Described as an example of public participation in infrastructure projects, Cochin International Airport Limited (CIAL) can easily stand out as a role model project in the history of Indian civil aviation industry. V J Kurian, managing director, (CIAL) speaks to Reema Sisodia about the success of CIAL

Civil aviation in India has witnessed a number of changes over the years. But when compared to the global scenario, there is a lot that India has yet to achieve. CIAL could be regarded as one of the first state-of-the-art aviation infrastructure projects, that the country can be proud of. A good airport definitely contributes directly to a country’s international competitiveness and flow of foreign investment. Subsequently, airport projects have a large amount of low cost, very long gestation periods and highly uncertain returns on investment based on several assumptions of traffic growth that may fail to materialise.

Cochin, the commercial capital of Kerala, had an airport that was owned by the Navy and facilitated the operations of narrow-bodied aircraft. An airport of international standards for operating regular domestic and international flights was a necessity. However, the Airport Authority of India cited financial constraints for setting up a new airport. Since the resources, at the disposal of the government, for investment in airports is limited, the participation of private sector became essential for bridging the gap in resources.

Cochin International Airport is the first of its kind wherein Airport users - mainly Non-Resident Indians (NRI’s), joined hands with the Government of Kerala and Airport service providers to build an international airport. A public limited Company, Cochin International Airport Ltd., (CIAL) was incorporated on March 30, 1994 with an authorised capital of Rs 900 million. More than 11,000 individual investors from 30 countries have subscribed to the equity share capital of the company.

The total cost of construction of about Rs 2,830 Million (about 63 million dollars) was financed by an equity capital of Rs 900 million, loan funds of Rs 1,680 million and interest free deposits of Rs 250 million.

The project involved acquisition of 1,300 acres of land from 2,300 landowners and eviction and rehabilitation of 822 householders. The project involved about 32 government agencies and proper co-ordination was absolutely necessary for timely completion of the project and commercial operations from the new airport. The project had to overcome various hurdles during the construction stage and later. K R Narayanan, President of India inaugurated this airport on May 20 1999 and the commercial operations commenced from June 10 1999.

The Facilities

The Cochin Airport is built as the most modern international airport with all operational safety and passenger amenities, comparable to any other international airport.

• The airport is suitable for operation of B747 - 400 types of aircraft. It has a 3,400 metres length of runway, with sufficient apron space for parking eight aircraft at a time.
• It has ample car parking space to accommodate 1,100 cars in addition to taxi queuing space, tourists bus parking and other amenities like canteen, shopping, toilets, telephone booths etc.
• Fully air-conditioned terminals, one for domestic passengers with a floor area of 10,000 square metres and another for International passengers with 14,000 square metres.
• The terminals have all passenger amenities, like large shopping area, restaurants, swank bars, sliding doors, conveyor belts, excellent passengers guidance systems with FIDS, CCVT, PA systems and signage etc.
• An exclusive visitor’s gallery is also provided in domestic terminal. Passenger facilitation is of international quality with common check-in counter (Departure Control Systems), baggage reconciliation systems, boarding control systems etc, which are all fully computerised and automated.
• Bharat Petroleum Corporation Ltd provides aircraft refuelling system with the Hydrant system. The latest systems prevalent in Singapore and Hong Kong airports have been adopted here. Cochin airport is the third airport in the country after Mumbai and Delhi to have Fuel Hydrant System.
• A cargo complex of 4500 square metres has been constructed to handle the international and domestic cargo.
• A separate cargo village on the lines of Dubai Cargo Village is planned where all cargo activities of private and government agencies will be situated for easy booking, storing, clearing etc for convenience of consignees and consignors with all ancillary facilities. An area of 80 acres of land is earmarked for cargo village.

The Obstacles Encountered During Project Execution

The project to be completed on schedule required significant help from the Ministry of Civil Aviation, Government of India; Airport Authority of India and the Government of Kerala. During the five years of construction of the airport, we had to deal with three civil aviation ministers, four civil aviation secretaries, four chairmen of Airports Authority of India at the government of India level and three chief ministers, four transport ministers and five transport secretaries at the state level.

• An area of 1,300 acres of land was acquired for the project from about 2,300 landowners and 822 householders had to be evicted and rehabilitated. The above area fell within the justification of three panchayats and one municipality. Each panchayat had 10 elected members and the municipality had elected 20 representatives. The area fell within the constituency of two MLA’s (state legislative) and one Member of Parliament. Thus about 53 electoral representatives belonging to various political parties had to be consulted and taken into confidence for the completion of the project.
• About 400 civil cases were filed against the project at various courts out of which five cases were dealt with the Supreme Court of India.
• The original project cost was estimated at Rs 2,000 million. The high project cost and the company being the first of its kind in the country, there were doubts about the safety of investments and timely completion of the project.
• Three temples and two churches had to be removed to facilitate the construction of the airport without affecting religious feelings of the devotees.
• About 70 contracts were signed and their work was monitored to ensure timely completion of the project. Small contracts were awarded in order to reduce the cost of construction.
• The project involved shifting three high-tension (110 KV) electric lines from the surrounding area and relocation elsewhere.
• A large irrigation canal was shifted from the project area to facilitate cultivation in the nearby paddy fields.

Financing of the New Airport

The project cost was initially estimated at Rs 2000 million. Subsequently, it was expected that this project would be financed mainly by Non-Resident Indians from Kerala working in various foreign countries (There are more than two million people from Kerala working abroad, mainly in the Gulf countries). It was also assumed that at least 4,00,000 of them ie about 20 per cent would participate in a scheme for raising funds for the new airport. A new international airport at Kochi will reduce their travel time and air ticket charges apart from conveniences of travelling directly from one’s own city where the local language is spoken. The main attraction was assumed that if a direct flight is established between Kochi and the Gulf countries or any other European countries, the person would save at least two days on travel (ie avoid two halts at Mumbai, during arrival and departure).

A charitable society - Kochi International Airport Society, was incorporated in July 1993. The Society offered the following schemes for financing the airport project:

The scheme provided an interest free loan of Rs 5,000 (ie about US $110) for a period of six years from individuals. Kissan Vikas Patra (a savings scheme of the Government of India in which an amount would double itself in five and a half years) was proposed to be used which was supposed to work as follows:

a. When a person provides an interest free loan of Rs 5000, the society will purchase Kisan Vikas Patra (KVP) worth Rs 2,500 in his name;
b. This amount would double itself in five and a half years and the leader will get his capital back but without interest on maturity;
c. He will also be entitled to certain facilities like waiver of entry fee, special lounge in the airport, a separate check-in counter etc when the airport is opened;
d. If 4,00,000 people provided a loan of Rs 5,000 the society would get Rs 2,000 million in cash and would have spent Rs 1,000 million for the purchase of Kisan Vikas Patras;

The Government of India reimburses 75 per cent of the amount collected in the above savings scheme to the respective states as loan at concessional rates of interest. This amount of Rs 750 million was expected to be handed over to the society as loan which would be repaid when the incomes accrue from the project and sale of excess land due to capital appreciation resulting from the commissioning of the airport.

An amount of Rs 250 million was expected to be mobilised as donation from industrial houses and interest free loan from the airport service providers. Thus the required amount of Rs 2,000 million could have been raised.

However, the scheme failed as only Rs 40 million could be collected. To mobilise more funds it was decided to incorporate a Public Limited Company. The project was expected to be financed by way of an equity share capital of Rs 700 million and loan funds of Rs 1,300 million. However, the initial investment in shares was below expectations.

In the means time, Federal Bank granted a bridge loan of Rs 100 million for six months so that land acquisition could be commenced. Simultaneously, HUDCO was approached and they sanctioned a term loan of Rs 980 million on a guarantee from the Government of Kerala, with which the construction of the runway was commenced. With the progress of the construction activities, equity participation gained momentum.

During this stage, a greater participation of the government of Kerala, NRI’s and the airport service provider’s etc were sought.

The following core sectors were identified and competitive offers were invited:

i. Ground Handling of Aircraft: Air-India was awarded ground handling right at the airport on their payment of Rs 50 million in the equity capital and Rs 110 million as interest free deposits apart from a royalty of 15 per cent on the gross revenue.
ii. Aircraft Refuelling: Bharat Petroleum Corporation was offered exclusive fuelling right at the airport upon payment of Rs 52.30 million in the equity capital apart from the royalty charges and lease tent.
iii. Foreign Exchange Counters: State Bank of India was awarded the right to do foreign exchange business on payment of Rs 50 million in the equity capital and Rs 250 million as term loan. Thomas Cook was allowed a foreign exchange counter upon depositing Rs 5 million as interest free deposit. Federal Bank was also given the right to do foreign exchange business on payment of Rs 30 million in the equity capita of Rs 250 million as term loan.
iv. Restaurants: Land was allotted for setting a hotel against an interest free deposit of Rs 100 million. Oberoi were given the exclusive right to run the airport restaurant against an interest free deposit of Rs 25 million and payment of royalty.
v. Retail and Duty Free Shops in terminal buildings: Alpha Retail (England) was given the right to do duty free shopping on payment of Rs 30 million towards equity share capital and Rs 100 million as Interest free deposit.
vi. Petrol Outlets: Indian Oil Corporation provided an interest free loan of Rs 7.50 million and was given the right to set up petrol outlets. About 30 small shops were let out on rent of Rs 50 per square feet and interest free deposit of Rs 275 million.

Thus an amount of Rs 2,830 million was raised to finance the airport project as detailed.

Conclusion

The first green field joint sector airport in India, CIAL is the culmination of five years of hard toil. Pitched against innumerable odds, construction of the airport is the success story of public participation, especially with that of Non-Resident Indians in infrastructure development in the state and government. The new international airport will be a catalyst for the growth of economic prosperity of the city of Kochi as well as the adjoining districts and states. The airport has excellent market prospects owing to its strategic location. The new airport due to its unique characteristics, for example being a public limited company and the only planned and developed airport in the country can generate income from various non-conventional sources. There are a number of development plans slotted for the near future such as terminal expansion, and other developments in the airport vicinity, which would position the area as a promising investment and business zone.