Asia-Pacific, Development & Aid, Economy & Trade, Headlines, Latin America & the Caribbean

ECONOMY: Germany,South Africa Fly Past Mexico in India Airport Bids

Paranjoy Guha Thakurta

NEW DELHI, Feb 1 2006 (IPS) - Despite intense lobbying, Aeropuertos y Servicios Auxiliares (ASA), operator of the largest international airport in Latin America at Mexico City, has lost contracts to privatise India’s two largest airports to German and South African competition.

As airport employees opposed to the privatisation struck work, Tuesday, India’s minister for aviation Praful Patel announced that consortia running the Frankfurt airport and airports in South Africa had been awarded contracts to revamp Delhi and Mumbai airports respectively.

Mexico’s ASA had lobbied hard with the Indian government to establish its credentials and capabilities. Tying up with Reliance, one of India’s best known corporate conglomerates, ASA was initially tipped to bag the contracts that entail expenditures worth three billion US dollars.

At one point, the Mexican government intervened to argue the case for ASA. On Jan.3, President Vicente Fox Quesada wrote to Indian Prime Minister Manmohan Singh vouching for ASA’s capabilities and stating that the success of the Reliance-ASA consortium would help strengthen bilateral relations between Mexico and India.

Public controversy surrounding the bidding process is, however, not over with Reliance expressing displeasure with the awards. A spokesperson for Reliance stated, on Tuesday, that changes made by the government in the tender conditions hours before the final decision were ‘untenable’.

The Reliance-ASA consortium lost the Delhi airport contract to the GMR- Fraport (the Frankfurt airport operator) consortium despite emerging as the top financial bidder and being ranked as the second-best in the technical evaluation.

For the Mumbai airport contract, the GVK-South Africa consortium upset the Reliance-ASA alliance even though the latter had a superior technical bid. The Reliance spokesperson alleged that the government had followed double standards in awarding the contracts.

”To our utter shock and surprise, substantial changes to the published tender conditions have been telephonically communicated, in strange circumstances, barely two hours before opening of the financial bids,” the spokesperson stated, adding: ”We are advised these changes are a complete departure from the tender conditions and are untenable.”

The airports modernisation programme had been embroiled in a major controversy after the aviation ministry was accused of laying down faulty tendering procedures. It was claimed that the bidding system did not encourage competition and lacked transparency.

Infirmities in the bidding procedures sparked allegations that two out of the eight bidders shortlisted – including the Reliance-ASA consortium – had been favoured at the expense of others for award of 60- year contacts to operate the two airports that handle nearly half of India’s air traffic.

The airports at India’s capital city of New Delhi and the country’s commercial hub at Mumbai are badly in need of upgradation. The facilities at these airports are currently being used by twice the number of passengers they were originally meant for.

One aspect of the hue and cry over the shortlisting of two bidders was the perception that ASA of Mexico was not adequately qualified or competent to handle the work at hand. In fact, the technical bid of the Reliance-ASA consortium was downgraded below the 80 per cent cut-off mark, by a group of eminent technical experts.

A confidential government note had caustically remarked that while India has been attracting ”world-class investors” in various sectors of its economy, in this instance, ”we have managed to land ourselves in a situation where the consultants have chosen the bidders who should get one airport eachàthis is compounded by the fact that of all the airport operators in the world, we have chosen Mexico through technical evaluation, and not by competition.”

ASA had, however, refuted what it described as ”misconceptions and misinformation” that had been spread against the Mexican company in various reports in the Indian media.

It has pointed out that it operated Latin America’s largest and busiest airport that handles around 24 million passengers a year – a number that is equal to the number of passengers handled by the New Delhi and Mumbai airports put together.

On Dec. 8, ASA’s chief Ernesto Velasco Leon wrote to India’s finance minister Palaniappan Chidambaram mentioning that reports prepared in March 2005 by the Airports Council International had ranked Mexico City’s international airport 42nd in terms of passenger traffic and 39th in terms of operations, above airports like Beijing, Shanghai and Kuala Lumpur (in passenger terms) and above Rome and Tokyo (in operations).

Indian officials were apparently unconvinced by ASA’s claims of expertise. Gajendra Haldea, adviser to India’s Planning Commission stated in a note: – ”Unfortunately, the bidding process has failed to attract or pre-qualify any of (the) operators of the best airports in the world, such as Hong Kong, Singapore, Seoul, Kansai, Dubai and Kuala Lumpur”.

ASA predictably had a completely different point of view of its abilities. It pointed out that it manages some 950 operations a day at Mexico City with peak periods when 60 planes either land or take off in a single hour ”despite the difficult topography of the Mexico City valley with only one approach for landings and take-offs and two close runways which do not allow simultaneous operations”.

ASA went on to argue that Mexico City’s airport system had a ”socio- demographic profile” that made it operationally similar to India’s main airports especially in terms of congestion and ”restricted land availability”. But these arguments turned out to be in vain.