Case Study: Bangalore International Airport (BIAL)

Some Key Terms of the Concession Agreement for BIAL Greenfield Project
Government
Grant concession to build, operate airport; Close the existing airport; Grant exclusivity within 150 km; Allow the consortium to carry out business related to airport activities (including non-aviation); Allow the consortium to select service providers (e.g. cargo, ground handling, catering); Guarantee no discrimination; Disclaim explicitly any risk of project; No financial guarantees given.

Private Consortium Open new airport within defined time frame

Operate the airport according to high international standard Develop / expand the airport according to demand Pay concession fees to Government

Take all risks

Case Study: Bangalore International Airport (BIAL)

Key Success Factors

Strong private consortium; Local and central government act as one entity and as one access point; No major change during construction; Reasonable concession fee, better obligation to future investment; Tariff under control of neutral regulator with clear guidelines; Airport is just one link of the air traffic infrastructure. Allied infrastructure (railways, roads, ATC etc.) should be part of airport project; Airport city / economic zone planning to strengthen attraction / viability of airport

Project comprises a 6-lane bridge over Yamuna river and approach roads costing Rs. 4.00 billion. Flyover at Ashram road junction required for smooth traffic flow from the project delayed. Traffic significantly lower than appraisal estimates. Average daily collection is Rs. 0.27 million(Debt service liability about Rs. 1.70 million/day) Lesson: Co-ordinated development of linkages and accurate traffic estimation key for project success.

By-pass on NH-6 developed by Sancheti group on BOT basis

Toll-free alternative available to local traffic. Project scope includes a river bridge and ROB. NHAI provided sub-debt and limited shortfall guarantee. Project completed almost as per schedule. No local opposition to toll collection. Project in operation for two years.

Lesson: Being first project, project reached closure with help of financial support from NHAI.

First BOT bridge project in Kerala State; GCDA acted as the sponsor authority Other agencies involved - KSIDC, CPT, Cochin Corporation and PWD Project was offered on a BOT basis and bid for concession period. At bidding stage Traffic studies, technical studies & draft concession agreement was given to bidders Project has been awarded to Gammon India Lesson: Initial investment on project preparation yields high returns

By-pass on NH-47 developed by L&T on BOT basis

Toll-free alternative available to local traffic Subsequent to the award of the project, scope enlarged to include strengthening of Attupalam bridge before the by-pass Toll-free alternative no longer available Hence local opposition to toll collection Earlier, willingness to pay did not capture such an event

Lesson: Project structure should be sensitive to local traffic

Capacity building of government / public agencies Interest and capacity among private sector operators Building awareness for pay for use principle among consumers and communities within society Addressing financing issues of lenders and investors Ensuring adequacy of services at affordable rates to the urban poor

The Challenge is to make the behemoth move..