churumuri

Will airport in Hosur steal Bangalore’s thunder?

The new Bangalore International Airport will open at the crack of 23 May 2008. That’s official.

And the existing HAL airport will close at the end of 22 May 2008. That’s official, too.

This, despite mounting public opinion to keep the old airport open. This, despite the High Court of Karnataka directing the Union of India, the Airports Authority of India, and Bangalore International Airport Limited (BIAL) to renegotiate the terms of the contract which barred airports in a 150-km radius of Devanahalli. And this, despite the Supreme Court of India endorsing the HC’s call for renegotiation.

What kind of a case was made by the “State” during the renegotiations is not known since there are reportedly no minutes of the two rounds of meetings. But the last-minute demands and Public Interest Litigations (PILs) to retain the HAL airport for short-haul flights have raised a variety of questions on those asking them, their motives, their logic, and their business ethics.

V. RAVICHANDAR, a former member of the Bangalore Agenda Task Force (BATF), responds to criticism on churumuri.com on the backpedalling on the closure of the old airport.

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By V. RAVICHANDAR

First, a confession. Till November last year, I was for honouring the sanctity of the contract with Bangalore International Airport Limited (BIAL) and closing down the old HAL airport.

I have since revised my view and I shall present my case for being a “turncoat” shortly.

A disclaimer: asking for HAL airport to remain open does not mean one is anti-BIAL. BIAL is the future and is needed for the city. But HAL can co-exist with BIAL being compensated.

These are the reasons why the HAL airport should remain open even when the BIAL airport becomes functional (and none of them is about connectivity at all) :

# Future proofing is in the public interest: The capacity of BIAL is 12 million passengers. We are currently at 10.5 million passengers annually and we will reach current capacity by middle of 2009. With one runway the capacity can go to 14-15 million passengers, a number that will be reached by mid-2011. The new runway (if it does come up) will not be before 2014 (admitted by BIAL and the government). So expect shortage in capacity between 2011-14. I am not even referring to cargo which is reasonably messed up in the short term for the next year at BIAL.

# Hyderabad isn’t Bangalore: One argument being heard for the closure of HAL airport is that Hyderabad closed Begumpet airport, so what is the big fuss?

The situation in Hyderabad and Bangalore is not comparable. Hyderabad has a current demand of 6.5 million passengers and an airport with a capacity of 12 million passengers.

GMR has built the Hyderabad airport on a Memorandum of Understanding with the government of Andhra Pradesh; BIAL has built the Bangalore airport on a contract obtained after a global tender floated by the government of Karnatka.

# Keep working assets alive: For a rapidly growing economy like India’s, conserving working infrastructure assets makes sense (I do sound like Prakash Karat here). Closing down a working asset especially when it is known that we are going to run into a capacity constraint seems a silly thing to do.

And spending Rs 4,000 crore of public money on a high speed rail link from KSCA for a Rs 2,220 crore airport project is questionable when alternatives exist. And this spending for the fat cats is not going to go down well with aam aadmi.

# Infrastructure monopoly isn’t good: A private sector monopoly in the infrastructure sector is not in the public interest particularly in the absence of a strong regulator. As it is, in Hyderabad, two-wheelers are not allowed into the new airport and a passenger cannot take a private taxi not licensed by the Hyderabad airport. Do we want that situation here?

I think a duopoly will keep both parties honest in the interest of citizens. Two airports will strengthen State competitiveness, investments, job creation, etcetera.

# Tamil Nadu will steal Bangalore’s thunder: Closing HAL airport will be a self-goal. Expect Tamil Nadu to announce a Hosur airport in due course post final closure. And expect that to join Hogenakal as an issue sometime down the line.

Hosur may be within the 150 km radius of Devanahalli, but the compulsions of coalition politics can move mountains in our country. As it is, the Sitaram Yechuri panel has said the 150 km radius clause should be scrapped, and airport developers should accept realities of India, instead of expecting to be given a free run.

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The contract with BIAL is not cast in stone.

For example, in a recent contract for Peru airport, 70-odd conditions were renegotiated.

The Public-Private Partnership (PPP) models are imperfect and they are being honed with each experience.

The global tender when it was first floated for BIAL did not have the closure of HAL airport as a promise. It was in 2004, just before the concession agreement was signed, that BIAL insisted on it. And the Ministry of Civil Aviation agreed.

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I realize a suggestion such as keeping HAL airport open at this juncture has consequences. Let me deal with them:

# It is not my case that HAL be kept open and BIAL can take a walk. BIAL is in the driver’s seat with the contract. I am for users of HAL airport compensating BIAL on terms to be decided—the general public should not be made to pay for it.

I think market can decide the demand and adjust supply accordingly. For instance, the fare to Bombay from HAL airport can be Rs 5,500 and from BIAL to Bombay, it fare can be Rs 4,200. The difference is given to BIAL. This can be decided by auctioning slots too. BIAL could be made a shareholder in a HAL airport Special Purpose Vehicle (SPV).

# A point that is made is that renegotiating the terms of the contract with BIAL will hurt PPP. I don’t think so. Business will come where money is to be made and India is gold rush territory. It will suffer if there is arbitrariness in the decision to keep HAL open. If there is compensation to BIAL, then rule of law applies.

# BIAL claims they will make huge losses and folks have bid at the airport expecting a monopoly. A public hearing on finances should help get a sense of the “loss”. In their original projections, they expected less than 7 million passengers this year. If it is proven BIAL will be financially devastated, then HAL airport should not be kept open.

Finally, I repeat it is not about connectivity and travel time to BIAL which will be a hassle in the short term. It is about a few other issues I have tabled. You may or may not agree.

I rest my case.

(V. Ravichandar is chairman and managing director, Feedback Consulting, a research based consulting firm)

Photograph: Monica Mascarenhas Prabhu / BIAL Communications

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