Wait for Navi Mumbai airport gets longer

The City and Industrial Development Corporation (Cidco) now plans to start the bidding process for Navi Mumbai airport only after completing the crucial land acquisition process. This could delay the project and further push up costs.

Although the project received environmental clearance in November 2010, it has been stuck largely due to delays in land acquisition and lack of approval from the Centre for the issue of a formal Request for Qualification (RFQ) from bidders.

Cidco, nodal agency for the project, had planned to issue the RFQ in June, parallel to the land acquisition and rehabilitation of affected villagers. However it has now planned to do so only after the latter issues are sorted.

The proposed airport is to be spread over 2,020 hectares (ha). Of these, nearly 1,400 ha are already in Cidco's possession. It has yet to acquire 291 ha, as it is yet to arrive at an agreement with the project affected villagers (PAPs). Although the PAPs have withdrawn their demand for compensation of Rs 20 crore an acre, they are now demanding return of  22 per cent of developed land following the project implementation.

Cidco chairman Pramod Hindurao told Business Standard: "The issue was recently discussed by the Maharashtra cabinet, which will take a final call on the quantity of developed land to be given back to the PAPs."

Cidco's managing director, Tanaji Satre, said the Centre had indicated the RFQ could be issued only after settlement of the land issue. "We will discuss the present status and Cidco's plan in this regard during the meeting slated on Monday with visiting civil aviation minister Ajit Singh," he said.

A senior executive from a corporate house feels Cidco should initiate the bidding process, as this will reassure international investors and airport companies. "Investors are losing hope. Airports are being privatised in Brazil; even in Myanmar, two airports were taken up for privatisation. The entire bidding process and financial closure could take up to a year. The action has to start,'' he said.

Cidco has pegged the total project cost at Rs 14,500 crore (Rs 145 billion), of which Rs 9,000 crore (Rs 90 billion) would be for phase-I. Of this, the pre-development cost is about Rs 4,000 crore (Rs 40 billion) -- to be spent on land acquisition, rehabilitation of affected villagers and site development.

Cidco would bear the pre-development cost but it is unclear if that expense would be treated towards project equity or recovered from the company which wins the bid to construct the airport. Cidco has also sought financial assistance from the Centre for pre-development costs, while developers are also requesting viability gap funding for the project.

Larsen and Toubro chairman A M Naik has expressed fears that land acquisition issues could push up the project costs by about Rs 5,000 crore (Rs 50 billion), "Navi Mumbai airport was moving reasonably well till the Land Acquisition Bill was introduced in Parliament. Now, that has raised the expectation of farmers by five to six times. No project will come up if the land cost itself is going up by Rs 5,000 crore," he told a news channel last year.