BOTH the Finance Ministry and Niti Aayog had filed record-breaking objections to the 2019 airport bidding process, which were overturned, clearing the way for a full cleanup of six airports by the Ahmedabad-based Adani Group, they show. the records accessed by The Indian Express. .
This becomes important given that on August 31 last year, the Adani Group signed another agreement to acquire a majority stake in the country’s second largest airport, in Mumbai: the Airports Authority of India authorized this acquisition on January 12 .
Aviation is a sector that the Competition Commission of India has flagged for market dominance review. Niti Aayog, who ran a private financial zone on the runway, raised red flags before Adani swept 6 airports in Mundra, the Adani Group is today the largest private developer in the country in terms of the number of airports managed; and the second largest, in terms of passenger traffic, in a span of just 20 months.
The seven airports, Ahmedabad, Mangalore, Lucknow, Jaipur, Guwahati and Thiruvananthapuram, along with Mumbai, together handled 7.90 million passengers during the last fiscal year (2019-20). This translates to almost a quarter of the domestic air passenger traffic of Rs 34.10 crore.
In addition to this, Mundra airport, to which commercial flights began in 2018 under the government’s regional connectivity scheme, has also been cleared to become a full-fledged international commercial airport. Following the agreement with GVK, Adani also has a majority stake in the upcoming Greenfield airport in Navi Mumbai.
Records show that before the Ahmedabad, Lucknow, Mangalore, Jaipur, Guwahati and Thiruvananthapuram airports, the NDA government’s largest privatization program to date, were invited to tender, the Public Private Partnerships Evaluation Committee ( PPPAC) of the Center discussed the recommendations of the Ministry of Civil Aviation. proposal for the process on December 11, 2018.
During the discussions, according to the minutes of the meeting that The Indian Express had access to, a note from the Department of Economic Affairs said: “These six airport projects are high capital intensity projects, so it is suggested to incorporate the clause that no more than two airports will be awarded to the same bidder taking due account of high financial risk and performance issues. Giving them to different companies would also facilitate competition by criteria ”.
The DEA note, dated December 10, 2018, to the PPPAC was sent by a director in the department’s PPP cell.
To bolster its argument, the DEA cited the precedent of the Delhi and Mumbai airports, where GMR, despite being the only originally qualified bidder, did not receive both airports, and also referred to the privatization of Delhi’s power distribution. . “In the case of the privatization of Delhi Power Distribution, the city was divided into three zones and handed over to two companies,” he said.
At the PPPAC meeting, according to the minutes, there was no discussion about this red flag raised by the DEA.
On the same day as the DEA note, the NITI Aayog also raised a separate concern regarding the airport tender. Said a memorandum prepared by the vertical PPP of the government’s key policy think-tank: “A bidder who lacks sufficient technical capacity may jeopardize the project and compromise the quality of services that the government is committed to providing.”
In response to this, the PPPAC, chaired by the then secretary of the DEA, SC Garg – the first objection note was, ironically, from his department – said that the EGoS (empowered group of secretaries) had already decided that “the experience prior to the airport is not a prerequisite for the tender, nor a post-tender requirement. This will expand competition for brownfield airports, which are already functional. “
Garg, who was transferred from the finance ministry to the energy ministry in July 2019 and is now an advisor to Andhra Pradesh’s chief minister YS Jagan Mohan Reddy, did not respond to inquiries on the matter.
One year after winning the tenders for the six airports, the Adani Group signed concession agreements for the Ahmedabad, Mangaluru and Lucknow airports in February 2020.
A month later, the Adani Group invoked a force majeure linked to Covid19 to seek a delay until February 2021 to take control of the three AAI airports, citing difficulties in the transition processes, particularly with regard to airport personnel. The AAI had asked the Group to take over the three airports in November 2020. Consequently, three of these six airports (Ahmedabad, Mangaluru and Lucknow) were handed over to the Adani Group in November 2020. The concession contract for the three other airports – Jaipur, Guwahati and Thiruvananthapuram – were signed between AAI and Adani Group in September.
Just under six months after requesting more time from AAI citing the Covid-19 pandemic, the Adani Group acquired a majority stake in the country’s second-largest airport in Mumbai and the upcoming Greenfield airport in Navi Mumbai from Hyderabad-based GVK. . Group.
During the bidding process for the six AAI-managed airports, the Adani Group outperformed its rivals, including seasoned players such as GMR Group, Zurich Airport and Cochin International Airport Ltd, in addition to other infrastructure players, by a large margin in each. of the six tenders, thus obtaining the rights to operate the six airports for a period of 50 years.
This is a departure from the privatization of the Delhi and Mumbai airports, where the concession period was 30 years, and AAI held a 26% stake in both airports.
Incidentally, the government’s first goal of handing over the airports to the Adani Group in November 2019 coincided with an authorization from the Competition Commission of India for the group’s acquisition of a minority stake in Mumbai airport of two companies Bidvest and Airports Company of South Africa. (ACSA).
In its order, the ICC noted the nature of an airport’s “geographic monopoly” and said that the geographic market, in this case, “appears to be as narrow as each of the parties’ airports (ie Adani and MIAL) , as to provide or make use of any service at airports, the service provider / consumer must have access to the facilities / premises of the airport in question ”.
Establishing this, the CCI said that the presence of both parties in the same line of business was not likely to raise competition problems “since currently no other airport in which the Adani group has a stake operates in the vicinity of MIAL.”
Even when CCI authorized the purchase of a minority stake in Mumbai airport by the Adani Group, concerns raised by the Department of Economic Affairs that a single company had a significant stake in several key infrastructure projects were reinforced.
The GVK Group, which had signed an agreement with investors, including the Indian sovereign wealth fund IFRS, in October 2019 trying to prevent the Adani Group from entering the Mumbai airport, relented and agreed to cooperate with the Ahmedabad-based conglomerate in August. 2020.
On August 31, GVK Group signed an agreement to allow Adani Enterprises to acquire its stake in Mumbai Airport and Navi Mumbai Airport.
According to a notification from the CCI, the acquisition of MIAL by the Adani Group was “deemed approved”, as there was no overlap of deals offered by either party in the relevant geographic market. CCI’s notification was uploaded in September 2020. AAI, which owns 26 percent of MIAL, also approved the acquisition of the second largest airport in the country by Adani Group.
By the way, just a month before it decided to throw in the towel, GVK Group had to face the heat of multiple investigative agencies. On July 7, the Enforcement Directorate registered a complaint under Section 3 of the Prevention of Money Laundering Act (PMLA) against the GVK Group and its president GVK Reddy, his son GV Sanjay Reddy and some others, with based on an FIR filed by CBI against them on June 27. The CBI alleged irregularities of more than 705 million rupees in the development of the Mumbai international airport.
Emails sent to Grupo Adani and the Ministry of Civil Aviation received no response. Sources from the Adani Group said that the tender was carried out according to specific rules that followed “due process and due diligence.” When asked about the delay in taking control of the three AAI airports, they said it was due to “anticipated difficulties in transitioning airport staff and staff amid the pandemic.”
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