288 India Infrastructure Report 2002

10 INTEGRATED TRANSPORT

10.1 EXPERIENCES OF VARIOUS FORMS OF COMMERCIAL

PARTNERSHIPS IN INDIAN RAILWAYS1

G. Raghuram

We bring out aspects of governance in the relationship of the Table 10.1.1

Ministry of Railways with various service delivering commercial Stake of the Indian Railways
entities under it. Problems arise when both the ministerial Cases
(policy and regulation) and commercial and executive powers
are vested in the same body, namely the Railway Board. The 1. Container
attempt in these ventures was to bring about commercial Corporation of
orientation. Success has varied. The key dimensions that we India (CONCOR)
examine are: (i) degree of separation of the regulatory and 2. Palace on Wheels
policy roles from the commercial activity (ii) extent of private (POW)
3. Railway Sidings
participation (iii) extent of improvement in transparency,
4. Pipavav Railway
contestability and competition, and (iv) appropriateness of Corporation
regulations. We bring out the salient features of each of the Limited (PRCL)
cases and comment on their commercial viability. A concluding 5. Konkan Railway
section discusses key concepts which would be relevant for Corporation (KRC)
such commercial partnerships in the future. The seven cases 6. Own Your Wagon
and the nature of stake of the Indian Railways (IR) are given Scheme (OYW)
in Table 10.1.1. The stake of the railways generally decreases 7. Catering Contracts
from the first case.
Nature of IR’s Stake
Wholly owned autonomous
company
Revenue, cost and investment
sharing
Investment sharing
SPV with equity partnership
BOT
Lease payments and service
guarantees
License fee and revenue
sharing basis

CONTAINER CORPORATION OF INDIA2
CONCOR was incorporated in March 1988 as a public
sector undertaking under the ministry of railways with the
1 We acknowledge the Railway Board and R.K. Jain (Executive
Director, Perspective Planning) for providing some of the inputs for
this documentation. Research assistance by Sushma Chaudhary and
Deepa Kheskani is acknowledged.
2 This section draws from CONCOR (1998); Communication
from Railway Board, New Delhi, 2000 (Regarding Financial Issues,
Management and Privatization/JVs of CONCOR)
main objective of being a catalyst for promoting container-
ization and to boost India’s international and internal trade
and commerce by carrying out a container business and
organizing multimodal logistics support. CONCOR is a
successful case of a corporate entity created by the railways.
CONCOR was incorporated with an authorized capital
of Rs 100 crore. The IR subscribed an amount of Rs 64.99
crore in phases. CONCOR is a profit making company and
has been granted Mini Ratna status by the Government of
India (GOI). All the capital requirements are met by
CONCOR either through its internal resources or from a

loan sanctioned by International Bank for Reconstruction
and Development (IBRD).
GOI has already disinvested 129 lakh shares in 1994–
5 at an average price of Rs 71.15. By 1995–6 government
had divested 23 per cent in the company. Disinvestment
commission studied various aspects of CONCOR and
recommended that disinvestment of GOI holding in
CONCOR may be restricted to 100 lakh shares and the
company may also go in for public issue of 125 lakh shares.
This would bring down GOI holding to 51 per cent and
therefore, the company would continue under the control
of GOI. In pronouncing that it would not go below 50 per
cent, the value realized was much lower than otherwise
possible. In any case there is little reason for CONCOR to
be in the public sector. [Editor] Accordingly GOI further
disinvested 9 million shares in November 1998 at a price
of Rs 250 per share. Another one million shares of GOI are
required to be disinvested to retail subscribers. A decision
in this regard is awaited. GOI shareholding is now reduced
to 63 per cent. Remaining shares of about 37 per cent are
now held by foreign institutional investors (FIIs), domestic
financial institutions, mutual funds, banks and individuals.
In view of the present cash surplus position of the company
it does not contemplate to raise resources through issue of
fresh equity in near future.
Over the years CONCOR has responded to the
environment by setting up its own container terminals,
obtaining new rolling stock and cutting down transit times
on key routes (Delhi-Mumbai). Substantial portion of
container traffic is transported through IR. Door-to-door
services and transportation of containers from some of the
CONCOR facilities which are not connected with IR are
undertaken by road. Road transportation is completely
outsourced to private contractors. Handling of containers
in most of the facilities has also been privatized. Most of
the ancillary activities have also been outsourced.
Business arrangements have been made with Madhya
Pradesh State Warehousing Corporation and the Inland
Container Depot (ICD) Malanpur at Gwalior is being run
with their association. Some more projects for Joint Ventures
(JVs) are under consideration by the company. CONCOR’s
financial performance has been good. In 1998–9 it made
a net profit of Rs 140.65 crores. Its sales grew at CAGR
of over 30 per cent between 1994–5 to 1998–9 to reach
Rs 685 crores. In 1998–9 it carried 8 lakh TEUs (twenty-
foot equivalent units) of containers, representing a 19 per
cent CAGR between 1994–5 to 1998–9.
While CONCOR is moving in the right direction of
creating the necessary infrastructure and service concepts,
the pricing for the usage of IR track capacity—a key input
cost for CONCOR—is currently an internal administrative
matter and not subject to tests of competition or even
Integrated Transport 289
transparency. Therefore one is not sure about its revealed
performance.
PALACE ON WHEELS3
The Palace on Wheels (POW) is a joint venture between
the IR and Rajasthan Tourism Development Corporation
(RTDC). It was introduced with the objective of (i) increasing
inflow of foreign exchange, (ii) improving overall flow of
tourists to India significantly (contributing to India’s image
abroad) and (iii) creating opportunities for employment in
the tourist industry and enhancing the value of RTDC’s
tourism assets. It was first started as a meter gauge service
in 1982 using the erstwhile royal saloons of the various
princely states of Rajasthan. Over the first five years of
service the average occupancy went up from 41 per cent to
58 per cent. The business risk has been shared both by IR
and RTDC.
In the initial days the fare was arrived at on a cost plus
basis with 50 per cent occupancy assumption. The service
has become popular over the years. The entire train was
replaced by a newly manufactured meter gauge train set,
with both parties contributing in the late eighties. With
conversion to broad gauge of the various routes in Rajasthan,
the broad gauge POW train was introduced during 1995–
6 as a 50:50 joint venture between IR and RTDC. The rake
of the POW comprises of 21 coaches. The train over its
eight day journey covers places of tourist and historical
interest in Delhi, Jaipur, Chittaurgarh, Udaipur, Sawai
Madhavpur and Jaisalmer, Jodhpur, Bharatpur and Agra.
The financial and management arrangements of the POW
between IR and RTDC are currently as under:
• IR and RTDC have invested equal shares in the
capital cost of the rake. The actual cost of the rake as worked
out by the Integral Coach Factory (ICF) came to Rs 22.48
crores.
• IR is responsible for operation and maintenance of
the train and have to provide the entire infrastructure needed
for the operation of the train including security of the rake
and safety and security of the train during its run.
• RTDC is responsible for house keeping, catering on-
board as well as on the ground, local sightseeing and
entertainment of guests at all the destinations.
• RTDC is also responsible for the maintenance of
interiors and furnishing and décor either directly or by
outsourcing.
• The earnings are shared between IR and RTDC.
While the railway board has decided to share the earnings
in the ratio of 67:33 between IR and RTDC, the management
3 Bhatt Sanjeev (1990), ‘Palace on Wheels’, unpublished case
study of IIM(A).
290 India Infrastructure Report 2002
of RTDC insists that the earnings of the venture should be
shared at 50:50 since they have made equal investment in
the capital.
This tourist circuit is popular and is commercially viable.
While the revenues are clear enough, the costs are not. This
venture has so far been managed as an arrangement between
IR and RTDC with each bearing its own costs. As is obvious,
both parties presumably depending on internal cost
assessments, are seeking an appropriate revenue share. It is
time to make this a joint venture with an appropriate
understanding of investments, and cost and revenue
transparency. The joint venture could pay the IR and RTDC
for services rendered. The net profits could then be shared
as dividends or used for further investments in the same or
even other circuits depending on the joint venture’s business
plans.
RAILWAY SIDINGS
In the early years of railway development in India and until
the seventies, IR took it upon themselves to construct railway
sidings to various factories on the assumption that this
would bring in rail traffic. There were norms of what traffic
levels would justify a siding. The entire costs were then
borne by IR except the rail related assets within the factory
premises. This was paid for by the factory owners, more to
retain ownership of such assets than in anyway to control
the operations.
The policy towards sidings began changing soon after.
IR was in a sellers market and did not see the need to bear
much of the costs of sidings. Today all siding costs, including
investments are expected to be borne by the customer. The
IR does make exceptions in sidings with high traffic potential.
The issue gets a little more complicated when the adjoining
main line is electrified or converted. IR has been issuing a
variety of notifications to deal with such situations and
arrive at cost sharing terms. Lack of mutuality of interest,
and asymmetric benefits are not uncommon in these siding
arrangements.
Gauge Conversion of Sidings
The policy circular for gauge conversion of sidings has become
more complicated and involved over the years. A 1994 circular
had four conditions in one page while the revised 1997
circular had 16 conditions in four pages. More importantly
the 1997 circular introduced the concept of guaranteed
traffic to be supplied by the industry over and above the
maximum traffic of the past eight years to qualify for IR
spending on the siding conversion. However, belying the
expectations of industry there was no concomitant agreement
that the IR would adhere to a known freight rate formula.
Electrification of Sidings
IR is going ahead with railway electrification as a cost saving
strategy. The IR is putting conditions on the owners of the
sidings for sharing the cost of electrification. Traction remains
the choice of the carrier and not that of the customer. The
user offers traffic from one place to another and the carrier
in a market driven economy carries it. The IR therefore
cannot impose the conditions of sharing the cost of a
particular mode of traction on the user.
Time and Motion Study
There are IR rules providing for time and motion studies
to be done for all the sidings to calculate reasonable loading/
unloading times and consequent demurrage charges. These
studies always exclude the times on IR account like that for
cleaning of the wagons, riveting etc. A specific example is
that of Gujarat Ambuja Cements’ siding at Kodinar
commissioned in December 1986. The time and motion
study was done in 1988. This resulted in benefits to Gujarat
Ambuja Cement. It was however implemented only in 1994,
i.e. after eight years of opening of the siding. The IR did
not extend the benefits retrospectively. The Ropar siding of
Gujarat Ambuja Cement was commissioned in 1995 and
the time and motion study was done in 1997. Again
implementation was not done retrospectively. The IR has
however reserved the right to open all money matters retros-
pectively.
Wagon Load vs. Train Load Rates
Coal normally moves to the siding in train load rates.
However when a wagon gets disconnected (due to IR’s
operations) and is placed into the siding the higher wagon
load rate is charged to the users.
Enhanced Carrying Capacity Rate
Certain varieties of coal cannot be loaded upto the enhanced
capacity of the wagon. It is open to the IR to conduct a
joint trial alongwith the industry (Coal India) in a transparent
manner and demonstrate how the enhanced carrying capacity
can be achieved. Once they have done it they can charge
the freight on enhanced carrying capacity. However there
are collieries where the IR officers, Coal India and the
consumers feel that loading cannot be done upto the defined
carrying capacity but the IR continues to charge freight at
the enhanced capacity.
Penal Charges Due to Overloading
Section 73 did not exist in the 1890 IR Act. It was
incorporated in the 1989 Act and is reproduced below:

Where a person loads goods in a wagon beyond its permissible
carrying capacity as exhibited under sub-section (2) or sub-
section (3), or notified under sub-section (4), of section 72,
a railway administration may, in addition to the freight and
other charges, recover from the consignor, the consignee or the
endorsee, as the case may be, charges by way of penalty at such
rates, as may be prescribed, before the delivery of the goods.
Provided that it shall be lawful for the railway administration
to unload the goods loaded beyond the capacity of the wagons,
if detected at the forwarding station or at any place before the
destination station and to recover the cost of such unloading
and any charge for the detention of any wagon on this account.
This Act now states that if coal is loaded beyond the
permissible capacity punitive charges can be recovered from
the consignee or the endorsee. In other words, even if Coal
India violates the carrying capacity the punitive charges can
be recovered from the cement siding owner. The 1962
Goods Tariff did not levy any penal charges if overloading
was detected at the destination. The 1965 Tariff had the
same provision. The Act permits the unloading of the excess
quantity if detected, at the forwarding station or any place
before the destination station. Even when the excess is
detected at the forwarding station (as per railway receipt),
the IR do not make any effort to take out the excess quantity
since operationally they find it difficult. The IR therefore
carry this excess coal until the destination and then reserve
the right to penalize the siding owner.
Customer orientation in the business of sidings is not
part of the management ethos of the IR. Customers4 are
subject to delays in wagon allocation, allotment of open
wagons in place of covered wagons which they may require,
no guarantee of time in the movement of goods, and poor
record keeping. As quoted by an ex railway officer turned
senior executive of an industry association, ‘This (lack of
customer orientation) permeates the whole process of
definition of rules, procedures, interpretation and policies
of IR. Customer centered policies on the part of IR would
be imperative if more freight traffic has to be attracted.
Sidings should be viewed as a proactive measure to invest
in and make the customers captive to IR.
Apart from the marketing angle investment in sidings is
also an important issue for wagon utilization. As per the IR
Year Book 1998–9, out of a wagon turn-round of 8.2 days,
only 28 hours was the revenue earning run over an average
lead of 669 km. Most of the wagon turn-round time is spent
in terminals due to inadequate infrastructure or lack of co-
ordination. It may be best to think of Special Purpose
Vehciles (SPVs) in which IR and the concerned factory/
factories have an equity share in owning and operating the
siding. This would bring in stakeholding in making the
sidings commercially viable.
4According to communication received from Gujarat Ambuja
Cements Ltd, New Delhi, 1999.
Integrated Transport 291
PIPAVAV RAILWAY CORPORATION LIMITED5
Pipavav Railway Corporation Limited (PRCL) is a joint
venture between Gujarat Pipavav Port Ltd (GPPL) and IR.
GPPL is a joint venture port between the Gujarat Maritime
Board (GMB) and private operators including Sea King Ltd
and Port of Singapore Authority. In the current phase it has
a capacity of 12.06 million tonnes at Pipavav much of
which is presently operational. In January 2000 a pioneering
joint venture memorandum had been signed between GPPL
and the IR. GPPL and IR were to form an SPV to execute
the infrastructure project to provide rail connectivity to the
port. An operating segment of IR was for the first time to
be handed over to an SPV for upgradation and operation.
The project involved establishing a 295 km broad gauge
link to the port by a 281 km gauge conversion project and
a 14 km laying of a new line. It is estimated to cost Rs 270
crores, and funded with a debt equity ratio of 1:2. The IR,
and GPPL and its associates would have 50 per cent equity
each. Recent investments made by IR towards upgradation
of this route would form its equity contribution. The ownership
of assets so created would remain with the SPV. The project
is expected to be completed within 18 months. The
CONCOR, Maersk and the Central Warehousing Corporation
Ltd (CWCL) would be associates to GPPL in the new SPV.
The demand risk and the project construction risk were
to be borne by the SPV. Traffic guarantee as already offered
by the GPPL (1mt in the first year, 2 mt in second year
and 3 mt from the third year onwards) would now be given
to the SPV. Revenues would be collected by IR as per IR
determined rates. IR would first take a certain percentage
of revenues as a charge for operating and maintaining the
line including the hire charges for wagons, locomotives and
coaches. The remaining would be apportioned to SPV as
per agreed terms and would form the revenues of the SPV.
A lease rental is payable to the IR for the use of the existing
assets to be valued at historical cost. Other costs would be
interest, marketing, administration, and depreciation. Indian
Railways would have the option of running passenger and
freight trains other than to the port. This would be done
in consultation with the SPV and apportioned earnings
would accrue to the SPV. IR would also be free to provide
rail connections with the project line. The SPV would be
managed by a board with equal representation from IR and
GPPL. The chairman would be from IR while the chief
executive would be from GPPL. The detailed terms of the
agreement have yet to be worked out, the tenure of the SPV
has not been clarified and similarly the obligations of IR
to ensure operational and maintenance effectiveness may
need to be spelt out rather than being taken for granted.
5 Raghuram G. (2000), ‘Regulation and Privatization: A Comparative
Case Study of Gujrat Maritime Board and Jawaharlal Nehru Port Trust’,
unpublished case study of IIM(A).
292 India Infrastructure Report 2002
The Economic Times dated 31 August 2000 reported
that the project cost is Rs 294 crores. The traffic projections
were 2.5 mt by 2002-03 and 10 mt by 2008-09. The return
on investment was expected to be 15 per cent. The concession
would be for 33 years on a build, own, operate, and transfer
(BOOT) basis. The SPV would be entitled to rights and
obligations under the Railways Act. While IR would be
entitled to run passenger services in the project area as they
exist today additional services would require the consent of
PRCL.
A positive aspect of the JV is that the partner is a key
stakeholder driven by interests to make the port viable. But
there could be a problem. It is not clear that the terms of
the JV are such as to result in gains nearly equally to both
partners. Much of the benefits must be accruing to IR.
Costs too are not clear and each partner cannot check the
others costs. It is very important from the perspective of
other such ventures that this pioneering model does not fail
on account of lack of mutuality.
KONKAN RAILWAY CORPORATION6
Konkan Railway Corporation Limited (KRC) was set up as
a Public Sector Company under the Ministry of Railways
in July 1990 to bridge the 738 km Konkan Gap by providing
railway connection between Roha (150 kms south of
Mumbai) and Thokur (about 22 kms north of Mangalore).
KRC was structured as a build-operate-transfer (BOT)
project, with a concession period of 10 years from start of
operations. KRC completed the project at a cost of Rs 3,375
crores (Rs 2,425 crores of investment and Rs 950 crores as
capitalized interest) and commenced operations since 26
January 1998. Out of Rs 3,375 crores, Rs 800 crores was
equity capital.
The operating and maintenance expenses were in excess
of Rs one crore per day. Given that KRC was expecting daily
earnings of Rs 25 lakhs by way of passenger traffic (seven
pairs of trains on the segment), it needed about 10 loaded
freight trains to ply over the entire KRC segment daily (at
an average contribution of Rs 7.5 lakhs per train in 1998)
to break even. (Each freight train going over the entire KRC
segment could bring in a revenue of Rs 9 to 10 lakhs at
the average freight rate of the IR inflated by 50 per cent
in the case of KRC as per Railway Board’s pricing.) The
average cost payable to IR for wagon and loco hire, fuel and
crew was Rs 1.4 to Rs 2.7 lakhs for a train going over the
entire segment. This would depend on the number of wagons
and locos hired for the train. The contribution figures in
2000 was expected to be Rs 9 lakhs per freight train and
6
Banerjee, Bibek, G. Raghuram and Narayan Rangaraj, (2000),
Communication from Konkan Railway, Mumbai, (2000).
Rs 1.3 lakhs per passenger train. KRC also needed to make
surplus to pay back the debt burden of Rs 2,575 crores.
At the end of nine months of operation only 94 rakes
had moved over the KRC segment! Earlier projections of
business growth had not materialized. Out of the 94 rakes,
61 either originated or terminated in the KRC segment,
while 33 passed through. Even out of this 33 rakes, 30
either terminated or originated at stations immediately
adjacent to KRC. Thus KRC did not really serve the purpose
of a through railway bridging the Konkan gap and offering
shorter routes. It was servicing new traffic from and to the
KRC segment. One of the major reasons for this was the
inflated (transfer) price on the KRC segment making it
unviable for north south traffic on the IR to be rerouted
via KRC.
KRC’s financial position has deteriorated. Budgetary
support from the IR, and some further debt were necessary
for survival. In response to the situation, KRC has been
trying to increase its revenues through a marketing approach.
They have proactively solicited freight traffic from Rajasthan
and Gujarat towards the south and from Kerala towards the
north. They have advertised and distributed promotional
material on the benefits of using KRC and offered discounts
on the KRC segment of travel.
Pushed to the corner they attempted service innovations
like a Ro-Ro service and are proposing other schemes for
revenue generation like leasing their station area for budget
hotels (‘Railotel’), catering, parcel traffic in break vans etc.
They also have leveraged their transport project management
and tunneling expertise to bid and construct similar projects
like tunnel segments of the Mumbai-Pune Expressway. They
also have business plans in the area of urban transportation.
RO-RO SERVICES ON KONKAN RAILWAY
Ro-Ro services were started on 26 January 1999 for carrying
trucks on train on the KR section between Kolad (150 km
south of Mumbai) and Verna (Goa), a distance of 420 km.
(The total KRC segment is 738 kms). The Ro-Ro service
was expected to be financially viable, if reliable and regular
services were offered. The customers saw this service as
having a definite advantage over road driving, saving fuel
and wear and tear of trucks. Trucks would be moved on
railway flat cars over the distance of 420 km to save much
time and expense for the truckers. The actual performance
of the Ro-Ro Services (based on flat cars hired from IR
rather than the originally intended own flat cars) is given
in Table 10.1.2.
The KRC experience has not been as was envisaged. The
KRC successfully carried out the asset creation without the
vast delays and cost overruns usual in railway projects. They
had autonomy at this stage and funding for a separate entity

Table 10.1.2
Performance of Ro-Ro Services
(in Rs lakhs) Total expenditure
26/01/99 to 31/03/99 49.53
01/04/99 to 30/09/99 112.26
01/10/99 to 29/02/00 132.98
01/03/00 to 31/05/00 98.63
Total 393.39
Source: Konkan Railway Corporation, internal documents, Mumbai, various years.
was easier. Strangely they do not have the authority to set
their own prices and do not have access to the major industrial
market of Mumbai! Their operating interface with the IR
was crucial given the network nature of railway operations.
Since IR would not shift business to the KRC (KRC being
an independent entity) it faced large revenue risks which
actually materialized. That Ro-Ro could work is indicative
of the very high (beyond the point of revenue maximization)
pricing of freight traffic by the IR and the KRC. It suffered
because IR effectively denied its own child access to its
network!
The inflated rates on the KRC segment which were
supposed to help bring in more revenues have become a
liability in that the traffic is not being re-routed via KRC.
Of course it is also interesting that the re-routing is partly
being denied due to a competitive outlook from the
neighbouring railway zones who wish to keep the revenue
to themselves. In the end the parent, namely IR itself would
have to come to the rescue of KRC. The BOT framework
of KRC allowed the IR to make an investment to the tune
of Rs 3,375 crores with just an equity investment of Rs 400
crores from the IR. This may be seen as an advantage but
contingent liabilities could have gone up. Mispricing and
the killing of KRC would most certainly have made the
market twice shy about such projects.
Under very trying circumstances KRC’s Ro-Ro services
is an innovation despite the fact that one such proposal
between Ahmedabad and Mumbai had been discussed ever
since the mid-eighties. Here too had KRC got the right kind
of wagons its profits from the RO-RO service could have
been much more.
OWN YOUR WAGON SCHEME7
The Own Your Wagon (OYW) scheme was started in the
early nineties to attract private investment for building up
modern wagon stock. Under the scheme the wagons could
either be procured directly from a wagon builder or from
7 Raghuram, G. and M. Ravi Babu, (1999), ‘Alternate Means
of Financing Railways,’ in G. Raghuram et al (eds), Infrastructure
Development and Financing: Towards a Public–Private Partnership,
Macmillan Ltd., Delhi.
Integrated Transport 293
Total earning Net surplus
49.82 0.29
107.01 (5.25)
153.07 20.10
117.63 19.00
427.53 34.14
the IR. In the former case the wagon buyer has to pay a
design loan and an inspection charge of one and a half per
cent and in the latter case the buyer has to pay a service
charge of three per cent of the price. The utilization of the
wagons which could either be under a general pool or a
closed circuit would be mutually decided. The benefits to
the owners under three possible arrangements are:
Pure Lease
As a pure lease the wagon is used by the IR as a general
wagon and it pays lease charges at the rate of 16 per cent
per annum on quarterly basis for a period of ten years
followed by a rate of one per cent for the next ten years.
This lease charge will be calculated on the current price of
similar wagons owned by the IR. After the expiry of another
ten years the lease is continued on mutually agreed terms.
The owner however also has freedom to dispose off the
wagon. Maintenance is done by IR at its own cost.
Lease Cum Guaranteed Clearance with General Service
Wagons
Under this arrangement IR in addition to paying the lease
as specified before assures the leasor to clear a minimum
volume of traffic during a specific period. The movement
of traffic would however be subject to rules—legal and
administrative provisions like the Railway Act, preferential
traffic schedule, central or state government restrictions/
bans on movement of goods etc. There would be no further
freight concessions. Maintenance of the wagons would be
done by IR at its own cost.
Guaranteed Clearance
In this category lease charges are not to be paid to the
wagons moving in dedicated routes. However IR would give
a concession in the freight rates depending on the movement
patterns of the wagons. The freight concession would vary
with changes in budget provisions. Maintenance would be
done by the IR and the rates would be charged to owners
at rates which are mutually agreed upon.
In spite of the changes in the modalities of the scheme
it has not picked up as expected.
294 India Infrastructure Report 2002
The scheme has many one sided contract clauses, like the
termination of guarantees in case of damage of wagons in
accidents by paying the book value (which due to depreciation
provisions of Income Tax law would be much lower than
the market value of the asset). Similarly in case there are
any change of rules which are unacceptable to the owner
the wagons would revert to IR at the book value. While
availability of wagons to participants could increase due to
supply guarantees, the non-participants could also benefit
due to increased overall supply of wagons. Another significant
issue is the IR’s own ability in delivering service level
guarantees. With a pooled wagon system priority to
customers leasing to IR would be difficult to realize. For
customers to whom wagons can be dedicated, like in iron
ore circuits, coal merry go round etc. the problem may not
be there.
CATERING CONTRACTS8
As a part of its passenger business IR provides catering/
vending services at stations and on selected long and medium
distance mail/express trains. Catering facilities are available
at more than 3200 stations and in 170 pairs of trains.
Catering services at 68 stations and in 48 pairs of mail/
express trains are managed through departmental staff
whereas at more than 3100 stations and 120 pairs of mail/
express trains, catering services are being managed by private
operators. IR recovers a percentage of sales turnover towards
licence fee in addition to rent on building/space, electricity/
water charges etc. from the licencees. So far 3–5 per cent
of sales turnover in case of static units and 5–8 per cent of
sales turnover in case of mobile units was being charged as
licence fees. IR has now decided to increase the license fee
in all cases of catering/vending units to 15 per cent of sales
turnover in case of Rajdhani/Shatabdi express trains and to
12 per cent of sales turnover in case of other mail/express
trains and static units. The revised licence fee has come into
effect from 1 July 1999. In the year 1998–9 IR has realized
approximately Rs 8.80 crores as licence fee from the licensee
operated catering/ vending units on IR. Today licencees are
managing the catering/vending units under a renewable
five-year agreement. However there has been no proper
arrangement of assessment of sales. As such there has been
significant under-reporting of sales adversely affecting the
inflow of revenue to the IR. Keeping this in mind the
Ministry of Railways has decided to enhance the licence fee
across the board with effect from 1 July 19999.
Thus far both prices and the revenue are strictly regulated!
In order to provide branded products from reputed
8 Communication from Railway Board, (2000) regarding the
extent of activity and financial issues.
9 The Rs 8 crores of licence fees at an average of 5 per cent of
turnover would mean a total annual sales of Rs 160 crores, i.e. of
manufacturing companies it has been proposed that IR should
provide food marts or food plazas at 25 nominated stations
through private participation. A beginning has been made
by Western Railway (WR) in this regard where two fast food
outlets are being operated at Ahmedabad by a reputed brand
company. WR is getting Rs 3.11 lakhs as licence fee from
these two units per month which is more than the total
licence fee collected all over Vadodara division. These outlets
have to pay a minimum amount specified, or a percentage
on sales turnover whichever is higher. In this way IR has been
sharing revenue with the catering licencee. Besides, there has
been much improvement in the quality, and the level of
hygiene. Exclusive supply from reputed food manufacturers
is being considered on certain high speed trains.
Railways’ monitoring of the revenue of caterers may not
be effective. Gross under reporting is possible. Since food
is a key complementary to travel, IR would necessarily have
to bear responsibility for quality. The experience in
Ahmedabad would suggest that there is con-siderable scope
for improvement largely through flexibility on price and
variety.
CONCLUSION
Based on the case studies we identify eight dimensions for
good commercial partnerships. We describe these briefly.
• Through OYW and POW type arrangements the
railways are able to leaverage more investments out of their
contribution. There is an optimal level of equity since
otherwise smaller stakes by IR would not be credible.
• A clarity of goals in the commercial partnership to
evolve clear strategies is a must. CONCOR and POW are
good examples of this. Both organizations have developed
the market and created a valuable niche for themselves. The
development of Railway Sidings and the OYW scheme has
suffered due to lack of goal clarity and a consequent inability
to adhere to service levels. In the case of KRC the goals were
sharply defined only in the project management stage. KRC
is not in a position to access potential revenue generating
markets since this runs into conflict with railways.
roughly only 0.6 million servings annually right across the IR’s
contracted outlets at Rs 10 for an average serving. This is most
certainly a gross underestimate of the total servings made by the
contractors. So rather than raising the rate which would apply on
a base (sales) which in principle the Railways cannot know, it would
have to worry about other mechanisms of realizing revenue from
contractors. One cannot rule out the possibility of massive agency
failure (and even fraud) in the contracts of railways with caterers
which is on the basis of percentage of sales turnover. Thus the typical
long distance second class traveller’s expense on food is at least third
of his ticket fare. Even if only a fraction of the same is spent on
official caterers, Rs 160 crores is too small an amount as the sales
turnover of Railway caterers [Editor].
 Integrated Transport 295

• IR’s own traffic routing policies would be a major
determinant of revenue. In the BOLT and OYW schemes,
revenue to the partner is guaranteed through a lease rental.
In terms of revenue sharing the POW administrative
arrangement is being questioned. In the case of Railway
Sidings, PRCL and KRC the principle of distance based
sharing seems acceptable. PRCL and some Railway Sidings
also offer a traffic guarantee to IR. In catering contracts
there is an attempt to move from licence fees to a revenue
sharing arrangement at least for large contracts.
• Commercial partnerships must have decision making
autonomy (independent of interference from IR) to pursue
their own goals and implement strategies effectively.
CONCOR and to a certain extent KRC, would be good
examples of this. They have been able to develop a variety
of customer oriented initiatives. The POW and Railway
Sidings are not structured for such autonomy though they
could do a lot better if provided the autonomy. For example
the expertise developed in running POW has not been
internalized in a way that transfer of the same to other
potential tourist train circuits is easy. Railway Sidings have
more often than not been an area of conflict between IR
and the partner. Special efforts to distance organizations
such as CONCOR and KRC in their operations from the
IR may be necessary.
• POW has done reasonably well and the PRCL is also
likely to do so since the partners (RTDC and GPPL
respectively) have apparently strong stakes in the success of
these partnerships. In the context of Railway Sidings and
the OYW schemes while the partners have strong stakes the
structuring and decision making scope have not permitted
the partners’ interests to fully mature.
• CONCOR and the Catering Contracts can be viewed
as well structured projects in which there is a consistency
between the goals, decision making autonomy, scope of
operations and financing. The POW, Railway Sidings and
OYW schemes have not been well structured since they are
Table 10.1.3
Attributes of Commercialization by the Railways
Railways’ Goal Revenue/ Decision
Equity Clarity for Market Risk Making
Leverage the Activity Borne by Autonomy of Interest
the Activity the Entity
just administrative arrangements, lacking any form of
ownership which would have been possible, say through an
SPV. Often these administrative arrangements are implicitly
one sided and biased in favour of IR. KRC though an SPV,
is not well structured since the scope of operations are not
consistent with the market risk.
• In the OYW scheme the partners are not happy with
the structuring or the service levels. The IR too may be a
loser financially in this scheme due to the high lease payments.
• All the commercial partnerships have transaction costs.
Monitoring adds to (transaction) costs. The charges payable
by CONCOR to IR for carriage of containers, liabilities
dues to delays and safety violations need proper definition.
The same would apply in all the other situations with
varying degrees of complexity. In the case of PRCL, defining
and monitoring traffic rights, route interconnections, traffic
guarantees, operations and maintenance charges and service
levels, etc. would be complex. If such a project were
undertaken within the ambit of IR there would not have
been the need to define these transactions. Are the benefits
therefore in excess of the transaction costs?
• The charges paid by CONCOR and KRC (and possibly
PRCL in the future) to IR are neither transparent nor
contestable. Had they been so other stakeholders and other
possible players could have had the opportunity to contest
and offer better charges. In the context of revenue sharing
on the POW and service levels on the Railway Sidings and
OYW, even though there is transparency, there is no
contestability. The catering contracts were contestable partly
because a competitive tendering process was adhered to.
• The Table 10.1.3 below summarizes the attributes of
the efforts at unbundling commercialization by the Railways.
The dimensions considered are equity leverage, goal or
objective clarity, market or revenue risk, decision making
autonomy granted to the new entity, stakeholders’ interest,
project structuring quality, extent of transaction costs and
transparency/contestability.
Partner/ Project Transaction Transparency/
Stakeholders’ Structuring Costs Contestability
Quality

CONCOR Low High High High Low High High Low

POW Low High High Low High Low * Medium
Sidings Low– Low High– Low High Low * Medium
Medium Medium
PRCL Medium * Medium * High Medium High Low
KRC High Medium Medium High Low Low * Low
OYW High Low Low * High Low * Medium
Catering High * Low * High High * High
* information available is not sufficient to comment upon.
Source: Author’s analysis.
296 India Infrastructure Report 2002
10.2 CIVIL AVIATION IN INDIA: DEREGULATION AND CONSTRAINTS
TO GROWTH AND EFFICIENCY10
India reverted back towards an open sky policy11 in the
nineties conforming to the worldwide trends in the aviation
sector. The main reasons for deregulating the civil aviation
sector in India were the following:
• Decline in performance as well as profitability of
both Air India and Indian Airlines due largely to
organizational and managerial inadequacies.
• Increased passenger demand from 1990 onwards
necessitated additional capacity creation in the domestic
market which Indian Airlines could not manage.
• Opening the civil aviation sector was in keeping with
policy of economic liberalization more generally.
Consequently the major reform measures initiated in
the domestic market are as follows:
• Private firms were allowed to operate scheduled and
non-scheduled services thus removing entry and exit barriers.
• The aircraft type and size was decided by the operator
and not by the government as was previously the case.
• Foreign equity up to 40 per cent and Non-Resident
Indian (NRI) investment up to 100 per cent was permissible
in the domestic air transport services.
• ‘Open sky’ for cargo operators on a permanent basis
was instituted.
• Fares were deregulated and left to the market.
However equity from foreign airlines was not allowed
directly or indirectly in the domestic air transport services.
Private operators were also not allowed on international
routes. This restriction was placed despite there being no
Indian carriers plying to certain countries like Spain and
Australia.
The new air transport policy also laid down categorizations
of air services and routes. For the systematic development
of air transport services, four categories of operator services
were defined––Scheduled Airlines, Regional Airlines, Non-
scheduled (Air Taxi) Charter Services and Air Cargo Services
for transportation of cargo and mail. Scheduled airlines
were to operate on routes according to a published timetable
each flight being open to use by members of the general
public. Regional airlines were to operate between state
10
This is based on Chapters 3 and 4 of the NCAER study on
civil aviation by Subir Gokarn.
11 [The ‘open sky’ policies even elsewhere does not imply that
the markets are entirely competitive. Landing rights auctions are
constrained by the notion of bilaterals, which is a major factor
restricting competition from third country carriers]
Subir Gokarn
headquarters and other cities and towns in the region. Non-
scheduled services were to cover specialized traffic like
business tours, executive flights and special flights to
destinations without scheduled flights. Air cargo services
were either on a scheduled or a non-scheduled basis but
could not carry passengers. However these destinations are
within the country. Operations outside the country of
whatever kind required the special permission of the Director
General Civil Aviation (DGCA).
The second important categorization is of air route
dispersal. This was done in order to account for the need
of air transport services in different regions of the country.
Accordingly, a three-way categorization was made. Category
I consists of to and fro routes from:
• Mumbai to Bangalore, Calcutta, Delhi, Hyderabad,
Chennai and Trivandrum;
• Calcutta to Chennai and Bangalore;
• Delhi to Bangalore, Hyderabad and Chennai.
Category II routes connect stations in the north eastern
region, Jammu and Kashmir, Andaman and Nicobar Islands,
and Lakswadeep. Category III consists of routes other than
those on category I and II. The guidelines further mandated
that all scheduled operators are required to deploy on category
II routes at least 10 per cent of their capacity deployed in
category I routes. Of this, 1 per cent capacity was to be
deployed exclusively on category II stations. Moreover, 50
per cent of the capacity provided on category I routes were
to be deployed on category II routes. These two categorizations
are important as they have been at the root of the many
problems faced by the Indian civil aviation sector.
IMPACT OF PARTIAL LIBERALIZATION
Since the repeal of the Air Corporations Act and the entry
of private operators, seven private airlines were assigned
‘scheduled’ status and were allowed to operate on all domestic
routes alongside Indian Airlines. Apart from these there
were 27 non-scheduled operators12. However there are no
private operators on international routes.
Initially there was a lot of euphoria and optimism that
accompanied the entry of private operators in the Indian
12 As on 1 April 1998 the number of scheduled operators stood
at seven and the number of non-scheduled operators stood at twenty
seven.

domestic market. But the bulk of the private operators
could not sustain their operations for long and soon turned
into sick units. There are several factors that contributed
towards this. The operators had to adhere to the route
categorization laid down by the government, or in other
words had to ply in certain economically unviable routes.
But these airlines operated long-haul jets on the trunk
routes and due to lack of smaller aircraft had to operate
category II/III routes with bigger aircraft incurring
unnecessarily high costs thereof. Many of the private
operators lacking the scale could not afford to maintain
separate aircraft for flights on category II/III routes.
Not all the operators who entered were professionally
managed. Many could not adhere to regular timetable.
Some were even involved in disputes relating to lease
agreements, payment of dues, lack of schedule integrity,
frequent shifting of routes and operations, etc. Most of the
airlines turned sick. Thus despite liberalization and
deregulation of the civil aviation sector the domestic air
transport sector has not grown on expected lines. The private
airlines which had to close down, blamed their sickness on
the following main reasons.13
• Lack of transparent and consistent government policy
• Route dispersal guidelines – especially the insistence
on operation on uneconomic routes
• High cost of aviation turbine fuel
• High inland air travel tax and income tax on leasing
of aircraft
• High rates of airport charges
• Lack of adequate airport facilities and limited watch
hour problem at minor airports and
• Uneconomic fares
The experience of the air taxi operators have not been
particularly different. The operators who started operations
in the wake of the open sky policy adopted a regional or
feeder approach. Yet, none of them have been consistently
profitable and they have had their share of problems and
difficulties in operating in an uncertain and difficult
environment. They have suffered due to certain policies of
the DGCA too. For example the DGCA does not allow the
use of semi-prepared airstrips. The cost for the concrete
airstrip rises by eight to ten times. Such high cost is not
always justified where operations of air taxis might be needed.
When there is a temporary need semi-prepared airstrips can
well be used. Again, single turbine aircraft were not allowed
in India, while the cost effectiveness between a single turbine
aircraft and a twin turbine aircraft can be substantial.
Moreover there is very high customs duty on aviation gas
fuel which is used primarily by the air taxi operators.
13 GOI (1988), ‘Report of the Committee to Review the Reasons
for Sickness of Private Domestic Airlines’, Ministry of Civil Aviation,
Government of India, New Delhi.
Integrated Transport 297
Existing Bottlenecks
Many problems that are generated and perpetuated in the
civil aviation sector in general stem from a lack of foresight
on the part of the government.
• The DGCA is vested with a lot of power which needs
to be delegated. Approval of aircraft procured and types that
could be used need to be more flexibly defined. Again
kuccha or semi-prepared airstrips ought not to be completely
banned. Similarly single turbine aircraft if allowed could
have aided the growth of air taxi operators in the country.
• Wet Lease is not allowed in India. Again, hiring of
foreign professionals require certain clearances and the
procedures take a couple of months, whereas they are usually
required when there is an emergency.
• Scheduled operators do not have route flexibility. As
a result no specialization among operators could emerge.
This is perhaps the most important limitation in the policy.
• There is no system of valuation and sharing of burden
in routes that are uneconomic. There should have been
some way by which the region benefiting from the forced
operation of in economic routes compensating the airline.
Alternatively route permits could have been made tradable
which could have ensured that the lowest cost airline(s)
operate the routes most suitable to it.
• Underutilized and unutilized loading slots in other
countries could have been given to private airlines.
• Many smaller airports suffer from the watch hour
problems (i.e., the airport staff operate only till 6 p.m. in
the evening). This constitutes a major problem in the
development of fractional ownership of aircraft.14
• There is need for a more transparent system to allocate
landing (time) slots, parking space, air terminal space and
ticket counters at airports.
AIRPORTS
In India, the airports are owned by a government
department—the Civil Aviation Ministry of the Government
of India, and thus are under national public ownership. The
Airport Authority of India, a body directly under the Ministry
of Civil Aviation manages the airports. The Airport Authority
of India came into existence on 1 April 1995. It was formed
by merging the International Airport Authority of India and
the National Airports Authority in order to bring about an
integrated development, expansion and modernization of
the operational, terminal and cargo facilities at the airports
in the country conforming to international standards. It is
also responsible for managing the entire Indian airspace and
14Where there is a huge future potential and is the practised
norm in Europe.
298 India Infrastructure Report 2002
provides air traffic services over the entire Indian airspace
and adjoining oceanic areas.
At present there are 449 airports/airfields in the country
but the Airport Authority of India manages five international
airports, 87 domestic airports and 28 civil enclaves, a total
of 120 in the country. However most of the airports are
almost non-functional. Of the total traffic in 1996–7, more
than fifty per cent was handled at the airports in Mumbai
and Delhi. All the airlines together operate only through
61 airports. Thus there is an uneven distribution in the flow
of traffic resulting in lack of infrastructure at certain places
and at the same time a massive under utilization of the
existing network of airport infrastructure. Other problems
have been overstating, limited commercial orientation and
inadequate maintenance. Most airports depend upon
government subsidies.
The Policy on Airport Infrastructure
The Ministry of Civil Aviation brought out a Policy on
Airport Infrastructure in December 1997. The policy
acknowledged that airports do assume a significant role in
the national economy and the quality of airport infrastructure
contributes directly to a country’s international compe-
titiveness and the flow of foreign investment. The document
also mentioned that the government was developing a
separate policy framework for the entire civil aviation sector
and so the present document on airport infrastructure should
be read along with the national policy on civil aviation.
Nevertheless the policy on airport infrastructure is very
sketchy and simplistic in its approach.
The policy proposes to reclassify airports into international
hubs, regional hubs, and other operational airports.15 For
this purpose and in keeping with ICAO standards and
recommended practices, airport infrastructure is proposed
to be modernized and upgraded. Greenfield airports and air
traffic services according to ICAO (International Civil
Aviation Organisation) standards and recommended practices
are also planned. For this CNS/ATM (communication,
navigation, surveillance/air traffic management) systems are
to be introduced on a priority basis. Ground handling,
cargo handling and airport security are also to be according
to ICAO standards and recommended practices. The policy
15 Airports are presently classified into five categories––
international airports, customs airports, model airports, other domestic
airports and civil enclaves in defense airports. Apart from the
international airports, customs airports have limited international
operations. Model airports are domestic airports, which have a
minimum runway length of 7500 feet and adequate terminal capacity
to handle aircraft of the Airbus 320 type. They can also cater to
limited international traffic if required. All other airports are covered
under the fourth category apart from the 28 civil enclaves in defense
airfields.
on airport infrastructure also recognizes the low landside
revenue generation in the Indian airports16 and proposes to
improve the same.
The policy on airport infrastructure lays a lot of stress
on the need for financing of airport infrastructure by the
private sector. For this the report proposes that ‘foreign
equity participation in such ventures may be permitted upto
74 per cent with automatic approvals and upto 100 per cent
with special permission. Such participation could also be by
foreign airport authorities’.
In order to facilitate private sector participation the policy
on airport infrastructure proposes to establish an Airport
Restructuring Committee in the Ministry of Civil Aviation.
The committee is to identify existing airports where private
sector participation in the development and upgradation of
infrastructure is desired. The committee would also prepare
a shelf of projects in respect of greenfield airports and the
pre-feasibility reports are to be made available to the private
sector. The policy also prepared an independent statutory
body called the Airport Approval Commission having
adequate technical and financial expertise to examine the
proposals for private sector participation and submit its
recommendations for the central government to decide.
The decision of the government was to be irreversible. Fiscal
incentives for airport development were prepared in the
policy. It also lays down the roles of the central and the state
governments. Finally the policy paper also proposes to
establish a fair and independent appellate authority, called
the Airport Regulatory Board as a grievance redressal
mechanism, which would help in speedy and effective
resolution of disputes among the various stakeholders.
Existing Bottlenecks
The policy on airport infrastructure had identified the
problem areas in the existing system as being:
• The need to declare some additional airports as
international airports
• The need for capacity addition in some of the airports
to overcome congestion
• The need for improvements and upgradations in some
of the airports and
• Overcoming the deficiencies in respect of ground
handling facilities, night landing systems, cargo handling
etc., at some airports.
But the policy on airport infrastructure does not directly
address problems. In fact the policy paper touches on every
topic from modernization and upgradation of airport
infrastructure, to airport security and legal framework, but
they do not directly address these identified needs.
16This is around 22 per cent compared to 60–70 per cent
worldwide.
 Integrated Transport 299

Box 10.2.1
Regulatory Institutions in Civil Aviation in India

The Ministry of Civil Aviation of the government of India is the apex body in the regulatory structure of civil aviation in Ind ia.
The Ministry of Civil Aviation is responsible for the formulation of national policies and programmes for development and regulation
of civil aviation and for devising and implementing schemes for orderly growth and expansion of civil air transport. Its functions
also extend to overseeing the provisions of airport facilities, air traffic services and carriage of passenger goods and services. Within
its administrative purview lie certain organizations1 that include Bureau of Civil Aviation Security (BCAS), the Directorate General
of Civil Aviation (DGCA) and the Airports Authority of India (AAI).
The BCAS is attached to the ministry of civil aviation. The BCAS is responsible for laying down the standards of pre-embarkation
security and anti-sabotage measures vis-a-vis civil flights in India but does not take part in the actual enforcement on the ground.
This is entrusted to the respective state/union territory police.
Although the ministry of civil aviation is the apex body, it is the office of the directorate general of civil aviation which is most
important in the regulatory structure of civil aviation in India. The directorate general of civil aviation is responsible for:
• regulation of air transport services to/from/within India; registration of civil aircraft;
• formulation of standards and grant of certificate of air worthiness for civil aircraft registered;
• licensing of pilots, aircraft maintenance engineers and flight engineers;
• licensing of aerodromes in India;
• investigation into air accidents and incidents;
• rendering advice on matters relating to air transport;
• processing of aviation legislation;
• supervision of training activities of the flying / gliding clubs in India;
• development of light aircraft, gliders and wenches and
• type certification of aircraft.
It also coordinates all regulatory functions with International Civil Aviation Organization and is in charge of the implementation
of bilateral air service agreements with foreign countries.

1 This categorization under the Ministry of Civil Aviation and the subsequent functions of the bodies under it is based on the definitions provided
in the Annual Report of the Ministry of Civil Aviation. For details see Annual Report 1998–9, Ministry of Civil Aviation, Government of India.

Safety and Regulation17 Entry, licensing of airports and licensing of aviation

Adequate safety is the primary factor in a well functioning
civil aviation system. Currently the regulatory structure is
not appropriate for that objective. There is a serious mismatch
between the capabilities and objectives of the DGCA from
what is required. Adequate safety involves the creation of
a system that allows the growth of the industry, facilitates
entry and expansion of activities and infrastructure, and at
the same time ensures that unhindered growth does not lead
to a fall in safety standards.
A regulatory structure that consists of these distinct
institutions is most appropriate for India. Each of the
regulatory agencies would have to be completely independent
and autonomous. Their areas should also be mutually
exclusive––the recommendations of one being binding on
all concerned including other regulators.
• The Civil Aviation Authority or the CAA oversees the
technical aspects of aviation—both airports and air services.
17 This section has benefited tremendously from the Report of
the Committee on Aviation Safety submitted to the Ministry of
Civil Aviation in 1997. The committee was headed by Air Marshall
JK Seth.
professionals should come under its purview.
• The economic regulator––aims at preventing the long-
term monopolization of air services. Both the pricing related
aspects of airports as well as competition between airline
operators should come under its purview.
• Accident appraisal agency––investigates accidents and
recommends improvements as and when required.
The regulatory agencies should have senior level personnel
(at the Director General level) who have an extensive
understanding of the aviation industry. They may be from
the government or outside but have long (about five years)
and secure tenures.
The regulatory agencies should be autonomous in the
matter of recruitment/appointment and financial mana-
gement within the budgetary allotments made by the
government. Moreover there should be a sound mechanism
for maintaining a reasonable balance between the number
of officers of different backgrounds.18
18 A balanced force of engineers, pilots, air traffic controllers and
communications engineers are available. Other professionals such as
legal and medical officers, meteorologists and psychologists should
also be involved.
300 India Infrastructure Report 2002
The economic regulatory agency would be well advised
to involve non-governmental economic and legal experts.
There should also be a forum for appeals and arbitra-
tion.
The investigation of accidents/incidents should be
segregated from the DGCA and entrusted to an independent
body of expert pilots, engineers and air traffic controllers
having very substantial practical experience of aviation. It
may be named as the Accident Investigation Bureau, and
be an integral but functionally independent part of the Civil
Aviation Board.
10.3 STATE ROAD TRANSPORT UNDERTAKINGS IN INDIA: ISSUES,
CONSTRAINTS AND OPTIONS
Over the past few decades the share of road transportation
in total surface traffic movement in India has been gradually
increasing with a definite shift away from the railways being
observed. According to recent estimates (GOI 2000) the
road transport sector is currently handling around 80 per
cent of passenger movements and 60 per cent of freight
movements as compared to its estimated share of 20 per
cent and 11 per cent in passenger and freight traffic
respectively in the early fifties. A scrutiny of the financial
performance of State Road Transport Undertakings (SRTUs)
in India for the year 1999–2000 reveals that the total loss
of all SRTUs taken together was around Rs 1960 crores.
Only 85 per cent of costs could be covered through receipts.
Table 10.3.1 portrays the existing scenario for rural, hill-
based and urban SRTUs.
Table 10.3.1
Magnitude of Profits and Losses 1999–2000
Rs crores Rural Hill-based Urban Total
Costs 10370.88 357.12 2424.23 13151.24
Revenues 9065.22 243.15 1878.88 11187.25
Profit/Loss –1350.66 –113.97 –545.35 –1963.99
Source: Indian Journal of Transport Management (2000), 24 (7).
The recovery-cost ratio indicates the extent to which
total costs can be covered through receipts. Ratios pertaining
to SRTUs for the study period by different types are presented
in Table 10.3.2.
The recovery-cost ratio has declined in the case of rural
and hill-based SRTUs. Urban SRTUs performed only slightly
better in this respect. Therefore the overall recovery-cost
ratio increased insignificantly from 0.85 in 1997–8 to 0.86
As practised in progressive countries and supported by
the ICAO there should be a confidential reporting system
for aviation personnel to point out safety hazards experienced
or observed by them along with suggestions for their remedy.
A rigorous system of safety audits covering the entire industry
needs also be set up.
Civil-military coordination in air traffic control which
is presently not satisfactory should be enhanced. Defence
aerodromes used by scheduled civil flights should be either
licensed or subject to joint civil-military inspections for
enhancing safety of air transport operations.
S. Sriraman
Table 10.3.2
Recovery–Cost Trends
Type of SRTU 1997–98 1998–99 1999–00
1. Rural 0.92 0.87 0.88
2. Hill based 0.85 0.68 0.72
3. Urban 0.76 0.77 0.77
Source: Computed from ‘STU Profile and Performance. 1997–8,
1998–9, 1999–00’, CIRT, Pune = Recovery-Cost ratio = Total
Revenue/Total Costs.
in 2000–1. Traditionally fleet-utilization has been seen as
the key to physical performance. Fleet-utilization has been
increasing steadily in almost all the undertakings in the
recent decade. The demand conditions though are reflected
through the load factor (LF) parameter. Therefore what
needs to be emphasized is the LF which ultimately determines
the revenues that can be generated by expansion of bus
services through greater fleet-utilization.
LFs on the other hand have been declining over the last
several years. The large influx of private operators in an
unorganized and unregulated manner has contributed to
this declining trend. Declining LFs are to a certain extent
responsible for the gradual fall in the recovery-cost ratios
especially in the case of rural SRTUs (Table 10.3.2). Our
case studies in Maharashtra, Rajasthan, Himachal Pradesh
and Haryana reinforce the view on these emerging trends.
In the case of Himachal Pradesh the effect of falling LFs
has been somewhat compensated by fairly frequent increase
in fares. In Rajasthan, to mitigate the adverse effect of the
private sector on the SRTUs LFs, the policy has been to
geographically demarcate operating zones between the private
sector and the public sector. A similar policy adopted by the

state unit in Haryana preventing private operators on state
and national highways by restricting their operations to
‘link roads’ has however failed to materialize. The rise in
recovery-cost ratios in the case of urban-based SRTUs is
primarily due to the increase in ‘LFs’ and a higher rate of
increase in average fares as compared to rural and hill
SRTUs (Sriraman, 2000).
Fares Policy
The SRTUs have determined their tariffs based on so-called
fully distributed (or allocated) costs. These prices do not
measure by what amount costs would be increased if
additional quantities of any particular service were taken or
by what amount costs would be reduced if the service were
correspondingly curtailed. There are costs that are averaged
by an arbitrary method. Another defect of the fully allocated
cost criterion is its complete neglect of any demand data.
The optimal price to achieve profit maximization will differ
from that needed to maximize social welfare or sales revenue.
Thus an essential requirement for these undertakings to
function on business principles19 is for them to enjoy
complete autonomy to set their prices in line with costs.
There is definitely a need to include a built-in efficiency
criterion in regard to physical performance so as not to
impose undue burdens on the user. This is especially required
in the context of an emerging competitive market for bus
services wherein efficiency considerations would be of
primary importance and a more effective, rational and
integrated fares policy could be expected to emerge.
Social Obligations
Cross-subsidization which is not based upon the commercial
judgement of the transport undertakings ought to be treated
as a form of social burden—on par with expenditures on
say, students or handicapped persons and referred to as
concessions earlier—for which it is commonly agreed that
the government should share the responsibility rather than
allow undertakings to cross-subsidize from their profits. A
part of the costs of unremunerative routes need to be cross-
subsidized by remunerative operations to lower the burden
of subsidy on government. But to ensure this, it is important
for an SRTU to have a proper mix of remunerative and
unremunerative routes. The remunerative segment of many
SRTUs especially the rural and hill-based ones are in jeopardy
due to the influx of private operators in the past decade in
many states. These are the so-called ‘A’ category routes on
which the undertakings cover both their fixed and variable
19 As envisaged under Section 22 of the State Road Transport
Corporations Act, 1950 which states that ‘It shall be the general
principle of a Corporation that in carrying on its undertaking it shall
act on business principles’.
Integrated Transport 301
costs and are also able to generate some surplus. Over a
period of time the number of routes coming under this
category has been falling. The case studies referred to earlier
bring out this feature clearly.
Private Sector Entry
Liberalization of the Indian economy in the early nineties has
provided the basis for the directive issued by the Planning
Commission in 1992 which asked the SRTUs to make room
for the private sector in all their routes except the loss-
making ones and not to expand their fleets in the future.
According to Dalvi (1993), the argument in favour of
deregulation in the passenger road transport sector is
unassailable since the road transport market is perfectly
contestable where little significant scale economies exist for
a monopoly operator to exploit, and where the presence of
a monopoly supplier in such a market only serves to restrict
user choice and increase costs as has probably been the case
with SRTUs in states which had opted for total nationalization.
The counter argument in favour of nationalization would
draw attention to operating performance of some SRTUs
which is as good as that of many private operators and private
operators may avoid unremunerative routes.
A feverish bid to curtail budgetary assistance to the
SRTUs has undoubtedly been the prime motive behind
increasing private sector operations. Vested political interests
in private sector operations are dominant. As a consequence
the influx of private operators almost entirely on remunerative
routes appears to jeopardize the revenue earning potential
of the existing SRTUs.
Consider the case of Himachal Pradesh where it was
observed that private sector operations are concentrated in
the Dharamsala division of the state (see Table 10.3.3).
With comparatively better roads, higher population and
higher density of settlements, the Dharamsala division has
higher traffic potential and is therefore attractive to the
private sector. Thus the main problem being encountered
by the SRTU here is that LFs have been adversely affected
especially on the remunerative routes. LFs are inherently
low for hill-based SRTUs when compared to the others due
to small scattered population settlements.
Table 10.3.3
Haryana Roadways: Share of Private Sector
(percentage share)
Division Private sector HRTC
Shimla 15 85
Mandi 35 65
Hamirpur 50 50
Dharamshala 65 35
Source: CIRT (1997).
302 India Infrastructure Report 2002
In Haryana some demarcation of areas for private sector
operations was made and accordingly permits issued. These
operators could operate only on inter-district routes which
are essentially link roads. To ensure monopoly of Haryana
Roadways in profitable inter-state routes, these link roads
could include national and state highways only to a maximum
of 15 km. But unauthorized operations have affected the
state unit adversely (see Table 10.3.4). There seems to be
definite diversion of patronage to private operators as revealed
by declining LFs. With lower tax burden, weak maintenance
practices and poor adherence to labour laws, private operators
are able to illegally indulge in fare cutting and still manage
to break even (Sriraman and Sarkar, 1999).
In Maharashtra too, with the liberalization of issue of
permits since the early nineties, all India tourist permit
holders are engaged in long-distance clandestine operation
while smaller vehicles concentrate on short-distance routes.
As a result, between 1990–1 and 1999–2000, load factor
of the Maharashtra State Road Transport Corporation
(MSRTC) has come down from nearly 81 per cent to less
than 63 per cent. It is estimated that throughout Maharashtra
over 50,000 medium vehicles and 5000 private buses are
involved in clandestine operation with the result that MSRTC
is losing approximately Rs 800 crores per year (Gawhane,
Karekar and Mohite, 2000).
Many state governments have not been able to regulate
the private sector effectively despite an adequate regulatory
framework provided by the Motor Vehicles Act 1939 which
has been comprehensively amended during the past decade.
Laxity on the part of the state governments has in fact,
facilitated growth of unauthorized operations in this sector.
This is perhaps the most serious problem confronting the
SRTUs today. With such large quantum of resources at
stake, there is an ardent need to restructure these undertakings
to meet emerging requirements.
Our simulation studies of SRTUs reveal that the load
factor LF and a critical fare level are most significant
influences on the financial performance of an SRTU. These
Table 10.3.4
Performance of Haryana Roadways
Year Share of Total Effective Vehicle Utilization
Kilometers (per cent) (Kms./ bus/ day)
1990–1 100.0
1991–2 100.0
1992–3 100.0
1993–4 100.0
1994–5 81.0
1995–6 80.0
1996–7 80.0
1997–8 79.6
1998–9 79.0
Source: Sriraman and Sarkar (1999).
exercises undertaken for the different SRTUs reveal three
scenarios. Scenario one relates to the case of undertakings
in Tamilnadu where there are 20 such units that have been
registered as companies under the Companies Act. Almost
all of them achieve a high level of physical efficiency in
terms of the parameters and have high LFs. This performance
does not get reflected in the financial performance since fare
levels are low. A uniform tariff for units across the state in
spite of varying sizes and characteristics and low levels of
such tariffs (15 to 16 paise per passenger km. compared to
25 to 30 paise or more in the case of units in Maharashtra,
Karnataka, etc.) have resulted in huge losses to these units
despite high levels of efficiency. On the other hand under
scenario 2, higher fare levels but low physical efficiency has
contributed to losses in states like Maharashtra, Gujarat,
etc. Improvement of performance to optimal levels could
see the emergence of large surpluses. For example, an increase
in LF in MSRTC could bring in additional revenue at
1997–8 performance levels. Under scenario 3, undertakings
need to take care of price increases as well as take measures
to promote efficiency. Thus this analysis reveals that the LF
and a critical fare level are significant influences on the
financial performance of an SRTU. Given the emerging
liberalized economic framework, SRTUs would need to
effectively tackle the problem of low LFs in a variety of
ways. It must be understood that while LF is mostly demand
driven, it is also supply-induced. Once this is realized an
appropriate fare strategy is required to set the organization
on a long-term growth path.
But systemic changes are required and the reform package
should possibly consist of inter alia
• Incentive schemes linked to achievement of targets;
• Any kind of funding through government channels
must be linked to achievement of targets;
• Ad hoc principles governing fares must be done away
with and
• Granting complete autonomy at all levels within the
undertakings.
Passengers Carried Load factor
(lakhs) (per cent)
268.59 5534.47 82.2
288.16 6100.94 82.6
297.97 6922.60 82.3
310.48 7251.64 73.0
315.66 7183.68 76.5
301.81 6117.59 78.6
296.24 6228.05 76.1
292.90 5060.07 68.5
284.00 NA 63.0

10.4 GOVERNANCE ISSUES IN AIRPORT DEVELOPMENT: LEARNINGS FROM
COCHIN INTERNATIONAL AIRPORT LTD.
Air traffic to Kerala (described by the National Geographic
Traveler in October 1999 as one of the 50 must see
destinations and later in April 2001 as the most beautiful
place in India) came from tourism and expatriate Keralites
and their families, mainly from the Gulf region. It was
estimated that more than two million people of Kerala
origin were working abroad for whom air was the most
common mode (rather, the only available) of travel. Kerala
had three functional international airports within 600 km—
Trivandrum (Thiruvanantha-puram), Cochin (Kochi) and
Calicut (Kozhikode).
The Indian Navy owned airport located in Willingdon
Island in the centre of Kochi city had the distinction of
integrating multiple forms of transportation (air, sea, rail
and road) in a small island. The island also headquartered
the Western Command of the Indian navy. The Airports
Authority of India (AAI)20 maintained a civilian enclave in
the naval airport. The airport was profitable even though
the Indian navy received a substantial share of the revenue
generated. The effective runway available for landing was
5000 feet out of a total runway length of 6000 feet which
allowed landing of smaller Boeing 737 aircraft with a load
penalty (limited passengers and fuel). Strategically Indian
Airlines had decided to phase out the 737 series on account
of higher fuel consumption and substitute it by larger, new
generation aircraft like Airbus 320 and 300. The runway
20 Airports Authority of India (AAI) was formed by the merger
of International Airports Authority of India and National Airports
Authority through Airports Authority Act (N0. 55 of 1994). It came
into existence on 1 April 1995. AAI manages all airports which
handle commercial air traffic. The airports are classified as international
and domestic. Domestic is further classified into three categories.
AAI also provides air traffic services over the entire Indian airspace
and adjoining oceanic areas.
International Airports: This status is accorded by GOI. These
airports are available for scheduled international operations by Indian
and foreign carriers.
Domestic Airports:
a. Customs Airports with Limited International Operations: These
have custom and immigration facilities for limited international
operations by national carriers and for foreign tourist and cargo
charter flights.
b. Civil Enclaves in Defence Airports: These are civil enclaves in
defence airfields, where limited commercial operations by domestic
airlines are permitted. These airports are under the operational
control of the defence and AAI uses the facilities on payment basis.
c. Other Domestic Airports: All other airports, where domestic
airlines are allowed are covered in this category.
Integrated Transport 303
Biju Varkkey • G. Raghuram
of Kochi airport was not equipped to handle larger aircraft.
The airport had the threat of closure hanging over it.
This, along with the need for more direct air connections
and seating capacity, generated public opinion towards
upgradation of airport facilities. The conservative estimate
of expanding the existing runway was Rs 70–72 crores
(1991 price levels). There were technical and social issues
like the giant crane of Kochi shipyard located close to the
aircraft approach path, reclamation of land from the
backwater, relocation of the railway line and rehabilitation
of 200 households. All these were expected to increase the
project cost. The owner of Willingdon Island, Cochin Port
Trust Ltd. had reservations about airport expansion. In their
opinion, the scope for port expansion would be reduced if
land was given for expanding the airport. The Indian navy
was also not interested in making investments for developing
the airport.
THE COCHIN INTERNATIONAL AIRPORT LIMITED
(CIAL) EXPERIENCE
Initial Financing Plan
The fund requirement for a new airport was estimated at
roughly Rs 200 crore based on discussions with AAI and
aviation experts. One of the subcollectors proposed the idea
of raising money from the Gulf based NRIs (Keralites) who
stood to benefit most from the new airport. (The Gulf
bound air passengers were forced to spend two days in
transit in Mumbai or other cities. Their representatives had
been demanding direct connections from Kerala.
Thiruvananthapuram and Kozhikode airports had direct
Gulf connection, but the demand far outstripped supply).
Investment could come in the form of interest free loans and
donations from NRIs as well as corporates and other societies.
Kissan Vikas Patrikas (KVP: a savings scheme of Government
of India, which doubled the principal in 66 months) could
back the loans. For every Rs 5000, KVP of Rs 2500 would
take care of repayment, yielding Rs 2500 directly as cash.
GOI had a scheme of lending back 75 per cent of the
collected amount to the state government for developmental
purposes as low interest, long term loan. Remaining amount
could be raised as donations from corporate bodies. Four
lakh investors, constituting 20 per cent of Gulf based Keralites
could build the airport by contributing Rs 5000 each. (Table
10.4.1 gives details of the initial financing plan).
304 India Infrastructure Report 2002
This loan from GOI came at very low interest and long
repayment period. Repayment could be made when income
from the airport accrued and from the sale of excess land
(By design, extra land had to be acquired, keeping repayment
in view). The contributors would have privileges like special
check in counters, waiting lounge, reserved car parking,
directorship in the airport board etc.
Table 10.4.1
Initial Financing Plan (1992)
Categories in Rs crores
A. Interest Free Deposit from 4 lakh 200
NRI’s @ Rs 5000 per NRI
B. Money invested in KVP’s of Rs 2500 each for 100
repayment in six years when the amount doubles
C. Cash in hand (A – B) 100
D. Loan against KVP’s 75
(75 per cent of Rs 100 crores)*
E. Donations 25
Total C + D + E 200
* GOI loans upto 75 per cent of the money collected, back to
the states at very low interest and long repayment period. The
money needs to be used for developmental purposes.
Source: CIAL Records.
The new financing plan was submitted to the chief
minister (CM) of Kerala by the district collector. Impressed
by the innovative fund raising technique (which had no
financial burden on the state government) the CM asked
the district collector to prepare a proper project report and
agreed to the suggestion of forming a charitable society for
the purpose of raising money. Meanwhile media carried
news about the developments on the airport project which
mostly evoked positive responses. The NRI community was
particularly enthused by the project. The first contribution
came to the district collector as a personal cheque for
Rs 20000 from Mr. Jose Maliakal, an NRI from Gulf.
The Kochi International Airport Society
Kochi International Airport Society (KIAS) was incorporated
as a charitable society in July 1993. The district collector
was appointed the special officer for the airport project and
was relieved of field responsibilities.
Despite the limited euphoria about the airport project
created by advertising in the local media the funds did not
flow in as expected. Abroad, particularly in the Gulf countries,
KIAS had to compete with the fund raising attempts of
Kozhikode airport. (Kozhikode airport had also adopted the
same model for funding on the suggestion from AAI). The
scheme could raise only Rs 4 crores, as against the anticipated
Rs 200 crores. Mr. C. V. Jacob, a businessman from Kochi
made the first contribution of Rs 25 lakhs.
Table 10.4.2
Project Cost (as on 31 December 2000)
in Rs crores
Land Acquisition and Rehabilitation Expenses 70
Construction Cost—Runway, Terminal 160
Buildings and Other Utilities
Interest Capitalized 53
Total 283
Source: CIAL Records.
Formation of CIAL
Meanwhile the land acquisition proceedings had progressed
to the stage of issuing notifications under the Land
Acquisition Act 1894. (Notification for acquiring about
500 acres for public purpose had been issued by then21).
It was impossible to revert back. Government of Kerala
(GOK) was reluctant to contribute money for the airport
at the early stage of land acquisition. To mobilize funds it
was decided to incorporate a public limited company. The
project was to be funded by equity share capital of Rs 70
crores and loan funds of Rs 130 crores. Thus the CIAL was
incorporated on 30 March 1994 as a public limited company
with Rs 90 crores authorized capital. KIAS entrusted the
responsibility of constructing the airport to CIAL and the
special officer was appointed the Managing Director of the
company. The existing donors were given the option to
convert their loans into equity shares. The project was to
be completed in three years and the tentative date for
inauguration was fixed as 15 August 1997.
The estimate provided by a British company for building
the airport was Rs 500 crores excluding land price.
Meanwhile, the Federal Bank Ltd, a scheduled commercial
bank that had its origins in the neighbourhood of
Nedumbasserry sanctioned a bridge loan of Rs 10 crores for
six months, at 15 per cent interest. The bank was convinced
to associate itself with the project based on emotional ties
with the locality.
Land Acquisition
Three associations of landowners whose land would be
acquired were formed. Protests soon began. Demands for
stopping the project were made by sections of the people.
Some were willing to give up their land, but for a good
price. The elected representatives like MLAs had diverse
political affiliations. Meanwhile the CM who supported the
21 The Land Acquisition Act 1894 governed land acquisition by
the government in Indian territory. Under the act both central and
state governments hold the power to declare land as being required
for public purpose and the respective state machinery initiates the
acquisition proceedings.

project initially, had to move out of power following an
internal political reorganization.
CIAL finally acquired 1300 of the 1400 acres of land it
intended. The land acquired for the approach road was
more than what was required for a four-lane road. CIAL
had plans to commercially exploit the additional land at a
later stage. As the land value along the approach road
appreciated the original landowners demanded that the excess
land be returned. (Their demand had political support and
CIAL board had eventually taken a decision to return the
land). The original landowners were willing to pay back the
price paid during acquisition. However, under the Land
Acquisition Act it was near to impossible to work out the
return of land which would open altogether another
speculative dimension in the already troubled subject of
land acquisition.
Close to 5000 trees were cut and spot payment of
compensation was made. Since the land was on the approach
path of flights, the landowners were prohibited from planting
trees in this land even though this strip of land was fertile.
Paddy cultivation was not economical. The affected group
of landowners had initiated collective action, both legal and
political to force CIAL to acquire the land at the same rates
which CIAL had paid for the adjoining land.
Land Compensation
The airport authorities used a new option of negotiating
with landowners to determine the compensation package.
Through negotiation it was possible to build in contentious
variables like quality of land, earning potential of the land
etc22. A broad framework for compensating and reha-
bilitating the affected people was arrived at after consultations
with representatives of the landowner’s associations and
representatives of political parties. All the negotiations were
based on the tactical understanding developed with the
opinion leaders. A high power committee chaired by a state
minister negotiated the prices with representatives of land
owners. CIAL made price offers of Rs 4,000–6,500 per cent
(a hundredth of an acre) of dry land and Rs 300–1,800 per
cent of wet land (including paddy fields). Provisions of the
Land Acquisition Act were to be invoked in case of those
who refused the negotiated agreement.
Around 400 court cases were filed and one of them was
decided by the supreme court. The land for airport was
acquired from about 2,300 landowners. Eight hundred and
seventy two households had to be shifted. Those who lost
22 The Land Acquisition Act provides two routes to arrive at
compensation. The district collector could decide on the compensation
or the court upon a reference could decide the same. In the former
case there are no concrete guidelines. In the case of court reference
there are certain guidelines to arrive at the compensation. The
landowners are allowed to challenge the award in the higher court.
Integrated Transport 305
houses were rehabilitated in three locations which came to
be called as Six Cent Colonies (since six cents of land was
given to each family losing their house). One member from
each family which lost both house and land would be
considered for direct employment or provided indirect
employment opportunities in the airport like taxi permit,
managing public telephone facility or vending beverages. As
on 28 February 2001, 85 evictees had direct employment
in CIAL and 691 were given indirect opportunities.
The hurdles in land acquisition continued at every stage.
Runway and terminal building construction could not start
as planned because some residents refused to move out.
There were some false claims of houses in the form of
temporary hutments that came up overnight. They were
bargaining for a better deal and creating discontent among
those who had willingly given up their property rights.
These claims were surpassed with caveats from court and
at times through forceful eviction.
In addition CIAL had to deal with socially sensitive issues
like relocating three temples, two churches, a burial ground
and a mystery tree which had acquired the status of a
pilgrimage centre. (The tree located near the proposed
runway was considered impossible to fell since it possessed
divine powers. However it fell down on a cyclonic night).
CIAL followed a liberal approach to relocate the places of
worship after detailed discussions with religious leaders,
priests and community leaders. All expenses for relocation
including cost of conducting religious rituals related to
relocation were borne by CIAL.
Building the Airport
AAI had agreed to provide technical advice and runway
design to CIAL free of charge. The foundation stone for
CIAL was laid on 21 August 1994. CIAL appointed KITCO,
a state government enterprise as technical consultants.
KITCO was responsible for monitoring the progress of the
project and coordination. Absence of clear guidelines and
interdepartmental conflicts had almost brought work to a
standstill. CIAL could also claim the distinction of not
losing even one day of project time due to labour unrest,
otherwise a common feature in Kerala.
Financial Resource Mobilization
In March 1995, HUDCO sanctioned a term loan of Rs 25
crores at 16.5 per cent interest. GOK sanctioned Rs 1 crore
towards equity. The government contributed the next
instalment of Rs 5 crores to equity. Private placement efforts
brought in Rs 15 crores as equity.
The company decided to adopt the public issue route.
The public issue was discussed with merchant bankers and
financial institutions whose response was not very
encouraging. GOK indicated its inability to contribute more
306 India Infrastructure Report 2002
resources but was at the same time concerned about losing
control if another strategic partner was brought in. The
12th meeting of the board of directors of CIAL suggested
that, for maintaining control GOK should hold at least 51
per cent of the equity. The government accepted this decision
and a notification was issued in September 1997 in principle
enhancing the equity participation of GOK to 51 per cent.
This notification became the policy governing future
investment decisions in CIAL.
Since GOK was not in a position to contribute its equity
share efforts were made in the direction of raising equity
from the other stakeholders. Three public sector oil
companies were approached for giving refuelling rights in
CIAL. BPCL won the exclusive rights in exchange for
Rs 5 crores contribution towards equity. Equity contribution
also came from other service providers and public. The
equity holding community was spread in 30 countries.
Majority of the NRI as well as domestic investors were
attracted to the project through word of mouth and news
about CIAL. The company also contributed its bit towards
public relations through press releases and public meetings
in different parts of Kerala. NRIs, businesspersons and local
self-governments were personally contacted and requested
to commit to the project. The idea of owning a share in
an airport was emotionally irresistible to many. The public
relations drive directly handled by the MD prompted many
service providers as well as small investors to look at CIAL
favourably.
First Year of Operations
The airport was inaugurated by the President of India on
25 May 1999. Commercial operations started from June
1999 with Air India operating the first flight to the Gulf.
Shortly afterwards the commercial enclave in the old airport
was closed and domestic operations shifted to CIAL.
The airport had put in place a spacious car park, visitor’s
gallery, a pre-paid taxi system run through a co-operative
society and airport security managed by the Kerala Police.
Other airport services like fuelling facilities, public canteen,
foreign exchange counters etc. were in place by agencies
who participated in financing the airport. Even though
GOI had not yet declared CIAL as an international airport
(implying foreign airlines could not use the airport) national
carriers would operate international flights. Central agencies
like customs and immigration required for handling
international travellers had been organized. The airport
project envisaged handling 17 flights a day during the first
year of operations moving up to 31 flights a day in the fifth
year of operations.
AAI was the designated agency under the Airports
Authority Act responsible for providing Air Traffic Control
(ATC) services over Indian airspace. AAI owned airports
and all equipments required for ATC was installed by AAI.
The facility was managed by a special cadre of Air Traffic
Controllers who were AAI employees. According to
international convention all airlines travelling through the
airspace had to pay for the navigation support provided by
ATC. This was a major source of aeronautical revenue for
AAI. (The proposed new policy on civil aviation which
permitted private participation in airports, had clarified
that ATC was AAI’s responsibility. However the policy was
vague on the investment for ATC equipments and facilities
and the revenue sharing between AAI and the private airport.
Pending resolution of this issue the inauguration of the
airport was impossible.) AAI insisted that CIAL install the
ATC equipment while they would manage the facilities and
keep the revenue.
The MD of CIAL keeping the date of inauguration in
view, signed an MOU with AAI, where all equipment would
be installed by AAI for which CIAL would make payments
later on a cost plus basis. ATC charges had two components:
Route Navigation Facility Charge (RNFC) and Terminal
Navigation and Landing Charge (TNLC). According to the
MOU, CIAL would reimburse the cost of navigation
equipment installed by AAI and allow it to keep the RNFC.
CIAL would receive revenue from TNLC levied on airlines.
This MOU was subject to the approval of the CIAL board.
AAI went ahead and installed the necessary equipments for
traffic control.
AAI was the licensing authority for all airports in India.
AAI which itself was responsible for constructing and
managing the airports gave a permanent license to the
airports. Periodic inspections were conducted to ensure
compliance to standards. CIAL being the first airport outside
the control of AAI was given a temporary license valid for
three months. The license was renewable every three months
based on regular inspections. CIAL’s demand for a permanent
license was not accepted.
The closing of the old naval airport to civilian traffic was
a precondition for the viability of CIAL. The Indian navy
had already recorded its objections about the active civilian
enclave on grounds of internal security. However some
prominent citizens of Kochi objected to the closure of the
old airport and filed a public interest litigation or a PIL.
AAI employees stationed at the old airport and the private
airline company which had made investments there also
acted as pressure groups against shifting domestic operations.
There was also pressure from domestic travellers to keep the
old terminal open and leave CIAL to handle international
flights only. However the court decision and the civil aviation
ministry favoured CIAL for domestic operations. The civil
enclave in the old airport was closed and the AAI employees
were redeployed.
The civilian enclave supported a number of taxis that
provided the last leg of connectivity to the passengers. The

taxi operators from the old airport had approached the
CIAL management demanding rights to operate taxi services.
However by that time CIAL had formed a society of evicted
people to operate the taxi services. The evictees had
approached banks for loans. The initial traffic was not
sufficient to provide work for all the taxis. The taxi drivers
were under pressure to service the loans. (Some of the taxi
owners had borrowed money from private agencies against
pledge of the vehicle. The loan disbursement was faster and
involved less paper work. Default in payment resulted in the
vehicle being confiscated without notice.) Relatives who
came with own transport usually received the NRI travellers.
Business passengers and tourists used the pickup service
provided by the city hotels. The traffic flow in international
and domestic terminals were different. The CIAL taxi drivers
went to the extent of preventing city hotels from picking
up passengers directly from the airport and forced NRIs to
use their services. The matter was resolved by re-engineering
the prepaid taxi system. In addition restrictions were set for
other private vehicles and auto-rickshaws for picking
passengers from the terminals. The old airport taxis were
disallowed the right to operate from CIAL. Informally CIAL
did not press for operating long distance state transport
buses from the airport even though such an arrangement
could have benefited the passengers. In return the taxi
drivers had voluntarily agreed to follow a CIAL managed
allocation and payment system. They also agreed to a code
of conduct with passengers.
CIAL had decided to allow a single agent to handle the
ground service operations in CIAL. This was the common
international practice. Air India was given the exclusive
rights through open bidding and a high profile pitch made
by the Chairman, Air India to the Board of Directors.
Other parties involved in the bidding process approached
the court against the order. The domestic private airline Jet
Airways also approached the court citing that the exclusive
agent arrangement that too by a rival airline company was
detrimental to customer service.
CIAL had high expectations on revenue generation from
cargo operations. The responsibility of managing the cargo
operations was entrusted to Air India on a revenue sharing
basis. (15 per cent of cargo revenue would accrue to CIAL.)
The cargo operations failed to reach expected levels since
according to CIAL the tariff rates of AI was high.
At the time of inauguration of the airport the company
was already facing the interest burden from loans taken
from banks and FIs, particularly HUDCO. This information
led to speculations regarding the viability of the airport and
even the probable closure of the airport. This had its effect
on investor confidence.
Competition from Kozhikode and Thiruvananthapuram
could not be discounted. When CIAL started operations Air
Integrated Transport 307
India and Indian Airlines diverted some of their international
flights from these airports. All the three airports required
more flights to be viable. In the process, the lobbying done
by the state government got diffused and all three airports
were competing between themselves to protect their existing
flights. Even before the inauguration of the airport, several
international airline companies had indicated their
willingness to operate direct flights from CIAL which
included diverting existing flights from neighbouring states.
CIAL was able to obtain virtual monopoly of allowing
chartered flights carrying pilgrims for performing Haj
ceremony. The airport had anticipated the market and built
special facilities for catering to Haj pilgrims. Kozhikode
airport was directly competing with CIAL for the Haj
flights.
On the land acquisition front CIAL continued to face
hurdles. The critical Instrument Landing System (ILS)
commissioning was delayed because of the failure to acquire
land and remove obstacles (including houses) that fell in the
glide path of the aircraft. Lack of ILS was cited as a reason
which delayed the international airport status for CIAL and
had created discomfort to passengers and airline companies.
The delay which came from the GOK side inspite of the
fact that all the owners were willing to surrender their land
for a negotiated price was attributed to vested interests
operating in other airports. In addition, land acquisition
proceedings for the approach road and the eastern end of
the runway was in progress.
Into the Second Year: At Crossroads
In a strict sense CIAL was not a private airport. GOK
through a board level resolution had decided to hold
minimum of 51 per cent stake in CIAL. This would be
achieved through direct contribution from GOK and
investments from profit making state enterprises. Central
PSUs like AI and BPCL also held equity stake in the company.
In strict sense CIAL could be defined as a joint sector airport
with private–public participation. Even as on March 2001
the state government had not contributed its full share of
equity capital.
GOI controlled awarding landing rights to airline
companies which allowed them to operate from a specific
airport. India has so far entered into bilateral air service
agreements with 96 countries out of 185 countries that were
part of ICAO (International Civil Aviation Organization),
out of which 54 involved Air India. According to the civil
aviation minister, (Business India, June 11–24, 2001) the
demand for bilaterals came from state governments interested
in more connectivity for their respective populations. In
spite of demands from passengers request from GOK and
applications made by various foreign airline companies, no
decision was taken until March 2001. In April 2001 the
308 India Infrastructure Report 2002
central government allowed one foreign airline to operate
from CIAL. Applications from other airline companies were
being processed.
Aircraft refuelling was another revenue earning activity
that was envisaged and oil companies had created necessary
infrastructure, particularly a fuel hydrant system that could
reduce refuelling time considerably. CIAL could not exploit
this revenue earning facility also. Lack of traffic affected the
non-aeronautical revenue stream also since this had a direct
relationship with passenger traffic.
Right from the first day of commercial operations CIAL
followed the tariff structure adopted by AAI for landing
charges since any new tariff structure had to be ratified by
AAI. The landing charges were fixed based on the weight
of the aircraft. According to CIAL the AAI tariff structure
was inappropriate for new airports since the cost structure
of AAI airports and CIAL were different. A flexible tariff
structure would have enabled the airport to offer innovative
and flexible packages to airline companies. In addition CIAL
faced difficulty in collecting the charges from PSU airline
companies.
On the cargo front customers preferred to take cargo to
Thiruvananthapuram or Kozhikode. AI was not proactively
marketing their services to exporters. Hence the facilities
and capacity created by CIAL were unused. CIAL took over
the cargo operations from AI and started to manage the
operations with its own staff. Efforts to promote the cargo
operations included direct contact with exporters and
construction of a cargo village in the airport land modelled
after the Dubai cargo village. AI did not take this move very
kindly.
The MOU signed between AAI and MD, CIAL regarding
ATC payment was rejected by the board of CIAL. According
to the MOU, CIAL was to receive revenue only from TNLC
levied on airlines. As per CIAL the RNFC receipts were four
to five times the TNLC. CIAL refused to honour the MOU
commitment since it implied that CIAL had to reimburse
AAI to install and maintain the ATC equipment while AAI
received the bulk of the revenue. CIAL argued that the
revenues already received by AAI from RNFC was sufficient
to provide a 60 per cent return on investment or ROI on
AAI’s investment. This standoff came in the way of upgrading
the navigational facilities including installing radar facility
(estimated to cost Rs 25 crores). Further CIAL argued that
under the AAI Act and the draft policy on aviation, AAI was
bound to provide ATC services over Indian airspace. CIAL
was ready to allow AAI to keep the entire RNFC revenue
if AAI was responsible for investment in ATC equipment
and its maintenance. On the other hand it sought a share
of RNFC revenue from AAI.
Security services in the airport became a subject of concern
for CIAL. Initially the state police had the responsibility for
maintaining airport security. The police department charged
the airport a fee for the services. Later the services of a
professional security agency were enlisted for traffic control,
parking area management etc. In view of the increased
threat perception to aircrafts and aviation infrastructure,
GOI had unilaterally handed over the responsibility of airport
security to a paramilitary force, Central Industrial Security
Force (CISF). The cost involved in maintaining CISF in an
airport was considerably higher than using the services of
the state police. The airport had no direct control over CISF
since it would be under the Commissioner of Aviation
Security, Ministry of Civil Aviation. However the airport
had to bear the expenses of CISF and provide required
infrastructure like family housing and transportation.
Moreover there were concerns about the customer friendliness
of an organized paramilitary force. (CISF itself had
commissioned a customer perception survey, the results of
which indicated otherwise). CIAL was able to negotiate an
arrangement with AAI where the expenses for maintaining
CISF would be subsidized and the company would forfeit
a large share of the passenger service fee component in the
flight ticket in favour of AAI.
Revenue Model
The monthly average flights were 280 in the domestic sector
and 109 in the international sector during the initial
operations until December 2000 while the projected averages
were 330 domestic flights and 190 international flights even
during the first year. The international flights were less since
foreign airlines could not land at CIAL. Even after the
declaration as an international airport, lack of bilateral
agreements did not allow foreign airline landings in CIAL,
in spite of requests from several of them.
The business model of CIAL was heavily dependent on
the Gulf based NRIs. Employment trends in the Gulf region
indicated that job opportunities were shrinking as a result
of the Emiritization drive and fast-changing job profiles in
Gulf countries. Unskilled and semi-skilled labourers who
had gone during the boom period were returning in
thousands causing a severe strain on the Kerala economy.
At the same time the trend was shifting towards employment
markets in Europe, the Far East and US. Kerala was also
fast becoming a tourist destination and a critical point in
the southern circuit considered as the alternative to the
traditional golden triangle. However the national carriers
were restricting themselves to the Gulf sector which was
very lucrative for them. Allowing direct flights from other
sectors were necessary for long term viability of CIAL. This
would pre-empt the competition from Kozhikode which
has Gulf bound traffic as the only market segment as well
as boost the tourism development efforts of Kerala.
The cargo operations began in September 1999. In the
first 16 months until December 2000 the monthly average

was 159 tonnes in the domestic sector and 244 tonnes in
the international sector, adding to a total of 403 tonnes. The
projected average for the first year of operations was a total
of 1250 tonnes. It is interesting to note that in the international
sector, the export traffic was twice the import traffic.
The monthly average operating expenditure was Rs 62
lakhs during the period June 1999 to March 2000 and
Rs 59 lakhs during April to December 2000. During the
latter period, the actual was about the same as projected.
The personnel costs were restrained to half the projected
through control on intake and deferring the revision of
compensation structure. (CIAL had patterned the
compensation following AAI. When the AAI stakes were
revised only AAI deputationists were paid according to revised
scales.) While maintenance charges were lower than
projected, the general expenses were higher. The expenditure
on electricity and water charges as well as reimbursements
to AAI were significantly higher than the projected figures.
CIAL had an operating surplus right from the first year
of its operations. However the margin was inadequate to
cover the debt servicing. As per projections, complete debt
servicing was expected to be feasible from the second year.
The actuals indicate otherwise leading to the need for
financial restructuring.
Corporate Governance
The position of chairperson, Board of Directors CIAL was
held by the CM of Kerala. Other members of the board
were elected legislators, bureaucrats, FI nominees and investor
directors. The board had provision for 15 members including
three positions reserved for nominees of financial institutions.
The composition of the board as on 31 March 2001 indicated
that two positions of FI nominees were vacant.
The composition of the board, particularly its political
nature had been a subject of criticism. Apprehensions about
political and official influence on the CIAL project were
raised at different points of time. However CIAL was of the
opinion that the presence of the chief minister and legislators
as board members facilitated the company to work around
complex governmental systems, particularly land acquisition.
The minority shareholders (Indian public and NRI’s)
numbering around 10,040 had also demanded representation
in the board. Under the umbrella of Cochin International
Airport Share Holders Association (CIASHA) their nominees
had planned to contest for directorship. However on request
of the chairman (CM of Kerala), the nominations were
withdrawn. The other demands placed by the association
included immediate payment of dividend, while an
infrastructure project in normal course required high
gestation period.
The general elections conducted in April 2001 witnessed
a complete reversal of fortunes of the then ruling front. The
Integrated Transport 309
new political alignment (which was in power while the
project was initiated) had reiterated its commitment to the
development of CIAL. However a section among them
demanded removal of all political nominees of the previous
government from the board of CIAL and that the new CM
should assume chairmanship of the board. One argument
was, since, the CM of Kerala occupied the position of
chairman of CIAL board, the previous CM automatically
ceased to occupy the position. However there was another
point of view. Since the existing board appointment was
made by the annual general body meeting or AGM, it
would be prudent to wait till the next AGM for appointing
the chairman. In addition a former CM of Kerala also
indicated an interest in the chairmanship. Air India which
had equity and other financial investment in CIAL also
demanded board level representation. They also cited the
absence of air transportation professionals who could offer
guidance to the company at the board level as a risky
practice.
Capital Structure
The project cost as on 31 December 2000 was Rs 283 crores
including capitalized interest (Table 10.4.2). Table 10.4.3
gives the capital structure as on 31 March 2001. CIAL had
an authorized capital of Rs 90 crores and a paid up capital
of Rs 78.93 crores as on 31 March 2001. The government
of Kerala, (as per a CIAL Board decision dated 23 September
1996 and the related government order or GO dated 29
August 1997) had decided to hold at least 51 per cent of
equity in CIAL directly and through state owned enterprises.
This was to have effective government control over the
company. The GOK contribution stood at Rs 32.45 crores,
which was 39.85 per cent of the paid up capital. To make
the GOK share 51 per cent, under the current paid up
capital the authorized capital has to increase to Rs 94 crores.
GOK would have to bring in Rs 15.5 crores (see Tables
10.4.2–10.4.3).
Airport service providers (Air India, Bharat Petroleum
Corporation Limited, State Bank of India and Federal Bank)
had brought in Rs 21.25 crores as equity. NRI directors and
their relatives contributed Rs 14.14 crores. Six thousand
one hundred and sixty Indian residents and 3880 NRIs were
equity holders in the project with contribution of Rs 4.48
crores and Rs 5.4 crores respectively. The NRI investors
were spread in 30 countries. Two banks—India Overseas
Bank and Dhanalskshmi Bank Ltd. together contributed Rs
0.75 crores as equity.
In order to make payments towards HUDCO term loan
CIAL wanted to raise additional equity by offering a 1:1
rights issue. The closing date for rights issue had to be
extended twice. The GOK’s inability to contribute its share
had shaken the confidence of other investors who refused
310 India Infrastructure Report 2002

Table 10.4.3 inception, the term public purpose has been defined in
Capital Structure (as on 31 March 2001) vague terms. The Supreme Court also supported the view
Rs crore that the term need not be defined strictly. The apex court
was of the view that, the conditions which existed during
Equity Participation
Government of Kerala and Public 32.45
the time of acquisition need to be taken into consideration
Sector Undertakings and hence it would be better if the term is not clearly
Non-Resident Indians and others 24.23 defined. The power of the act could be leveraged by the
Airport service providers 21.25 government for notifying the intention of taking the land.
Total 77.93 The process also gave opportunity for the affected public
to voice their reservations. Past experience of land acquisition
Loan Funds
in India showed that the process led to acquiring more than
HUDCO—Term Loan 152.72
Federal Bank 24.69
the required land. The additional land was often kept without
State Bank of Travancore 27.51 any economic activity. The CIAL project also acquired more
District Cooperative Bank 12.00 land than it wanted for its core operations and further
Total 216.92 expansion. Further, the project had built in income from
land sale and commercial exploitation of surplus activity as
Interest Free Deposits major sources of revenue.
M/s Air India 11.00
During the process of land acquisition complete
M/s. Thomas Cook 0.50
M/s. Indian Oil Corporation 0.75
information about the extent of land required was kept
M/s. Alpha Retail—Duty Free Shop 10.00 hidden from the public. In this case land acquisition and
Retail outlets 2.75 the project proceeded almost together. While this approach
Total 25.00 could have phased the pressure on payments, operationally
it was not a desirable process. At a later stage the project
Total 319.85 layout had to be altered under political pressure and to meet
the convenience of influential individuals. The process that
Note: The equity contribution of non resident Indians and others
was expected to be Rs 36.3 crores, to make the total equity followed led to avoidable misperceptions among public and
Rs 90 crores. considerable energy had to be diverted to resolve the conflicts.
Source: CIAL records. A section of landowners were able to obtain a decision from
CIAL board to have their land returned. This decision
to subscribe unless GOK contributed its full share. Further, which is awaiting governmental approval could set a
the rules disallowing capital and dividend repatriation precedence of returning the land acquired for public purpose.
prevented NRI investors from contributing to the equity. To clear the flight path, trees in the flight path area were
(In April 2001, the foreign investment promotion board or cut and compensated by evoking the relevant provisions of
FIPB allowed dividend repatriation). The rights issue which Aircrafts Act. While the land ownership remained there
could generate equity up to Rs 188 crores, had failed to raise were restrictions on further construction in the area. The
any money. residents of the area suffer noise pollution, loss of agricultural
During the initial stages CIAL had offered equity stake income and damage to houses. The application of Aircraft
to the Airport Authority of India. AAI rejected the offer on Act denied compensation for any of the above effects. Legal
the grounds that the AAI Act did not permit equity holding. and mass action was initiated to have CIAL acquire the land
According to press reports while the international investment and compensate. The differences which would arise due to
community and the Indian FIs had shown interest in CIAL application of the two different acts need to be dealt with.
the state government was against such investments due to Compensation for acquired land was a contentious issue
perceived dilution of its interest. in land acquisition deals. The practice for determining the
price based on prices declared in governments records would
not work. Such prices are normally understated. Acceptable
IMPLICATIONS FOR GOVERNANCE compensation could be arrived at only by leveraging the
political process and at rates close to real market value. It
Land Acquisition
was equally important to manage the public perception that
All matters related to acquisition of land for project purposes the evictees had received a fair deal and the local community
were governed by the Land Acquisition Act of 1894. The would also benefit from the project. In spite of this there
Act empowered the central and state governments to acquire would be legal battles that need to be anticipated and
land for what was considered to be public purpose. From prepared for.
 Integrated Transport 311

Rehabilitation and Resettlement corporate governance and clear national policy on air
infrastructure would be essential to mitigate this risk.
Land acquisition often resulted in depriving a set of people
The revenue risk was due to demand uncertainties (driven
the livelihood and quality of life they were used to. The
by the market environment, service and policy on bilateral
process also harmed the fragile cultural fabric which was
agreements) and pricing. This risk can be mitigated by
shared by the community. The mechanical process of
creating a better dependence on non-aeronautical revenues,
compensation payment and resettlement did not always
developing and executing marketing strategies aimed at
help them to effectively rebuild their lives. Experiences of
different market segments (foreign and domestic airline
similar schemes were not very encouraging.
companies, charter flight operators, cargo), being customer
Rehabilitation schemes conducted with proper socio-
friendly in service delivery, lobbying for more traffic through
economic assessment of the locality with emphasis on family
bilateral agreements and in doing sufficient homework to
and cultural identities, could reduce the pain of relocation.
take appropriate pricing decisions.
In addition, community participation in the scheme through
The operating risks were due to cost escalation,
open dialogue and involvement of political, social and
unanticipated delivery of obligatory services like security in
religious leaders who had the trust of community members
the manner determined by external agencies, staffing, labour
could ensure speedy resolution of conflicts. Community
union relations and lack of coordination among various
members also expect their own economic upliftment in
agencies. Each of these causes of risk are complex and need
return for the sacrifice made. They would invariably support
to be dealt with in a generic manner through better anti-
projects which provide them with such opportunities.
cipation and professional management.
Involvement in the form of direct employment or indirect
The regulatory risks were due to uncertainty in licensing
benefits was the acceptable convention. Here also legal battles
(by DGCA), tariff fixation and revenue sharing (with AAI).
and hard bargaining should be expected and prepared for.
Clarity in the policy for air infrastructure would help mitigate
the risk.
Viability of Airports
It could be observed in the Indian context that decisions Staffing
about locating airports are at times based on political
Key people who managed the airport development came
considerations rather than commercial viability. Kerala’s
from the state government services and AAI. The first MD
proposed fourth airport to be located at Kannur was gifted
was from the IAS with prior experience in district
by a civil aviation minister who was born in Kannur. This
administration and management of state enterprises. CIAL
decision was announced in a public meeting, inspite of the
had recruited some senior professionals for critical positions
fact that there are two functional airports in the vicinity—
like finance, fire services, company secretary etc. from the
Kozhikode and Mangalore. Even though traffic studies
market. All technical personnel came from AAI on
conducted by AAI indicated that the airport was economically
deputation. Staff for critical administrative functions like
not viable, political interference led to identification of land
personnel and administration, land acquisition etc. came on
and even eliciting commitment from private sector investors
deputation from state government. Some deputationists
(including a member of a Middle East ruling family known
chose to join CIAL at a later stage. The state government
for making high profile investments). Similar experiences
appointed the present managing director, who also belonged
could be traced in other states also.
to the IAS. (The present MD had prior experience of
This raised serious questions about demand assessment,
managing major infrastructure facility in Kerala, even though
competition policy and governance. In the absence of clear
by cadre affiliation belonged to another state.)
guidelines, governments can encourage pure speculative and
Airport operation is a niche area that requires high quality
political interests affecting the viability of an airport with
trained personnel. Currently AAI is the only source of trained
a significant capital investment.
people, which has developed its captive recruitment and
human resource development capabilities. As private airports
Risk Mitigation
increase the natural inclination will be to recruit personnel
CIAL faced a variety of risks including political risk, revenue from AAI. This might hurt the interests of AAI and eventually
risk, operating risks and regulatory risk. lead to strained relationships. (The national air carrier, Indian
The political risk was due to non-continuity of political Airlines Ltd. faced a similar situation when the airline sector
leadership, lack of clarity on the decision making roles of was opened.) Planned interventions at the national level to
the centre and the state, and local political activism. Effective develop human resources for managing airports are required.
312 India Infrastructure Report 2002
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