Niti Aayog, Finance Ministry had flagged objections on Adani's airport bid

The Adani Group is now the country's largest private developer in terms of the number of airports it handles and the second largest in terms of passenger traffic

Amid the growing resentment over preferential treatment to the Gautam Adani-led conglomerate, which is facing flak after a US short-seller Hindenburg Research accused it of alleged accounting malpractices and manipulating stocks, the resurgence of a report that the Finance Ministry and the Niti Aayog had flagged objections to the Adani Group's bid could put more focus on the ruling Modi government.

Opposition parties have rallied against the BJP government, under whose regime they claim the company's fortunes multipled. Congress leader Rahul Gandhi attacked the Narendra Modi-led BJP government over the Adani issue during the Budget Session on Tuesday.

Alleging that embattled industrialist Gautam Adani received partisan treatment post-2014, Rahul noted that the government had altered rules of mandatory prior experience to develop airports, and then awarded Adani contracts across the country.

"Today, 24 per cent of India’s air traffic, and 31 per cent of air freight is controlled by Adani. In this year’s Budget, the government has gifted him 50 new airports," Rahul said.

The Adani Group is now the country's largest private developer in terms of the number of airports it handles. This transformation, which came from running a private airstrip in Mundra, within 24 months, seems "magical", Rahul said in his address.

However, Adani's entry into the airport sector came amid objections put on record by the Union Finance Ministry and Niti AAayog about the 2019 airport bidding process. These were subsequently overruled, paving the way for the Adani Group to scoop up the six airports on offer.

Before inviting bids for the privatisation of airports at Ahmedabad, Lucknow, Mangalore, Jaipur, Guwahati and Thiruvananthapuram, the Centre’s Public Private Partnership Appraisal Committee (PPPAC) also discussed the Civil Aviation Ministry's proposal for the bidding process on December 11, 2018.

At this time, a note from the Department of Economic Affairs, as per the meeting's minutes, said, "These six airports projects are highly capital-intensive projects, hence it is suggested to incorporate the clause that not more than two airports will be awarded to the same bidder duly factoring the high financial risk and performance issues. Awarding them to different companies would also facilitate yardstick competition," The Indian Express reported.

This note, dated December 10, 2018, to the PPPAC, was submitted by a PPP cell department director.

The DEA strengthened its argument by citing Delhi and Mumbai airports as precedents, also noting Delhi's privatisation of power distribution, where the capital was carved into three zones and given to two different companies. At the PPPAC meeting, as per minutes accessed by the publication, there were no talks over this red flag raised by the DEA.

On the same day as the DEA note, Niti Aayog also raised a different concern about the airport bidding process. A memo prepared by the PPP vertical of the government's key policy think tank, that IE accessed, says "A bidder lacking sufficient technical capacity can well jeopardise the project and compromise the quality of services that the government is committed to provide."

The PPPAC, chaired by the then DEA Secretary, noted in response that the EGoS (empowered group of secretaries) had come to a decision that "Prior airport experience may neither be made a prerequisite for bidding, nor a post-bid requirement. This will enlarge the competition for brownfield airports, which are already functional," IE noted.

During the bidding process for these six AAI-run airports, Adani Group outbid all rivals including experienced competitors like GMR Group, Zurich Airport and Cochin International Airport Ltd and other infrastructure players by a large margin in all six bids. They ended up winning the rights to operate all six airports for 50 years.

Earlier, the privatisation process was different, like in the case of the Delhi and Mumbai airports where the concession period was 30 years and the AAI held 26 per cent equity in both airports.

In March 2020, the Adani Group invoked a force majeure due to Covid-19 and sought a delay in taking over the three airports from the AAI till February 2021, saying there were difficulties in the transition processes especially concerning airport staff.

The AAI had asked Adani Group to take over the three airports by November 2020.

Just six months after the Adani Group had asked for more time from the AAI, it went on to have a controlling interest in India's second-largest airport in Mumbai as well as the upcoming Greenfield airport in Navi Mumbai from the GVK Group.

Months before the Adani takeover of the Mumbai airport, the GVK Group had signed an agreement with investors including India's sovereign NIIF fund, in October 2019, to fend off Adanis. However, on August 31, 2020 - less than a year - the GVK Group signed an agreement so Adani could take its stake in the Mumbai and Navi Mumbai airports.

A month before the agreement, the GVK Group faced ED raids at its offices and residences of promoters in Mumbai and Hyderabad, related to a money laundering case for alleged irregularities in the Mumbai international airport development.

The ED registered a complaint in July 2020, based on an FIR filed by the CBI, which also alleged similar irregularities.

However, GVK's Sanjay Reddy told NDTV that there was 'no pressure' from Adani to sell the stake.