Revenue sharing model between DIAL, AAI 'defective': CAG

In a report tabled in Parliament today, the CAG also observed that DIAL was "unduly benefitted due to the non-levy of interest on excess annual few actually received as per the provision of the OMDA (Operation, Management and Development Agreement)".
It recommended amendments to the provisions of the OMDA to include penalty clauses for protecting the interests of the AAI against delayed payments by DIAL.

Terming the revenue sharing model between DIAL and AAI as "defective", the government audit body found that AAI's receivable annual fee saw a "substantial reduction".

Maintaining that AAI was not in a position to levy penal interest in case of delayed payment by DIAL due to the absence of enabling provisions in the OMDA, the CAG said "had the AAI managed this contract more effectively, it could have earned additional revenue of 23 to 24 per cent of revenue received".

"Audit observed that while DIAL was required to pay to AAI, an annual fee at the rate of 45.99 per cent of its gross revenue, DIAL's agreement with the joint ventures (on cargo and airport parking) provided for sharing of gross revenue on the contracted out services".

This "resulted in substantial reduction in annual fee receivable by AAI", the CAG observed.

The government's audit body said the amount of revenue share of AAI from cargo and car parking operations undertaken by the two respective joint ventures (JVs) between December 2009 and December 2010 "worked out to Rs 103.29 crore".

The CAG report said independent auditors had also pointed out that after the handing over of the cargo busines to the JVs set up by DIAL, "revenue share to AAI was reduced" and recommended that this should be looked into by AAI in terms of the OMDA.

But the audit did not find anything on record to show that AAI had initiated any corrective action in this regard.

The agreements with these JVs "were not in consonance with the said clause of OMDA relating to Annual Fee. AAI should have ensured that 45.99 per cent of the gross revenue as stipulated was received", the CAG observed.

"Failure to do so resulted in AAI sustaining loss of Rs 103.29 crore till December 2010. The AAI was bound to suffer further losses during the currency of the concession agreement with the JVs in their present form," it said.