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RTI Activist Krishnaraj Rao’s Views : Govt leased 2000 acres of public land to GVK Ltd for Rs 100 rent. Justified ?

9 June 2011 One Comment

Two of the three companies in Consortium with GVK are dummy companies registered from a single address in Mauritius. Why did Union Govt allow this shady deal?

First, the news: Central Information Commissioner Sushma Singh delivered a well-reasoned order in response to a complaint filed against Mumbai International Airport Limited (MIAL) by Pune RTI Activist Sanjay Shirodkar (sanjay.shirodkar@gmail.com, 9766313997). In a Right to Information (RTI) application filed in 2008, Shirodkar asked questions related to parking facilities for normal civilian vehicles and embassy vehicles. He also asked about the pricing of mineral water at the Mumbai International Airport.

His RTI application was rebuffed by MIAL, which argued that it was not a public authority as per RTI Act 2005, and therefore did not have to reply to his questions.

Shirodkar appealed to the Information Commission. CIC MM Ansari ruled in his favour in June 2008. MIAL then appealed in Delhi High Court, which asked the Information Commission to hear the case again after giving sufficient notice to the company. This was complied, and finally on 30 May 2011, came CIC Sushma Singh’s order. The order confirms that MIAL is undoubtedly a public authority, and therefore must appoint a Public Information Officer (PIO) for replying to RTI applications within one month.

Download this order: http://tinyurl.com/Mumbai-International-Airport

NOTE: Important issues and conclusions are highlighted in the Word file.

SOME REMARKABLE FACTS ARE STATED ON PAGE 23 & 24 OF THE CIC ORDER:

1)      MIAL is using 2000 acres belonging to Airport Authority of India (“Miniratna Category-1 Public Sector Enterprise” according to AAI’s website), the actual market value of which is about Rs 50,000 crore. For this, MIAL is paying lease rent of Rs 100 every year to AAI.

2)      Maharashtra Government has waived stamp duty worth Rs 200-250 crore with respect to MIAL.

3)      MIAL is a consortium of GVK Airport Holdings Pvt Ltd, ACSA Global Limited, Bid Services Division (Mauritius) Ltd, and AAI. AAI holds 26% shares; also, three out of 13 directors on the board of MIAL are AAI nominees. In spite of being the beneficiary of such massive public funding and also government involvement in management control, MIAL has successfully evaded answerability under RTI for over 5 years already. Are the AAI nominees and Aviation Ministry ignorant of this evasion? Or are they just feigning ignorance? Even now, Shirodkar is unsure of receiving the little bit of information that he requested over three years ago. The reason? MIAL may appeal against this order to Delhi High Court, and then, Supreme Court if necessary. The company can continue buying time using the judicial system because time is money! “What is a citizen or RTI activist to do?” asks Shirodkar, feeling helpless in the face of such delaying tactics.

MORE FACTS ARE FREELY AVAILABLE ON THE INTERNET:

4)      In March 2011, GVK Airport Holdings Private Limited (GAHPL), a subsidiary of infrastructure giant GVK Power & Infrastructure Limited, bought out the 13.5 % stake held by Bid Services Division (Mauritius) Limited (BSDM) in MIAL. Therefore, GVK now has a 50.5% stake in MIAL. [Question: BSDM is one of those private offshore companies registered in Mauritius, with no apparent business activities. Did nobody in Govt of India ask who is behind this mysterious “Entity number C58109” that seems to have only a serial number and no directors, promoters etc? Even the date of formation is not disclosed. Who is this company fronting for? Not Dawood Ibrahim, one hopes. Is it possible that Union Aviation Minister Praful Patel, or some friends and family members are behind this front-company?]

5)      GVK bought this 13.5% stake at $240 million. (The legal work was done by Law Firm AZB & Partners, Express Towers, Nariman Point. Specifically, it was done by a partner in the law firm named Rajendra Barot.) A rough conversion into rupees @ Rs 45 per dollar gives you Rs 126 crore. As per this original Shareholding Agreement, available at http://www.aai.aero/righttoinformation/SHA_MIAL.pdf, the entire paid up capital (initial subscription) of MIAL in March 2006 when it was incorporated, was Rs 200 crore. [So, in five years, BSDM booked profits of over 450% on this round of divestment in return for zero participation in business activity. As the business of running Chhatrapati Shivaji airport is handled by GVK alone, this was purely a speculative profit. Please note that this was the second round of divestment by BSDM; GVK had evidently already bought out 13.5% at an earlier stage. With this latest transaction, BSDM washed its hands of the entire 27% stake in MIAL.]

6)      Now let us look at ACSA Global Limited, which is the fourth partner in the consortium, with 10% shareholding as per the original Shareholding agreement. It is another Private Offshore Company registered in Mauritius in February 2005, Entity Number C58296. Another front-company with no substance. [The address of both BSDM and ACSA Global are given in the Shareholding Agreement as “Les Jamalacs, Vieux Conseil Street, Port Louis, Mauritius.” BSDM’s contact is given as Mr Ryan Licht, Fax no. +27-11-772-8972. ACSA Global’s contact is given as Mr Rory Mackey, Fax no. +27-11-453-9354. One is curious to know which of MIAL’s directors stays in touch with Mr Licht or Mr Mackey, and for what purposes. When this consortium was put together to form MIAL as a special-purpose vehicle, was anybody at all exercising due diligence? WILL SOMEONE PLEASE CONTACT THESE FAX NUMBERS AND ASK QUESTIONS, AT LEAST NOW? ]

7)      So, as far as one can see, the only two real entities in this dubious consortium called MIAL are GVK and AAI. Currently, GVK owns an overwhelming majority of the shares in MIAL, and is in creeping acquisition mode to acquire further control. GVK’s latest annual report is available from http://www.gvk.com/files/annualrport/GVKPIL-AR-28-06-2010-Final.pdf (and its earlier annual reports can be downloaded from http://www.gvk.com/investorrelations/financialinformation/financialannualreports.aspx ). Page 8 of the latest annual report says, “The Airport assets (Mumbai and Bangalore Airports) as associates of the company have contributed to net profit of Rs. 51.68 Crores compared to Rs.31.55 Crores in the previous year. This includes Rs.2.59 Crores from the Bangalore Airport which has become an associate of your company only in January, 2010. The net profit after tax was Rs. 155.87 Crores as against Rs. 107.56 Crores in the previous year, an increase 44.91%.”

Does it sound like MIAL / GVK needs 2000 acres of public lands to be virtually gifted to it at Rs 100 per annum by Govt of India? Is this subsidy for public good or overwhelmingly for private good?

One is also curious to know what happens after the 30-year lease period is over, and GVK has acquired, say, 74% of the shareholding? Is this land to be transferred to GVK for a token amount like, say, Rs 1000? Will the government decide by default that MIAL is now free to shift the airport to another location – say Nhava Sheva – and GVK can develop the 2000 acres of land in the heart of Mumbai in any way that it pleases?

To learn more about GVK, go to http://www.gvk.com/investorrelations/investors/investors.aspx

This website says, “GVK has consolidated its infrastructure assets under one company making it an integrated infrastructure player. As part of the consolidation, all the infrastructure assets in Power, Airport, Road, and Mining will now come under one umbrella of GVK Power & Infrastructure Limited (GVKPIL).  As a result of this consolidation, Mumbai International Airport Pvt. Ltd. (MIAL) which operates India’s busiest airport, the Chhatrapati Shivaji International Airport in Mumbai and GVK Jaipur Expressway Pvt. Ltd. which operates the six-lane toll road project on the Golden Quadrilateral will come under GVKPIL.

“The Chhatrapati Shivaji International Airport, Mumbai is GVK’s first and flagship airport project in India. As part of our overall stated objective of consolidating our presence in the airports sector in India, we have taken this significant step of increasing our shareholding in MIAL. This signifies our commitment to the airports sector and further reinforces our vision of transforming CSIA into a world class airport,” Dr G V Krishna Reddy, Chairman, GVKPIL is quoted as saying when on 2 March, 2011, when he bought over BSDM’s 13.5% shareholding.

RTI Activist Krishnaraj Rao says ” To me, it sounds like Dr GVK Reddy is slowly acquiring India in bits and pieces – a bit like East India Company did some centuries ago. I feel uncomfortable. Don’t you?”

One Comment »

  • Astra said:

    What a shame of a scam… More importantly, some of the provisions of the civil aviation land scam is that if an alternate airport comes up int he vicinity of existing Mumbai and Delhi airports, thent he existing airport land will automatically transfer to GVK and GMR… Even a CBI enquiry in this scam worth over Rs.127000 crores has been stymied.