Letter to Minister of Commerce & Industry and Civil Aviation – Trivandrum Airport

Dear Shri. Suresh Prabhu ji,

I would like to seek your kind urgent intervention to direct the concerned authorities not to provide further with the bid finalization and halt the issue of letter to highest bidder to develop Thiruvananthapuram International Airport and instead allow the State Government designated entity that has participated in the bid the right of first refusal without range parameter to match the highest bidder to take over and run the airport on fifty year concession.

As you may recall that I had in my earlier letters informed that Thiruvananthapuram International Airport has around 635 acres of land including land given by State Government, the erstwhile Travancore State and also land acquired by the State from to time and transferred free of cost to Airport Authority of India.
In 2005, sanction was accorded for the transfer of 23.57 acres to AAI free of cost for the construction of international terminal subject to the condition that in the event of the AAI structured into a company for any reason or if a SPV is set up for the Trivandrum International Airport then the value of the land transferred to AAI would need to be reflected as Government of Kerala’s share capital and/ or in any other appropriate financial instrument mutually agreed up on.

I had also brought to your kind attention in my earlier letters that Government of Kerala has the demonstrated adequate experience in promoting/sponsoring SPVs for the construction and operation of two green field international airports in the State.

I had even suggested that the Ministry of Civil Aviation may constitute a committee with Secretary, Civil Aviation, Chief Secretary, Government of Kerala and Chairman, Airport Authority of India to look at various options and business models under which the Thiruvananthapuram International Airport is formed as an SPV for operation and development where the land value of the land acquired and given by Government of Kerala free of cost be treated as equity investment and the investment made by Airport Authority of India may be valued and converted as its equity.

In response to my letter, Union Civil Aviation Secretary had requested the Chief Secretary Kerala to make presentation before the Empowered Group of Secretaries (EGoS) headed by CEO NITI Aayog on December 4, 2018 explaining the background and various options suggested by Government of Kerala.

During the meeting, Chief Secretary and Principal Secretary Transport made a presentation explaining the background and the extent of public funds spent by the State Government for land acquisition and land given free to the Airport Authority of India and drew attention to the written assurance given by the then Union Civil Aviation Secretary in 2003 that if and when decision is taken induct private sector into the management of Thiruvananthapuram airport, Government of India would consult the State Government taking into account the contribution being made by the State Government towards acquisition of additional land for the airport and could even think of an SPV with State Government and financial institutions as partners and in that case adjust State Government’s contribution in the SPV against the cost of land acquisition fully or partially.

Chief Secretary had presented options as a way forward. The one option being that Airport Authority of India handing over the Airport to an SPV to be formed by the State Government in tie up with strategic partner who is a proven operator at international level, to operate maintain and develop on a nominal lease for 99 years, upon payment of value of airport as a going concern as assessed by an independent valuer. The second option suggested was that the SPV to be formed by the State Government may be allowed to participate in the bid process with the right of first refusal (RoFR).

The minutes of the 2nd EGoS received by the State Government, showed that the EGoS while recognizing the expertise demonstrated by the State in the airport sector, has decided to offer two options as a special case in respect of PPP and have requested the State to indicate the choice latest by 11.12.2018.

“Government of India will invite Chief Secretary and other officials of Government of Kera/a as special invitees for the purpose of participating in the selection process for the PPP partner for Trivandrum airport so as to address concerns/ interests of the State Government Or
To proceed with the alternative (b) offered by GoK with the stipulation that the entity!SPV in which GoK has a direct equity of 26% or more is eligible for right of first refusal provided that the SPV’s bid falls within the range (plus or minus) of 10 % of the highest bid. There shall also be 5 years equity lock­in-period for the GoK in the SPV”.

Thereafter I had informed that though the EGoS held deliberations there is no clear determination to resolve the issue and reiterated the State Government’s position and requested to kindly accept either of the two options our officials had presented in the EGoS meeting.

I would again requested that as regards the Option 1 suggested by the State Government the lease period may even be reduced to 50 years instead of 99 years as was indicated in the EGoS meeting, on same terms and conditions without bidding process. And if that option is not agreeable then the AAI may offer the SPY promoted by Government of Kerala the right of first refusal (RoFR) without any range parameters for matching the highest bidder in the RFP itself.

On 12th December, we were informed that if State Government/State
Government Owned Entity bids for the RFP it would be given right of first refusal with a range of 10 % to match the highest bidder. On 14th December 2018, AAI issued RFP indicating that the last date for submission for bid was 14.02.2019. It was surprising to note that in the RFP there was no condition for prior experience of operating Airports and all that a bidder needed to have only experience in infrastructure projects. Constrained by the tight timelines, State Government to protect the interest of the State and the land given to AAI, designated KSIDC to participate in the bid process.

It is seen that ADANI group that has no experience in Airport operations has emerged as the highest bidder in all the six airports for which bid process was completed. In the case of Trivandrum Airport, State designated KSIDC has come second with the bid amount of Rs 135 as against Rs168 of ADANI.
As you are aware there is huge public opposition and resistance to the privatization of the Trivandrum Airport and more so now when it is known that a single private entity has emerged as the highest bidder for all the six airports. A shade of distrust surrounds the process.

Given the fact the State Government had even acquired land and gave a significant parcel of land free of cost to the Airport Authority of India on condition that Government of India should consult the State Government before inducting the private sector into the management of the airport and that the value of land handed over to AAI would be converted into equity of State government in the event of airport being structured into a company or an SPV set up to manage the airport, I would request that the State designated entity be allowed to the match the highest bidder.

Such an action would ensure that the interests of the State and Union Government are protected and State designated KSIDC would operate the airport including future expansion with support of the State Government.

In any other situation it would be extremely difficult for the State Government to commit state support given the public opposition and resistance to the selection of the private bidder for the operation of the Trivandrum Airport.

I would therefore request for your kind intervention to halt the further processing for the issue of letter of offer to the highest private bidder and allow the state designated KSIDC the right of first refusal to match the highest bidder.

With regards,

Yours sincerely,

Pinarayi Vijayan