Construction of the Bangalore International Airport must commence by January 1, 2005, failing which there will be a huge delay once again because the concessional agreement signed in July 2004, will expire in December 2004.
Speaking at an open house session on "Direct International Flights" organised by the Greater Mysore Chamber of Industry in Bangalore on Friday, Albert Brunner, chief executive officer, Bangalore International Airport Ltd, said that the financial closure agreement must be signed in the next "one month", which will pave way to commencement of construction "by the end of this year".
"However, since the concessional agreement is valid only for six months, it will result in further delay if construction does not begin by the end of this year. If construction begins around this time, the airport will be ready for operation by September 2007," Brunner said.
According to him, the only bottleneck in reaching a financial closure is the state support agreement and the land lease agreement. An amount of Rs 350 crore (Rs 3.5 billion) is being given by the state as part of the state support agreement.
"This amount is neither debated by the state government nor the BIAL. Though negotiations had concluded, the elections resulted in the delay. The new government wanted an update on the consensus we had reached earlier. They have told us that it will be finalised within the next few weeks. So, we expect this to take 2-3 weeks," Brunner explained.
While Brunner feels that once these agreements would be in place by the end of this month, it would clear all hurdles for commencement of the construction. BIAL, as part of the state support agreement, has also called for the need to have a bank guarantee for the state support.
"We have discussed this with the government. We have also asked the shareholders of the airport to submit a bank guarantee for the equity," Brunner added.
He said that BIAL has "almost finalised" all agreements with ICICI Bank which is the lender for the project.
Though all this seems to in place, the Engineering Procurement and Construction Agreement between the BIAL and the contractors has just expired in September. "Due to the continuous delays, this agreement has already been extended twice when it was re-negotiated. Since it has just expired, we need to negotiate once more on this agreement," Brunner said.
As of now, the total cost of the project is Rs 1,340 crore (Rs 13.4 billion). While Rs 315 crore (Rs 3.15 billion) will be the equity portion, Rs 675 crore (Rs 6.75 billion) will come as debt. The state support would constitute the remaining Rs 350 crore (Rs 3.5 billion). This would be an interest free loan but it must be paid back within 10 years after the grace period.
On the future developments planned in the airport, Brunner said, "All commercial activities like cargo, fuel and hotels business will be outsourced. We are looking for partners who can invest in these activities as we do not intend to invest. Our marketing activities for finding these partners will commence only after construction of the airport begins."
The land is being leased out to BIAL for a 30-year period, extendible by a similar period or a period determined at the time of renewing the BOT (build-own-transfer) pact.