GMR’s Delhi airport cost overrun in focus again

The ministry of civil aviation is planning to once again ask GMR, which leads the consortium developing the Delhi International Airport (DIAL), for a detailed explanation over cost overrun.

The current estimate pegs the cost of modernising this airport  at Rs 12,700 crore, significantly higher than the earlier-projected Rs 9,875 crore.

The ministry had written to GMR in April this year, too, but did not get details of projects which led to an overall cost overrun.
A ministry official told DNA, “We had asked DIAL to explain how and when costs escalated but they haven’t explained. We will write to them again… we need details of which specific projects within the airport led to overall cost escalation.”

He gave several examples of how, while constructing the new integrated terminal building, T3, GMR has overshot its own estimates given earlier.

“Glass work was extended to a much larger area without any previous planning to make the airport look good. Even the number of aerobridges was increased, which led to an increase in the terminal area and subsequently the overall cost for building T3. Earlier, GMR had projected that 70% of passenger traffic would use aerobridges but later changed this to over 90%… as many as 15 new aerobridges were added to the original plan.”

Sidharath Kapur, chief financial officer (airports) of GMR, said his company is cooperating fully with the Airport Economic Regulatory Authority (AERA), which has appointed two firms — Engineers India Ltd and KPMG — to conduct cost audit of DIAL.
“Even before we went to AERA, a project cost committee had submitted a comprehensive report on project cost overruns to the DIAL board, where government nominees are also present and this report was then given to AERA,” Kapur said.

AERA’s cost consultants have been conducting their study for the last four weeks.

The ministry official made it clear that the audit by AERA and the ministry’s queries were separate and that similar questions on cost escalation have also been raised with GVK, which is developing the Mumbai International Airport (MIAL).

The official said, as of now, the overall funding shortfall for modernisation of the Delhi Airport stands at Rs 2,600 crore, but of this, Rs 1,800 crore would be bridged through the Airport Development Fee (ADF) being collected since last year.
After GMR’s pleas on funding shortfall, the government had permitted it to charge every departing domestic passenger Rs 200 and every international passenger Rs 1,300.    

In May this year, DIAL sought permission to extend the period of this levy by a year, which is when AERA decided to appoint cost auditors.

On its part, AERA has already said that the airport levy should be withdrawn by March next year, instead of the earlier deadline of 2012, citing greater revenue generation through commercial property development at the airport in the interim.

The ministry official said as per current projections, only Rs 500 crore would be generated in 2009-10 but this amount should increase significantly next year because of T3 and the model being used to generate revenues though commercial activities at the new terminal.

The ministry official said that total passenger traffic projected for DIAL in 2009-10 is between 28-29 million when the total airport capacity (after T3 is commissioned) would touch 60 million passengers.