In an audit critical of the government, the CAG has found that Mumbai Airport was handed over to Mumbai International Airport Ltd (MIAL) with an agreement with terms virtually frozen for 60 years.
"Absence of review clause, thus, virtually allows MIAL the right to operate the airport for a period of 60 years with the terms and conditions frozen in the OMDA (Operation, Management and Development Agreement)," the report tabled in Parliament on Friday said.
While the implementation of the airport project was progressively delayed, scope of the mandatory capital project for the terminal building was revised and its implementation delayed by two years.
"Although AAI (Airports Authority of India) had the right to levy liquidated damages on MIAL, no communication urging MIAL to speed up the work was on record," the report said.
As a result, the project cost has more than doubled, from an estimated Rs. 5,826 crore in 2006 to Rs. 12,380 crore in 2011 on account of revised scope of work and delay project completion.
The cost escalations have largely been funded out of levying development fee (DF) on passengers. While DF amounted to about 29.19% of the project funding, the private partner GVK shared far less a burden at 7.6%.
"Thus, in this case, the financing risk has not been effectively transferred to the private partner," the audit report said pointing out that it resulted in higher airport charges for passengers.
In addition, MIAL enjoys Right of First Refusal (ROFR) on the second airport within 150 km from Chhatrapati Shivaji International Airport, Mumbai. "Allowing such ROFR thwarts competition and provides MIAL with a natural advantage on the second airport," the report said.