The civil aviation ministry has estimated the cost of upgrading the Delhi and Mumbai airports at Rs 3,500 crore (Rs 35 billion).

It has directed the Airports Authority of India to engage international consultants for the upgrade of infrastructure and construction of terminals at the airports.

The deadline for appointing the consultants is March 2003. The target for the completion of the upgradation work at both the airports has been set for October.

The ministry has shelved privatisation plans for the two airports for the time being and will instead set up separate companies for them.

The companies would be under the Airports Authority of India and might have separate managing directors, official sources said.

The proposal was chalked out after discussions between the finance secretary and his counterpart in the civil aviation ministry, they added.

Of the Rs 3,500 crore required for the upgradation, the Delhi airport is likely to get the lion's share of Rs 2,000 crore (Rs 20 billion), while the Mumbai airport will be allocated Rs 1,500 crore (Rs 15 billion).

The ministry proposes to fund the scheme through AAI's reserves, which officials pegged at nearly Rs 2,000 crore, and grants from the Centre.

The promptness in finalising the upgradation schemes comes in the wake of the Cabinet directing the ministry to come up with a proposal by February-end.

In January, the Cabinet had deferred a decision on the privatisation of the metro airports and had asked the civil aviation ministry to rework the proposal in consultations with the finance ministry.

Officials said the process had been expedited due to pressure from the finance ministry.

The ministry's earlier proposal to the Cabinet suggested the formation of joint venture companies for the four metro airports, with the AAI holding 5 per cent stake and managing security and air traffic control.

According to officials, the Cabinet had expressed concern about the hike in airport tariffs if the private player was given maximum freedom.

The ministry is concentrating on the Delhi and Mumbai airports because they are responsible for the bulk of passenger and cargo traffic.

The two airports garnered revenue close to Rs 734 crore (Rs 7.34 billion) in 2001-02 and have been raking profits for the past two to three years.

Ministry sources said though the upgradation of the Kolkata and Chennai airports were also on the cards, the Delhi and Mumbai airports were 'top priority.'

The airport privatisation issue has been hanging fire for the past four years, with the ministry earlier proposing to adopt a leasing format.

However, since that would require an amendment of the AAI Act, 1994, the joint venture route was opted for.