Govt stake in Delhi, Mumbai airports may drop below 26%

Centre's voting rights to remain unaffected; no cross ownership allowed

The government's stake in the project for developing the Delhi and Mumbai airports can fall below 26 per cent. This depends on fresh equity investments that government entities may or may not want to make in the venture.

In the event of fresh equity infused into the venture and the public sector undertakings not wanting to contribute to it, the government's equity in the project will come down accordingly.

However, the government will continue to have voting rights in keeping with its 26 per cent holding in the joint venture company.

The government's intention will be to maintain 26 per cent equity in the venture, according to the request for proposal (RFP) for the two airports circulated by it.

"If the Airports Authority of India (AAI) or any other government entity is not in a condition to invest in the future, when funds are raised by issuing additional equity, the government holding will come down. But, the decision to preserve the voting right has been taken to ensure that the government maintains control on the venture," said an official.

Government sources also said the RFP document had put in strong cross-ownership restrictions between the Delhi and Mumbai airports. As per the RFP, no common ownership by bidders bagging the two airports will be allowed.

Besides, the government will also not allow common involvement or participation by an airport operator in both the airports, either directly or indirectly.

Besides, the joint venture company will also have the right of first refusal, with regard to developing any airport near the Delhi and Mumbai airports on the basis of a competitive bidding process. In the event of the joint venture company not emerging as the highest bidder, it will be given a chance to match the highest bidder.

The airports will be leased to the joint venture company for an initial period of 30 years, which can be extended by another 30 years. During the period of agreement, the joint venture company will pay a lease rental fee of Rs 150 crore and an annual fee, which will be a percentage of the annual gross revenue of one of the airports.

Besides, in the evaluation process, additional weightage is provided to bidders who commit to absorb more than the minimum level of 40 per cent of employees of AAI in any of the two airports.

The government will impose a financial penalty on the joint venture company, if it fails to provide employment to less than 40 per cent of the existing staff.

Conditions in RFP

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• The government will continue to have voting rights in keeping with its 26% holding in the joint venture
• No common ownership by bidders bagging the two airports projects will be allowed
• The joint venture company will have the right of first refusal on developing any airport near the Delhi and Mumbai airports