July 20, 2018
The Chief Secretary, Government of Goa, Panaji G O A Dear Sir, As Chief Secretary of Goa state, we are sure you will agree that effective governance would normally require that all major projects be announced only after analysis and delivery of an in depth and painstaking report that would first examine the feasibility of the project itself, while also considering local conditions, impact and repercussions of the project on the land and the community. These basics of good governance however, seem to have been ignored by the Goa Government, which with unseemly haste, plunged headlong into the imposition and implementation of the Mopa Airport project in 2013, apparently without any serious application of mind and study of the viability and suitability of this controversial project, especially since concerned citizens have been expressing their apprehensions and putting forward unanswered questions right from day one. After a close study, we are distressed and alarmed to find serious inconsistencies, procedural lapses, omissions and illegalities in the Concessionaire Agreement signed between the Government of Goa and GMR, that make it abundantly clear that the Government bent over backwards to give undue concessions to the Concessionaire at the cost of Goa and Goans, surrendering valuable land and foregoing much needed revenue, which is highly irregular and goes against the public interest. We therefore come to you as Chief Secretary of Goa, to raise some of the many anomalies in the Mopa Concessionaire Agreement for your consideration and immediate action. 1. The Draft Appraisal Report was prepared in 2013, when Mr. Parrikar took over as Chief Minister. It was based on an Amman & Whitney Master Plan, created during the tenure of the previous Government. The income and expenditure analysis projected by KPMG, was based on the figures mentioned in the Amman & Whitney Master Plan. Interestingly, the KPMG Report concluded that on a standalone basis without land, the Airport project was not feasible and hence land should be given to the contractor for commercial use. Strangely, after awarding the tender, the Airport developer GMR was permitted to prepare a whole new Master Plan in 2017, where the airport design plan and passenger traffic projections differed widely from the earlier Amman & Whitney Master Plan. The Government itself admitted that the Draft Financial Appraisal Report prepared by KPMG was entirely based on the earlier Amman & Whitney Plan, which with the new Master Plan in place now made it obsolete, outdated and irrelevant. Since the whole basis upon which income and expenditure analysis was made had now been radically changed, why did the Government not order a fresh financial appraisal report on the GMR Master Plan? 2. 9.38 lakh square metres of land for commercial development has been given free of cost to GMR (city side area). If the rule of thumb used by the CAG, with respect to Delhi Airport is adhered to, then the earning potential of such land over the 60 year lease period is calculated as 6 times the product of the market cost of the area of the land. Hence if Rs.25,000 per square metre is assumed to be the average cost of commercial land, then it appears that the Government of Goa has squandered the State’s earning potential to the tune of Rs.13,920 crore in exchange for an amount of just Rs.150 crore paid by GMR as a one time concession fee that covers all the expenditure incurred for land acquisition, consultants fees etc. The KPMG report had recommended that a Joint Venture be set up between the Government and the developer so that the profits of the revenue generated from the commercial development of this land be shared. However, the Government has conceded all revenue earned from this resource to GMR. The Government has justified this “sell out” of a valuable public resource as necessary to its endeavor to make the project viable for the developer. According to AERA, after all the ongoing upgradation and additions at Goa’s existing and centrally located airport of Dabolim have been completed, it will be able to service 1.12 crore passengers by 2021 and thus, according to expert projections, have the ability to to handle Goa’s passenger traffic until 2036. In addition to Dabolim, Mopa Airport will have to compete for passengers with other airports in the vicinity namely Chippi, Karwar, Belgavi and Hubli – so you will surely appreciate that its chances at attaining viability are exceedingly slim indeed. In the light of these circumstances, what was the need for the Goa Government to foist an unviable second airport on the State at such great cost to Goa and the community of Goans, given that we have a perfectly functional existing airport in Dabolim, whose efficiency and capacity is being further enhanced through ongoing expansion, upgradation and modernization? 3. As the bidder offering the highest percentage of revenue share (36.99%) to the government, GMR was awarded the Mopa Airport project. Now the Model Concessionaire Agreement defines the term “revenue” as “all pre-tax gross revenues earned by the Concessionaire…and shall include all transactions including cash or credit… and any monies received by the Concessionaire as deposits which are refundable or otherwise received from subleases and other parties”. Why then has the Government disregarded this guideline and redefined the term “revenue” to include only the deposits received from subleases, excluding the rest of the transactions, whether cash or credit, thereby throwing away a substantial chunk of revenue for the State of Goa? 4. In 2015, the then Chief Minister Laxmikant Parsekar declared that the Expressway linking NH 17 to the Airport would include a flyover whose cost of around Rs.300 crore would be borne by the developer, since it would cater exclusively to Mopa Airport. Hence the cost of Phase I of the project, which had been set at Rs.1500 crore by the Government was accordingly revised to 1800 crore to include the cost of the Expressway. At the presentation by KPMG to the Steering Committee in December 2015 however, the Expressway was spoken of as a 6 lane one, omitting the word “flyover”. At the next Steering Committee meeting, the 6 lane Expressway was reduced to a “new 4/6 lane approach road at Mopa”. In the final Concessionaire Agreement, the Expressway was defined as a 4 lane Expressway. Interestingly, the Government failed to include this project within the scope of works to be implemented by the Concessionaire in the Agreement. The Chief Minister in his answer to a Legislative Assembly question, clarified that the Expressway is not part of the Agreement. On what basis was the cost of the 4 lane Expressway pegged at Rs.300 crore – the same cost as that of the flyover? And why did the Government fail to add this project in the Agreement to the Concessionaire’s list of jobs to be undertaken as decided earlier, according to which the cost of Phase I was enhanced and escalated? 5. Yet another contradiction that arises is that in the loan Agreement with Axis Bank, GMR has pegged the cost of the Expressway as Rs.65 crore and not Rs.300 crore as estimated by the Government of Goa. It has also added other costs such as Rs.74 crore Reserve Debt and Rs.25 crore contingency fund which are not a part of construction costs. Why did GMR factor in Rs.65 crore in its loan agreement for an Approach Road/Expressway it is clearly not constructing? 6. According to the Concessionaire Agreement, GMR has to publish the job advertisement in only two newspapers and is not obligated to check with the Employment Exchange for qualified jobless youth that it could potentially hire. Although GMR has agreed to give preference to people with 15 years domicile, it is in no way restricted from hiring others if it fails to find Goans that are eligible. Hence it is clear that in the Concessionaire Agreement, there is no clause obliging GMR to give Goans jobs. Why then is the Government handing over additional land and infrastructure free of cost (Pednem ITI Institute) to GMR putting out the canard and misrepresenting to the people that it will give jobs to locals? 7. Through the Concessionaire Agreement, the Goa Government has assumed the entire financial liability of the Airport Company GGIAL. So if GMR decides to cancel the Agreement, the Goa Government has undertaken to pay 90% of the loan (i.e. Rs.1540 crore) along with 70% of addition termination payment which includes the cost of any assets which GMR installs, acquires or constructs inside the airport area or city side area. If the Agreement is terminated by the Government of Goa, then the Goan exchequer will have to pay to GMR the entire debt due (a maximum of Rs.1540 crore), 115% of “Additional termination payment” and 150% of adjusted equity which is the market value of the Company GGIAL. Yet, when the Finance Department of the Government of Goa raised the query with the State Directorate of Civil Aviation on how much Goa would have to pay GMR if the Concessionaire Agreement was terminated, the response received from it was “Financial implications of the same cannot be defined at present as the costs will depend on the time at which the event of Force Majeure occurs. This is also envisaged in MCA of Planning Commission.” The Finance Department also raised a query with the Director of Civil Aviation on the clause stating that on termination of the Agreement, GGAIL would pay the Government any outstanding concession fee and damages only after debt dues were paid. The Director of Civil Aviation’s justification was “DCA stated that financing of a large infrastructure project such as an airport is a big challenge. Hence the provision is provided to provide comfort to lenders for the project. This is also envisaged in MCA of Planning Commission”. Why should Goa and Goans lose so heavily just so that the Government of Goa can provide comfort and viability to lenders and developers of an indisputably unviable project that the State does not really need? 8. In the case of every other Airport, the State government and the airport contractor together set up a Special Purpose Vehicle to run the airport. The SPV signs a Concessionaire Agreement with the Central Government, so that in case the Airport Contractor quits, the Central Government through the AAI can take over the running of the Airport. In the case of the Mopa Airport, however, the State Government has signed the Concessionaire Agreement directly with GMR. The involvement of the Central Government will only be to provide immigration, air traffic control, security and central services. Therefore in case the developer quits how will the Goa Government run the Airport? 9. While passengers pay around Rs.250 as UDF in Dabolim, which is one of the lowest in India since major expenditure of runway maintenance and air traffic control is borne by the Navy and the Central Government, the Draft Financial Appraisal Report prepared by KPMG projects the UDF for Mopa Airport to be four times that amount - around Rs.1000 per passenger. Hence passengers will have to pay a much higher user fee at Mopa Airport compared to Dabolim Airport. In addition, passengers will also have to contend with the additional burden of long distance fares due to Mopa’s extreme location at Goa’s northern most tip. In the light of the substantially increased financial burden that Mopa Airport will lay on passengers, one fails to understand on what basis the Government of Goa expects Mopa Airport to boost Goa’s already faltering tourism industry. Acts of omission and commission by the authorities have a direct and serious impact on the lives and economic wellbeing of citizens. And if it is mandatory for private individuals and institutions to sacrifice their land for the public good, then surely it must be equally incumbent on the various authorities to discharge their duty and ensure that the acquired land is utilized judiciously in the public welfare and not to cater to vested interests. For additional insight into the issue, we enclose herewith a copy of the HERALD FORTNIGHT dated July 15, 2018 with the cover story “MOPA: THE MOTHER OF ALL SCAMS”. We therefore request you to put the Mopa Airport project on hold while it is reviewed and audited and institute a Vigilance Inquiry on the Concessionaire Agreement of Mopa Airport, specifically on the issues that we have raised. We also request you to give us an appointment so we can discuss this issue with you. If we do not hear from you within 7 working days, we shall be compelled to approach the Court for justice. Looking forward to your co-operation, Your truly, For GOANS FOR DABOLIM ONLY
