Gulbarga airport project almost grounded

The Gulbarga greenfield airport project is almost grounded. With the shareholders of Gulbarga Airport Development Ltd (GADL) mired in serious bickerings, the State government has initiated the process to terminate the project contract.

GADL has failed to respond to a show-cause notice issued recently by the State Infrastructure Development Department (IDD) on terminating the contract for the violation of Project Development Agreement (PDA). The IDD has, therefore, decided to seek the Law Department’s opinion before terminating the contract, official sources said.

GADL, the promoter of Gulbarga airport, is a 60:40 joint venture between Rahi Aviation Holdings Pvt Ltd (RAH) and IL&FS Transportation Networks Ltd (ITNL). Taken up on public private partnership basis on 30 years lease to build, operate and run the airport, the private partner has completed about 75 per cent of the project spending about Rs 120 crore. The project work came to a grinding halt last year following a dispute between the shareholders over alleged financial irregularities.

The project was scheduled for completion in May 2012. The warring shareholders did not re-start the project work despite repeated reminders by the IDD. A portion of runway, finishing touches to the terminal building and some minor works are pending, official sources said.

In the show-cause notice dated August 8, 2013 to GADL, the IDD has not only sought to know the reason for not commencing the work, but also set a condition that it should pay damages for the delay at Rs 10,000 per day with effect from May 5, 2012, which was the airport opening target date, for re-starting the work. The total damage works out to be about Rs 48 lakh, officials said.

The IDD also stated that it will forfeit bank guarantee (of about Rs 2.5 crore) besides initiating steps to claim the damages. The Department had given ten days time to the promoter to respond. But there was no reply. Therefore, the IDD is seriously considering terminating the contract, officials said.

The Shimoga airport project, which is also awarded to the same shareholders, is likely to meet the same fate. But the IDD has not so far initiated contract termination process as the project work has been suspended due to technical problem. The Airport Authority of India (AAI) has refused to give permission for building the runway as there are large number of smoke-emitting chimneys in the adjacent industrial area. Only about 30 per cent of project has been completed, officials said.

When contacted, Minister for Infrastructure Development Santosh Lad said the promoter has chosen not to respond to the show-cause notice. “I will soon hold a meeting with the Principal Secretary on the issue and take appropriate steps. We need to take action cautiously as it now involves legal issues,” he stated.

AAI's help may be sought

The State government is likely to seek the help of AAI to complete the Gulbarga airport project if the contract with the private partner is terminated, official sources said.