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Airport ground handling privatisation hits a snag

Puja Mehra

The privatisation of the Rs 6 billion ground handling operations of the five international airports in the country has hit a firewall.

After awarding the tenders and issuing the offer letters to five private companies, the government now says that they will have to get clearance from the home ministry, the Foreign Investment Promotion Board and the commissioner of security for civil aviation -- within 60 days of the issue of the offer letter.

The new condition was imposed by the civil aviation ministry Thursday and will mean cancellation of the contracts of the companies unable to get the clearances. "The offer letter was a conditional one," officials said.

The private companies, however, see these new conditions as an effort to stymie the privatisation effort and protect the turf of the national carriers, Air-India and Indian Airlines.

Offer letters were awarded by the Airports Authority of India, at its board meeting on May 11, to five private parties including Interglobe, Cambata, Bhadra International, GroundGlobe and Worldwide Fleet to begin ground-handling services at five international airports-in Bombay, Delhi, Calcutta and Madras.

The meeting was contentious: AAI decided to award tenders to the second highest bidder, Interglobe, because the first bidder Samarnath Aviation (which had bid for all the airports) had withdrawn.

Some members of the board questioned this decision because according to the terms of the tender, if even one bidder withdrew, bids had to be called afresh.

However, this was rejected by the majority which argued that as the second bidder's bid was substantially higher than the rest, the value of the bids would increase across the board, resulting in enhanced annual revenue for AAI. But there was some acrimony over the issue with one member later saying that he did not sign the minutes and another leaving even before the decision was taken.

Meanwhile, even at this meeting, the issue of getting clearances from the home ministry was not mentioned. When Business Standard spoke to AAI chairman DV Gupta in May-end, he had made it clear that security clearances were neither an issue nor a requirement, because some of the private parties issued offer letters had been involved in ground handling operations in India "for decades."

The problem apparently boiled down to one bidder -- Dnata -- a 30 per cent equity participant in Interglobe having former Pakistan Air Force officers as its employees.

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