Privatization of Delhi & Mumbai Airports - A Bumpy Take Off

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Case Details:

Case Code : ECON016
Case Length : 21 Pages
Period : 2003-06
Pub Date : 2006
Teaching Note : Available
Organization : Airport Authority of India, Ministry of Civil Aviation
Industry : Civil Aviation
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts Contd...

The Release of the Note

In order to bring transparency to the bidding process, the GoI made public a confidential note dated December 3, 2005. The note, which was prepared for the EGoM, contained the views of the GRC and IMG on the bidding process, comments on the various parties' ability to fulfill the contract, several observations regarding the bidding process like the technical evaluation and the apparent interests, if any, of the consultants. According to the note, the GRC was of the view that there was no apparent bias or prejudice against any individual bidder in the process. However, the GRC found the evaluation criteria, as specified in the RFQ, subjective in nature which, therefore, made it difficult for the evaluators to allocate a purely objective marking for the bidders...

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Efforts to Bring in Transparency

To quell the controversy that arose with the announcement of the technical bid results, Reliance sent an open letter to the EGoM dated December 20, 2005. It was signed by J.P.Chalasani (Chalasani) Director, Reliance Energy, and stated that the bidding process was not manipulated. The letter stated that most airport evaluations undertaken by international organizations were subjective in nature...

Continuing Controversy

The announcement of the successful bidders gave rise to other controversies. Reliance-ASA, which earlier was one of two technically qualified bidders and was sure to get at least one airport, ironically, did not get either airport. Immediately on the announcement of the financial bid results, Reliance protested against the award of the bids, pronouncing the modification in tender conditions hours before the final decision as 'untenable' and 'illegal'. It challenged the bidding process in the Delhi High Court and sought a stay order. Even Sterlite-Macquarie-ADP and DS Constructions-FMG dissented on the award of the bids...


Analysts were of the view that even if the case did get sorted out, it was unlikely that the projects would be completed on time and in line with the several conditions, some of which were quite difficult to comply with. One of the responsibilities given to the bidders was to clear the slums at the Mumbai airport. It was anticipated to become another roadblock to the modernization of the airports...


Exhibit I: Services Provided by AAI
Exhibit II: World's Top Ten Airports
Exhibit III: Mandatory Projects to be completed by the Winning Consortium by 2010
Exhibit IV: Information about the Bidders
Exhibit V: Marks Awarded to various Bidders by EC for Delhi Airport


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