Stuck on the runway

The government is caught in a cleft stick on the matter of privatising the country's two main airports at Delhi and Mumbai. It does not like the results of the tendering exercise so far (only two qualifying bidders for two airports), but does not know how to backtrack or modify the exercise without losing credibility with all concerned""and with the inevitable by-product that the expansion and upgrade of these two transport hubs, already choked to capacity, will be delayed. So the empowered group of ministers is reluctant to go forward, and unable to step back. It therefore asks the inter-ministerial committee of officials to come up with clear recommendations. When the results of that exercise prove unsatisfactory, the matter is referred to the committee of secretaries""which, being a bunch of generalist bureaucrats, is not the best equipped to evaluate a tendering process. Now the matter has been referred to a new panel, two of whose members know nothing about airports, but (importantly) one of whom has handled large infrastructure projects. Along the way, all manner of allegations of bias have been made""and some of these have been referred to the attorney general, who has said that everything is fine. Still, the fear is that unsatisfactory performance by the successful bidders (and who can rule that out?) will cause some mud to stick posthumously""as has happened in the case of the privatisation of Delhi's power distribution system.

It is obvious at this stage of the exercise that the tendering process has been less than perfect. The most serious flaw (handing over excessive real estate to the bidders) was fortunately caught in time and corrected. As for the rest, the government did not reckon on the possibility that there would be no real competition at the financial stage of the bidding process. Nor did it allocate grading points to sub-categories within each parameter for the technical bid evaluation""creating room for a level of subjectivity that has become a matter of debate. And since the ratings have been done by external consultants, the government now wonders whether theirs should be the final word""especially since some of them have had prior business dealings with those who are said to have made it past the first hurdle of technical evaluation.

There are points and counter-points on all these issues, and the ministerial group is left with the unhappy task of focusing on whether the tendering process has been fair and competent. The problem is that, even if the committee of secretaries, aided by its panel of experts, certifies just that (the opposite would truly make the mess hit the fan), there will still be only bidders for two airports. A possible option at that stage would be to say that, since only two bidders have qualified, the government will go ahead with privatising just one airport, and re-tender for the second. Between the two, it would be better to go ahead with Delhi, and to change one crucial condition in the Mumbai tender, which says that the successful bidder there will get preferential treatment in case a second Mumbai airport is to be built. The tender should in fact have said the opposite: that in the interest of competition, whoever gets control of the existing Mumbai airport will not be allowed to bid for a second one that serves the city. Imagine mandating local monopolies, instead of the opposite!