About four-and-a-half years after approving the project, the State government has found the proposed greenfield airport in Hassan financially not viable. As a result, it has decided to revise the project plan.
In the recent letter to the Infrastructure Development Department (IDD), the Finance Department has stated the Detailed Project Report (DPR) is “unreliable” and “inconsistent” and recommended that the project be planned afresh.
One of the reasons cited by the FD, official sources said, is the low rate of returns.
The acceptable Internal Rate of Returns (IRR) for such a project is 12 to 14 per cent. The DPR has, however, quoted 10.75 per cent IRR. “So the project is not viable. It is strongly recommended that the project may be planned afresh as per the Government of India guidelines so that it is eligible under Viability Gap Funding (VGF),” the FD has stated in reply to a proposal seeking VGF cover to the project.
The Public Private Partnership (PPP) project has been awarded to Jupiter Aviation and Logistics Ltd. The promoter would invest about Rs 1,200 crore on the project, while the government would provide 960 acres of land and utility services like power and water.
The project was planned in three components: Passenger, cargo and aviation related activities. Besides airport, it was planned to set up an aviation training academy and aircraft maintenance and overhauling facility as a back up to the Bangalore international airport.
The Hassan project was approved by the then JD(S)-BJP government headed by H D Kumaraswamy in 2007. The then government had appointed the PWD (the portfolio then held by Kumaraswamy’s brother H D Revanna) as the nodal agency to ensure speedy implementation. (IDD was the nodal agency for all other airport projects).
However, the project failed to take off. Of the total 960 acres, the government had handed over 536 acres to the company. But the company had been insisting that the entire land should be provided for it to start the work, sources said.
Cut down project size
In a recently held meeting headed by Chief Secretary S V Ranganath, it was decided to develop the airport on 761 acres of land instead of 960 acres as planned. The company has also been asked to submit a revised project plan as per the FD’s recommendation.
When contacted, IDD Secretary Raj Kumar Khatri only said that it has been decided to implement the project on 761 acres instead of 960 acres.
The project size will not be reduced. The company will implement the project in different components. The remaining 225 acres has been acquired and the work will commence soon, he added.