CAG rubbishes ministry objections on Delhi airport report

New Delhi: Officers at the Comptroller & Auditor General (CAG) have brushed aside charges leveled by the Ministry of Civil Aviation in a letter it wrote this June over the scathing report on Indira Gandhi International Airport.

In the letter, the Ministry had called the CAG report, which was tabled in Parliament today, full of inaccuracies and said that CAG’s audit will damage the Public Private Partnership (PPP)/Infrastructure development in the country. But CAG officials punched holes in almost every observation in the ministry’s June letter, which were repeated in a late evening press statement by the ministry.

So is the CAG being unnecessarily critical or did the ministry’s June letter come merely as a matter of routine and did not attempt to defend the airport concession agreement which was awarded when Praful Patel was the Civil Aviation Minister in 2006?

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[caption id=“attachment_421683” align=“alignleft” width=“380”]  Officers at the Comptroller & Auditor General (CAG) have brushed aside charges leveled by the Ministry of Civil Aviation in a letter it wrote this June over the scathing report on Indira Gandhi International Airport. PIB[/caption]

The ministry says that the calculation of presumptive gain from the commercial use of land at the Indira Gandhi International Airport (IGIA) is “totally erroneous and misleading” as it simply adds the nominal value of the projected revenue, without taking the net present value.

“In fact the net present value of the figure quoted by CAG is Rs 13795 crores only.”

It is also pointed out that the levy of Development Fee is under Section 22 (A) of AAI Act, 1994 and was in the knowledge of all the bidders prior to the bidding process, not a post contractual benefit provided to DIAL at the cost of passengers.

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“Further, the levy of the Development Fee has been upheld by the Supreme Court, which has already examined and rejected all the issues now being raised by CAG in its report.

“Speaking of the Ministry’s June letter, Deputy CAG A K Patnaik said that the response came late, much after the cut off date set by CAG. “The letter was received in June, which was much beyond the cut off date which had been communicated to them. Besides, the ministry’s response contradicted much of what it had said earlier, on the same report, in writing to us”.

He said much before the letter was written, the CAG had obtained written responses from the ministry on a draft report and had conducted the mandatory exit interview before submitting the report to the Government.

So what the Ministry said upto March this year is faithfully represented in the report presented today.

In the letter, the ministry said that contrary to what the CAG has said on dilution of revenue which would accrue to Airports Authority of India (AAI), the AAI would actually benefit by upwards of Rs 3 lakh crore because the concession agreement of the airport joint venture envisages 46% revenue share when equity participation of AAI is only 26%.

A senior CAG official said the report is merely pointing out that DIAL (the consortium which manages Indira Gandhi International Airport) created downstream subsidiaries and this is where revenue dilution has happened, not because of the concession agreement or any provision therein. This official also explained that on the issue of the Development Fee (DF), CAG had pointed out that the concession agreement for IGIA allows for project cost to be met through debt and equity and not through a DF.

“We did not address what the Supreme Court had addressed: whether the ministry of civil aviation is competent to permit DF”. The ministry, in its defence, has said that the tender process was transparent and upheld by the SC. On the issue of awarding airport land to the GMR led consortium for a period of 30 years and another 30 years - which has been roundly criticised by CAG - this official explained that nowhere in the world is a brownfield airport (which is already operational and is not being set up from scratch) is awarded for 60 odd years to the same developer.

In its defence, the ministry has also pointed out that all decisions taken with regard to the IGIA modernisation were approved by an empowered group of ministers and the Cabinet while alleging that its views have not been incorporated by CAG in its final report.

It has also said that DF was fixed by the Airport Economic Regulatory Authority and not by the ministry itself after an SC judgement. Denying any post-tender changes or benefits, the ministry has pointed out that the tender to modernise IGIA was awarded on the basis of highest revenue share (45.99 percent share of gross revenue of DIAL and 26 percent of all dividends) and not Rs 100 lease rent as alleged by CAG.