Delhi International Airport Ltd (DIAL), the privately-led consortium that runs the Capital’s Indira Gandhi International airport, could be denying Airports Authority of India (AAI) massive revenues through a complex web of joint ventures (JVs).
In 2006, DIAL had won rights to run IGI airport for 30 years by pledging 46% of its revenue to government-owned AAI. According to the agreement between DIAL and AAI, DIAL should pay Rs 46 for every Rs 100 of revenue earned.
In reality, however, AAI may be receiving much less as many activities — food and beverages, cargo, ground handling, advertisements, fuel infrastructure, information technology, and ground power equipment — have been farmed out to 11 JVs through separate agreements with no role of AAI. As a result, DIAL doesn’t fully show revenues from these JVs, bringing down the amount of money to be shared with AAI.
In a confidential note, a copy of which is with HT, aviation infrastructure regulator Airports Economic Regulatory Authority (AERA) has told the civil aviation ministry of DIAL’s JVs.
“It has been alleged that various revenue streams are being sub-contracted to JVs specially created by DIAL on revenue-sharing basis,” AERA chairman Yashwant Bhave said in a letter to civil aviation secretary last month. “This reduces the revenue share of AAI.”
This, he added, “may have certain serious regulatory implications.” “DIAL has awarded these activities to various concessionaires via competitive bid process that has also been approved by the board of DIAL,” a company spokesperson said in an emailed response to HT. “In order to enhance the return to DIAL subsequently, DIAL has also chosen to participate in these concessions through a minority shareholding investment.”
In these joint ventures, DIAL’s equity ranges from 26% to 49%. This dilutes the share of revenues for AAI.
“There has been no loss of revenues to AAI because of these JVs,” Narayan Rao, DIAL’s president told HT. "There will be extra benefit to AAI through the JVs."
That might not be the case. In the duty-free shop joint venture, DIAL earns Rs 32 for sales of R100. DIAL shares 46% of this, that is Rs 14.72, with AAI and keeps the rest. In effect, on revenues of Rs 100, AAI earns Rs 14.72 --- less than one-third of what it should have earned.
Worse, these don’t show up in DIAL’s consolidated revenues. “…as is common accounting practice since these investments are minority shareholding they do not consolidate into the revenues of DIAL,” the spokesperson said.
“I had the matter examined,” Bhave wrote. “I am also given to understand that DIAL had, in 2007, proposed that the hospitality district should be developed through a JV - Delhi Aerotropolis Pvt Ltd (DAPL).