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Land acquisition delays may push Navi Mumbai airport take-off to 2017

Source : BUSINESS_STANDARD
Last Updated: Sat, Dec 22, 2012 18:55 hrs
People are silhouetted as Kingfisher Airlines' aircrafts are seen parked at an airport in New Delhi

Due to inordinate delays in land acquisition and securing environment clearance, among others, the second airport in Mumbai, the Navi Mumbai International Airport (NMIA), may not take off before 2017, according to experts. The first phase of the airport was supposed to be operational by end-2014 or early 2015.

More than the delays, it will be cost escalation that will hurt the project, said industry observers. The first phase of the project is pegged at about Rs 9,000 crore. Any further delays could push up the costs, experts warned.

While the project has got environment clearance - which took a good three years - it is still grappling with issues related to land acquisition.

Land preparation, planning and construction of phase-1 could require about 50 months, according to a report by the Observer Research Foundation, which quoted Ansgar Sickert, former India head of German airport company Fraport.

"The Navi Mumbai Airport is critical for the city and the Indian economy, but we do not seem to demonstrate the urgency required to complete it. The project is likely to be operational by 2017-18, subject to it being put on fast track," says Kapil Kaul of Centre for Asia Pacific Aviation.

Delay in land acquisition has also resulted in a lag in issuing request for qualification (RFQ) to shortlist bidders. The City and Industrial Development Corporation of Maharashtra Ltd (Cidco), the nodal agency for the development of the airport, has said it will issue the RFQ only after the land acquisition issue is sorted out. A major hurdle is the large tracts of mangroves, which will need to be removed for the construction of the airport. To do that, Cidco needs the approval of the Union forest ministry and the Bombay High Court. It can approach the high court only after getting a green signal from the Centre.

The shifting of power transmission towers about 5 km away from the airport site is pending. Plans for surface connectivity (by road and rail) to the new airport have also not been finalised.

"There is a lack of clarity and undue delay in the Navi Mumbai airport project. We have been talking with foreign companies for collaboration, but these companies too want to have a look at bid documents before taking any decision. They want some comfort,"' says a senior executive of a corporate house with interests in aviation. According to another executive, the bidding process and financial closure for the project could take up to an year.

The Navi Mumbai airport will be spread over 2,020 hectares and Cidco is yet to acquire 291 hectares, which are largely farm land. There is no agreement yet between Cidco and the land owners on compensation. Initially, the demand was for Rs 20 crore per acre, but that has now been given up. "Cidco is offering 22 per cent of developed land in return, but some farmers are asking for 40 per cent land. They know the land is a gold mine," said a government official alluding to high returns the land can fetch. Cidco has large vacant land parcels which it can develop and allot to farmers in compensation. "We are amicably trying to settle the issue. A decision should be taken by February 2013," he said.

Maharashtra Chief Minister Prithviraj Chavan has conceded that the land acquisition process is painful' and slow'. He, however, refused to indicate a time frame for land acquisition or completion of phase I. He said the back channel negotiations are on going on. "We are working on alternate compensation models and will achieve results," he added.

The quest for second airport for Mumbai goes way back to 1969 when studies by the civil aviation ministry suggested expansion of existing facilities and creation of new second airport to cater to future growth. Actual planning began only in the 1990s. In 2001, Cidco prepared the techno feasibility report and the project received an in-principle approval from Union Cabinet in 2007.

Zurich Airport and US-based ADC & HAS Airports Worldwide (which has tied up with Essel Infrastructure) have shown interest in Navi Mumbai airport. Fraport, which is looking to exit from Delhi airport, too, may bid for it.

According to Cidco estimates, pre-development work including land acquisition, rehabilitation of about 3,000 affected families, land reclamation, site preparation, and shifting of power transmission towers will cost about Rs 4,500 crore, half of the estimated cost of the first phase.

While Cidco will bear the pre development cost, there is no decision whether the same will be treated as Cidco's equity component in the project or will be passed on to the joint venture developing the project. Cidco also sought financial assistance from the Centre for pre-development costs, while developers, too, are requesting a viability gap funding for the project.

According to a Cico official, unlike road projects that depend on toll collection, an airport will have various revenue streams and, hence, need not depend on viability gap funding. However, in case the pre development cost is passed on to the joint venture, developers as yet do not know whether the selection criteria will be based on revenue-share to the government. "There is no information on funding options, but even if the cost of land acquisition is passed on to the developer, that cost will be recovered in form of higher tariffs,'' said a consultant.




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