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"Following due diligence, the financial closure for the international airport is expected to take place within a month. The ball is now in the court of BIAL. We expect construction to start from February 2005," PGR Sindhia, minister for industries, infrastructure and civil aviation, told reporters in Bangalore.
Today's announcement came as the concessional agreement, signed in July 2004, was just about to expire. Further delays in obtaining this clearance would have resulted in re-negotiation of the agreement.
The project got bogged down after the April elections resulted in the formation of a coalition government in Karnataka. The Janata Dal (Secular), a partner in the Congress-led ruling coalition in the state, raised objections over some of the land acquired for the project.
Efforts stepped up significantly after NR Narayana Murthy, chairman and chief mentor of Infosys Technologies and also chairman of BIAL, got in touch with Prime Minister Manmohan Singh and Congress president Sonia Gandhi. They then took up the issue with Karnataka Chief Minister N Dharam Singh.
Today's decision also highlights the intense behind-the-scenes bargaining that has taken place. According to Sindhia, BIAL will not be given sales tax exemption, which amounts to nearly Rs 30 crore (Rs 300 million).
Other savings come in the form of "reduction of interest on debt from 12 per cent to 7-8 per cent, savings in trial-run costs as well as forex impact".
"BIAL has also agreed to complete the project with 4,000 acres of land instead of the earlier 4,450 acres. With this, the Karnataka State Industrial Investment and Development Corporation will retain prime property of about 400 acres.
This land will be retained by them and not given back to farmers. The total savings to the state as a result of our recent discussions with BIAL amounts to nearly Rs 100 crore (Rs 1 billion)," Sindhia added.
The total cost of the international airport project is Rs 1,334 crore (Rs 13.34 billion). Of this, the state support would be of Rs 350 crore (Rs 3.5 billion). This amount is an interest-free loan repayable after 10 years. Of this, Rs 275 crore (Rs 2.75 billion) is actual state support, while the remaining Rs 75 crore (Rs 750 million) is being kept as a contingency amount.
Besides the loan being given by the state government, nearly Rs 315 crore (rs 3.15 billion) will come as equity and about Rs 675 crore (Rs 6.75 billion) are expected to be pumped in the form of debt.
The KSIIDC and the Airports Authority of India have a stake of 13 per cent each in the project. The Siemens consortium has 74 per cent stake and is led by Siemens Project Ventures GmbH of Germany, Unique Zurich Airport and construction major L&T.
