Hijacked to Kannur

Written by M Sarita Varma | Updated: Jul 6 2010, 04:09am hrs
The Kerala government is gearing up to invest the hard-earned profits of state PSUs in a greenfield international airport project. At least 23% of the Rs 1,000-crore estimated project cost of Kannur International Airport Phase-I will be sourced from the growing profit-kitty of the public sector enterprises.

It should be a win-win situation for both the airport project and the public sector units, as infrastructure projects always yield high returns to investment in the long term, says state industry minister Elamaram Karim.

The ambitious aviation infrastructure project is pledged to be in the public-private partnership mode, but the way the equity-pattern is charted out, it looks the private sector would be squeezed for space on the airport board.

In a meeting in June, Chief Minister VS Achuthanandan, ex-officio chairman of the board of directors, had said 51% equity of the proposed airport company would be with the state. Of this, discounting the states 26% direct equity, 23% would be from profit-making PSUs and 2% from state-controlled institutions. That would leave 49% open for the private investor, in principle. Only in principle, because cash-flushed co-operatives in the state will get the first priority to subscribe to the 49% portion.

The private sector will get a chance only in the unlikely situation of too few co-operatives warming up to the offer. Several private groups had shown interest in partnering the project, including Leela Hotels, with technical support from Singapore Changi International Airport.

The political strategy behind the move is to safeguard the profits of PSUs from the intervention of political coalition coming to power after the next Assembly elections, due within a year.

After a strenuous feat of fine-tuning production, capital, marketing, manpower and strategic tie-ups, Keralas industry PSUs had clocked a collective working profit of Rs 239.75 crore in 2009-10, up from the previous years Rs 222 crore. In 2005-06, they were black-tagged as loss-makers to the tune of Rs 70 crore. By next year, we expect all 37 PSUs to make profits, says K Padmakumar, secretary, Restructuring and Internal Audit Board (RIAB), Kerala.

It is not clear how the government will sustain the profitability of these PSUs over the long term.

The states star PSUs--in terms of operating profits for 2009-10--are Kerala Minerals & Metals (Rs 90 crore), Malabar Cements (Rs 31 crore), Kerala State Industrial Development Corporation (Rs 25 crore), Transformers & Electricals Kerala (Rs 23 crore) and Travancore Titanium Products (Rs 21 crore). While one of the chief executives was edgy about being forced to pump money into a fancy business, nearly all others found the proposal attractive.

The state PSUs are counted to bring in as much as Rs 230 crore to the airport company over two years.

As much as 916 acres had been acquired for the project and another 368 acres would be acquired before July 15. The airport, at 12,000 feet length, would have one of the longest runways in India, according to V Thulsidas, former Union civil aviation secretary and managing director, Kannur International Airport Project.

Preliminary work on connectivity to the airport is already on. Various state departments are working on greenfield roads from Kannur to the airport and the airport to Wayanad and Bakel, two popular tourist spots, says Venu Vasudevan, principal secretary (tourism), Kerala.

The feasibility report of the airport counts on hosting at least 15 lakh passengers every year.

One undeniable edge the Kerala government enjoys is in the way it built the countrys first greenfield airport through public-private partnership ten years ago and set it on an early profit curve. While Cochin International Airport Ltd was steamed by NRI funds and initiatives, the Kannur airport is likely to have its board of directors jam-packed with government nominees.