agreement (OMDA) between DIAL and AAI.

The AG's opinion, however, said the land deposits as well as the subsidiary were permitted under the OMDA.

The AG's opinion, however, also lays down certain pre-conditions which DIAL does not meet.

The AG's opinion of November 14, 2007 concludes by saying, "In case of grant of licence to DCPL to undertake cargo-handling services and the DAPL to develop and maintain common infrastructure facilities, the same should be on arms-length commercial basis and should be in strict compliance with Article 8.5.7 of the OMDA."

Article 8.5.7 talks of arms-length relationships and Schedule 12 which, in turn, says that if any group firm (both DAPL and DCPL are group firms) tenders for a contract, an independent probity auditor should be appointed to review and monitor the tender, and this auditor has to be appointed in line with a procedure laid down by AAI.

DIAL did not reply to the email which asked for details of any competitive bidding done before choosing DAPL or DACL as subsidiaries.

Article 8.5.7 also says that if any contract is entered into with a group firm, AAI will have be consulted first and that AAI has the right to object to any term which it can show are inconsistent with the letter or spirit of the OMDA.

In response to a question on the land deal, the AG refers to an earlier opinion given by him (on June 17, 2005) and says DIAL cannot sub-lease any land if it violates the Airports Authority of India Act, 1994.

That opinion says the land cannot be used to build, among others, commercial arcades/ shopping complexes/ offices if these are not meant primarily for the airport's passengers or for use by the airport authorities.

DIAL's Request for Proposal (RFP), inviting developers to bid for commercially developing the land, says the OMDA envisages developing of hospitality, commercial and retail space to cater to the need of the airport.

The area available for such activities, however, appears far too large to be of use primarily by passengers.

Thus, land parcel C, for instance, envisages up to 200,000 sq ft of additional commercial space and 100,000 sq ft of additional retail space; land parcel D envisages up to 100,000 sq ft each of commercial and retail space and land parcel E up to 300,000 sq ft of additional commercial space and 100,000 sq ft of retail space.

The RFP also pitches the project in light of increasing rentals for office space for MNCs and the shortage of organised retail space in the capital region. DIAL/GMR officials did not comment on this aspect of the AG's opinion either.

Sunil Jain in New Delhi
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