Bangalore airport financial closure seen in November

The government of Karnataka has proposed to the ministries of civil aviation and finance that they consider granting "the first right of refusal" to the Bangalore International Airport Ltd (BIAL). The government also expects the project to achieve financial closure by November.

The new clause will come into effect after BIAL completes 60 years of its operations. This includes the first 30 years of the contract to run the airport as well as automatic renewal for another 30 years.

Speaking to Business Standard on the review of the Bangalore Airport project by chief minister S M Krishna, in Bangalore on Tuesday, S Krishna Kumar, additional chief secretary-infrastructure, government of Karnataka, said, "The ministries of finance and civil aviation, in the last meeting of the working committee on August 6, agreed for extending the contract from 25 years to 30 years. They have also agreed for automatic renewal for another 30 years. Beyond this term, we have proposed that they consider granting of the first right of refusal to BIAL."

With the passing of the Airport Authority Act in the Rajya Sabha last week, the on-going talks for the commencement of work on the airport seems to have got a fresh lease of life.

Kumar said the state was hoping to sign the concessional agreement by the end of this month. "If the other agreements are also concluded in September, we can go for a financial closure by November. The actual signing of the agreement will however happen during financial closure. For now, we will only have a negotiated draft. The chief minister is confident that the November time table is achievable," he said.

On the step-in right of the Karnataka government in the event of default, Kumar said that the working group, on August 6, has also considered the final formulation.

"Thus far, in the event of default, the formulation was that the Centre should take over the airport. We have now said that the government of Karnataka has to have a step-in right as we are the largest stake holder. We had raised this in the PMO and the ministries of finance and civil aviation wanted a formulation as to how and when we would get the step in right. Once we give the formulation, it would be discussed and we think it would be accepted," Kumar explained.

Kumar added that the ministry of finance is still stuck on the payment of concession fee in the event of default.

"We have tried to explain to them that it is improper to ask for such a fee when work is about to start. It was never part of the agenda."