Flights of fancy

Written by Ajay Sukumaran | Updated: Jul 24 2013, 19:11pm hrs
Karnatakas ambitious plan to connect its smaller towns with air services in the hope of attracting industrial investments seems to have hit an air pocket as work on several regional airports across the state has been stalled for months. These greenfield projects were part of a flurry of infrastructure investment proposals that the state had approved as public-private partnerships three years ago, but have been dogged by obstacles.

The development of minor airports was high on the agenda of the then government when it wooed industrialists to participate in a Global Investors Meet in 2010. While project development agreements were signed with private promoters for the construction of minor airports at Gulbarga, Shimoga, Bijapur, Bellary and Hassan, the government also planned at least 13 airstrips at district headquarters in a bid to boost industrial growth and tourism. Karnataka currently has two international airports located at Bangalore and at Mangalore while it has smaller airports run by the Airports Authority of India (AAI) at Mysore, Hubli and Belgaum.

The minor airports were planned across central and northern Karnataka, a region that is less developed than the rest of the state. Bellary, in particular, was seen to hold potential with the government hopeful of transforming the iron-ore rich region into a steel hub besides its tourism potential.

Work on the Gulbarga and Shimoga airports has now been stalled for months with the project promoters approaching the courts to settle differences between them. In 2008, the two airports had been awarded to a consortium led by the Hyderabad-based company Maytas Infra, whose subsequent financial troubles led to its acquisition by the IL&FS group. The projects were revived in 2010 through a joint venture between IL&FS Transportation Networks Ltd (ITNL) and Rahi Aviation Holdings. The R186 crore Gulbarga airport has achieved financial closure but work has come to a grinding halt while the R194-crore Shimoga project has been stalled for lack of funds, according to Rahi Aviation Holdings, which has moved court against its joint venture partner with several allegations.

The projects were originally slated to be operational by mid-2012. While presenting the maiden budget of Karnatakas ruling Congress party earlier this month, state chief minister Siddaramaiah had said that the two airports would be completed this fiscal, a deadline that looks unlikely considering the obstacles. The dispute between the stakeholders is an internal matter of the consortium.The government has already directed the developers to sort out the differences and complete the project early as per the Project Development Agreement, said Karnatakas infrastructure secretary, Rajkumar Khatri.

Meanwhile, the two airports in Bellary and Bijapur are also stuck as the Chennai-based infrastructure developer, Marg Ltd, wants to pull out of the projects. We have asked the AAI for its interest in developing these airports, said Khatri. The Bellary airport had hit a dead-end for not having a contiguous parcel of land after the Karnataka High Court quashed the government notification for land acquisition on local farmers plea.

Experts, however, are sceptical about the financial viability of these regional airports considering that several small airports maintained by the AAI are currently not operational.

India is not ready for regional airports till such time that we put in a framework which makes them financially viable, said Amber Dubey, partner and head-aerospace and defence at KPMG. Minor airports would need a low-cost approach, starting with a DGCA-approved low-cost design of the airports, free land and utilities, free security cover by local police, transferable development rights (TDR) for private developers, tax breaks and monetary support in terms of seat underwriting for airlines. While local air taxi operations need to be encouraged, there is also a need to bring in a seat credit system where the air taxis would be able to trade seat capacity with larger carriers, something on the lines of carbon-credits, he added. Regional airports require regional air taxis. They cannot fill up 180-seater aircraft day after day.

While the Karnataka government expects the AAI to make a capital investment of R150 crore in existing airports in Hubli and Belgaum, it plans to bring out a minor airport policy to utilise the existing idle airport infrastructure in the state. The basic infrastructure for undertaking airline operations in the state is in good condition. It is proposed to identify a private airline operator for commencing flight operations on select routes, through a transparent bidding process, for whom certain concessions will be given from the government, Siddaramaiah said in his recent budget presentation.