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Friday, 5 January 2018 00:00 - - {{hitsCtrl.values.hits}}
By Chathuri Dissanayake
The Government has sought clarification on a detailed proposal submitted by the Indian Government to operate the Mattala Rajapaksa International Airport to understand their business plan in order to move forward with the negotiations, a top Government official confirmed.
An Indian team of experts visited Sri Lanka to discuss the proposal, which was being studied by the Technical Evaluation Committee (TEC). The TEC has submitted its detailed report to the Cabinet Appointed Negotiating Committee (CANC) highlighting a number of concerns including a lack of a clear business plan and limitations in the Civil Aviation Act to form a joint venture with India.
“We see there is a big hurry to carry the plan through, but there isn’t enough details on a proper business plan to go to the next level. We have asked the TEC to look at that again,” an official who declined to be quoted told the Daily FT.
The Indian Government submitted its initial proposal to the Sri Lankan Government in May last year, offering to invest $ 205 million as their equity share while expecting their Sri Lankan counterpart to share the balance $ 88 million, totalling $ 293 million as per their assessment value of the net worth of MRlA. The initial proposal expressed interest to Operate, Manage, Maintain and Develop MRIA and is not limited to commercial aviation.
The CANC is yet to decide on the ownership ratio to negotiate with the Indian counterpart. The Government earlier said that the 70:30 ratio proposed by the IAA in the initial proposal is likely to be negotiated.
“All this will depend on the business plan. If the business plan is strong and there is an opportunity then the Government will evaluate the ratio again,” the official said.
The Cabinet gave approval for the Ministry of Transport to proceed with the negotiations with the Government of India in August last year after they failed to secure feasible bids following a call for Expression of Interest (EOI) for aviation-related ventures at MRIA.
Cabinet decided to look for investors in December 2016 due to the continuous operational loss incurred by the venture and received eight proposals mainly from local investors, but none covered the entire operation, management and maintenance of MRIA.
According to the ministry, the accumulated loss born by Airport and Aviation Services Sri Lanka (AASL) as of 2016 alone was a staggering $ 112.9 million. The average operational cost, including loan interest, without exchange loss per year is $ 20 million. With an average revenue generation of $ 1.2 million per year, the entity has been unable to meet its costs, prompting the Auditor General to give qualified accounts naming the airport as an impaired asset.
