Steady Progress: Greenfield airport development to be a major game changer

Greenfield airport development to be a major game changer

In view of the critical capacity crunch at major airports across the country, the development of greenfield airports comes as a breather for the sector. The government’s push towards greenfield airport development is reflected in the recent award of big-ticket greenfield projects such as the Navi Mumbai, Mopa and Jewar airports. Overall, the 18 greenfield projects that have been granted in-principle approval and another five that have been accorded site clearances amount to a capital expenditure of about Rs 300 billion. However, a cause for concern is the fact that several greenfield airport projects remain in limbo. A quick resolution of issues impeding their development is therefore necessary to ensure continued progress in this area.

Mopa International Airport: Completes financial closure

In August 2016, GMR Airports Limited secured the contract for the development and operation of the greenfield Mopa airport in Goa. The concession agreement for the project has been signed with the state government.

Further, in July 2017, GMR Goa International Airport Limited signed a common loan agreement/debt facility agreement with Axis Bank Limited for airport development, thereby achieving financial closure for the project. The entire debt of Rs 13.3 billion has been underwritten by Axis Bank on a long-tenor door-to-door basis of 18 years on competitive terms. Meanwhile, according to reports, Philippines-based Megawide Construction Corporation has pre-qualified as a contractor for airport development and will participate in the upcoming tender process slated for end-September 2017. Pre-construction works on the project have commenced and as per the concession agreement, GMR has to complete the construction of the airport by May 2020.

Navi Mumbai airport: In need of a push

Another major greenfield airport project, the Navi Mumbai International Airport is also moving forward, though at a much slower pace than the Mopa project. In February 2017, GVK-led Mumbai International Airport Limited (MIAL) emerged as the successful bidder for building, developing and operating the Navi Mumbai International Airport. However, as of August 2017, the Maharashtra government is yet to approve and finalise the winning bid, the validity of which expired on August 13, 2017, and issue the letter of award. The City and Industrial Development Corporation (CIDCO), the nodal authority for the project, has stated that the validity of MIAL’s bid will be extended for another 180 days as it awaits approval from the project management and implementation committee of the state government. The difficulty in shifting villagers due to the rains is being cited as the key reason for the delay.

In July 2017, the state government decided to hand over 250.07 hectares of forest land in Raigad district to CIDCO for Phase I works of the airport. Of this, 108.61 hectares of land is under mangroves while the remaining 141.46 hectares is reserve forest land.

Meanwhile, CIDCO has forwarded the trial result of the blasting of Ulwe hill to its consultant, the Central Institute of Mining and Fuel Research, for approval to go ahead with the blasting work that will make way for the runway and the new airport. This is a major component of around Rs 70 billion of Phase I of the Rs 160 billion airport.

It is only after the state government issues a letter of award to MIAL that a special purpose vehicle can be formed to execute the project. Thus, in view of the progress of airport development works, the state government’s completion target of 2019 seems difficult to meet.

Jewar airport: Development picks up pace

In a major development, in June 2017, the Ministry of Civil Aviation (MoCA) granted inprinciple approval for the construction of the Jewar greenfield airport in Uttar Pradesh. The airport, being developed on a public-private partnership basis, will be located 72 km from Delhi airport, and will serve as an alternative to the overburdened Indira Gandhi International Airport. The development of one runway will be undertaken in Phase I and three more runways will be developed in subsequent phases. Once complete, the airport is expected to cater to 30 million passengers per annum (mppa)-50 mppa.

The consultant for the preparation of the techno-economic feasibility report for the project is likely to be appointed by October 2017, with the process of selection by the Yamuna Expressway Industrial Development Authority (YEIDA) already having commenced. The project is likely to be operational by 2021-22. Meanwhile, YEIDA has sought funding of Rs 2 billion to expedite the land acquisition process for the airport. The funds have been sought from the budgetary provision of Rs 4 billion allotted by the state government in its 2017-18 budget.

Update on other key greenfield airports on the anvil

Works at the Shirdi, Kannur and Pakyong greenfield airports are also nearing completion, and are expected to give a major boost to the segment. With more than 90 per cent works completed, Pakyong airport is expected to be commissioned by end-2017. Notably, the airport’s completion has faced inordinate delays owing to issues such as land acquisition, poor material supply and labour management, heavy rains, etc. Recently, the Airports Authority of India (AAI) invited expression of interest bids for carrying out the 3D laser scanning survey for the airport.

Meanwhile, Shirdi airport is expected to be commissioned by October 2017. The Maharashtra Aviation Development Corporation (MADC) has submitted a task action plan to the Directorate General of Civil Aviation (DGCA), moving a step closer to the airport’s inauguration. The MADC has worked on most of the corrective measures highlighted during the joint inspection conducted by the DGCA and AAI in July 2017 and has sent a task report for the same, and is hoping to receive the required clearance by September 2017.

With regard to the development of Itanagar airport, the state government has approved the proposed Holongi site and is expected to undertake land acquisition for the project soon. AAI has prepared a draft master plan for the same and will proceed accordingly.

Further, the Steering Committee on Greenfield Airports has recommended in-principle approval to three projects in Andhra Pradesh – the Bhogapuram, Dagadarthi (Nellore) and Orvakal (Kurnool) airports. Besides, the MoCA has granted permission to the Telangana government for developing an airport at Kothagudem while AAI has granted in-principle approval for the proposed site at Purandar for the greenfield New Pune International Airport and for Orvakal airport. Package I works of Orvakal airport have been awarded to KCVR  Infra Projects Private Limited and the project is likely to be complete by May 2018.

In August 2017, AAI emerged as the successful bidder for the development, operation and maintenance of the Bhogapuram greenfield international airport. The authority has offered a revenue share of 30.2 per cent to Bhogapuram International Airport Corporation Limited (BIACL). BIACL will now submit the details of the bid evaluation along with the financial bids and respective offers made by AAI and its competitor, GMR, to the government. The project will be awarded once the state government and state cabinet accept the offer. Besides, environmental clearance has been granted for the development of Phase I works of the project.

Meanwhile, the Kerala state cabinet accorded its approval in July 2017 for the Cheruvally estate site for the Sabarimala greenfield airport project. As per the approval, the airport will be spread over an area of 2,263 acres.

Multiple challenges

While the government’s planning and intent with respect to greenfield airport development is encouraging, the ground reality presents a dismal picture. Unless the various challenges in project implementation are addressed, the segment will be unable to realise its potential.

In the case of greenfield airport development, the issues related to land acquisition and resettlement and rehabilitation are the most prominent ones leading to cost escalations and thus stressed bank balance sheets. This has been seen in the case of projects such as the Navi Mumbai, Chakan and Sriperumbudur airports. Land acquisition issues have further resulted in a general diffidence on the part of banks to take fresh exposures in greenfield airport projects.

Besides, the process of obtaining clearances also needs to be fast-tracked. As airport development has to be in conformity with the environmental regulatory framework, meticulous planning has to be done well in advance so as to prepare the necessary documentation including environmental impact assessment and environmental management plan reports.

Positive outlook

Amid all the challenges, greenfield airport development in the country is undoubtedly at a take-off stage, as reflected in the robust pipeline of projects. Further, several new airport projects have been announced under the government’s ambitious Regional Connectivity Scheme, thus lending optimism to this segment. The timely development of these airports will go a long way in strengthening the sector’s infrastructure by overcoming the existing bottlenecks and supporting the government’s multimodal logistics hub initiative. The airports will also play a big role in facilitating India’s journey towards becoming the third largest aviation market globally by 2020.