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Transparency please PDF Print E-mail
Saturday, 24 December 2005 00:00
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Now that a group of secretaries has been entrusted with resolving the fracas over the technical evaluation of the bids for the privatisation of the Mumbai and Delhi airports, the critical element has to be that of transparency. For, the problem with the process so far is precisely the lack of sunlight. Initially, the proposals allowed large tracts of land to be given away at a throwaway price—this was not land for the usual complement of duty-free shops and lounge areas that are an essential feature of all modern airports, but separate spaces for shopping malls and hotel complexes for the non-flying public. This then was removed after the same Planning Commission, which is now being pilloried for delaying matters, put its foot down, forcing various ministries to review their decision, with the obligatory reference to the Attorney General.
 
Fortunately, this happened before any bids were put in, or else the entire exercise would have had to be called off. After this, just a fortnight prior to the actual bids, the airport operator was asked to furnish a financial guarantee, and this saw some high-profile bidders walking out. In each of the stages, the government has responded with silence—when it’s public money and property that’s being dealt with, this simply won’t do.
 
And now that the technical evaluations have been done, there are reports of a conflict of interest since one of the consultants, ABN Amro, has served as financial consultant to some of the bidders. Some newspapers have reported that the Attorney General’s said there’s no conflict of interest, but the opinion has not been made public. The other controversy relates to the scores given, which has resulted in a situation where there are only two bidders left in the fray for the two airports. What this also does is to ensure there is virtually no competition for one of the airports. Say GMR, which is one of the two that have technically qualified, bids X for the Delhi airport and this is higher than the other qualified bidder Reliance Energy’s 0.8X. So GMR will get the Delhi airport. Since GMR can no longer get the Mumbai airport under the terms of the bid, which allow only one airport per consortium, even if Reliance bids lower than GMR does for Mumbai, it will still get the contract! Or the other way around. In which case, the technical evaluation has willy nilly acted as a sort of financial evaluation as well.
 
Under the circumstances, the goverment would do well to make public some of the documentation relating to the process so far. In the case of the technical evaluation, for instance, pretty serious charges have been made, and essentially amount to changing bid evaluation conditions afterwards. Broadly, the point that has been made is that while the tender specified marks under each head, like, say, the absorption of AAI employees by the new operator of the Delhi and Mumbai airports, the marks for the sub-heads within this were never specified, and this is what has led to the controversy.
 
To take this example further, one bidder who offered to absorb 95 per cent of AAI employees got just 0.75 marks extra, as compared to another who offered to absorb just 60 per cent. Given that the cost of absorbing the extra employees would be around Rs 40-50 crore per year of the period the lease is for, this appears curious. So, not only does the group of secretaries need to find a way out of this mess (and the allegation must have some weight if the Empowered Group of Ministers, which had some of the top ministers in the government, was forced to get the secretaries in to examine the nitty gritty of the issue), they will have to show that they have removed the element of subjectivity, if any, from the marking.
 
What complicates matters is that the race is very keen and even the slightest change in marking could see the field narrowing down from even the present two. In the case of the Delhi airport, while the GMR consortium has got 84.9 marks for “management capability” and 80.1 for “development capability” (under the tender, the qualifying bidder needs at least 80 marks under each head), the Reliance Energy (Anil Ambani) consortium has got 80.2 and 81 marks, respectively. For Mumbai, GMR has scored a comfortable 84.9 and 92.7 while Reliance Energy is once again in just by the skin of its teeth with 80.4 and 80.2 marks under the two heads, respectively.
 
Whether the committee of secretaries ratifies the marks already given, or changes them, which could eliminate bidders, the numbers and their rationale need to be made public, given the background just described. Apart from the fact that this is what natural justice demands, the government has just passed the Right to Information Act and so the papers will be called for, and will have to be provided, anyway. The larger point is that it is better to have any lacunae pointed out now instead of when it is too late—in the case of the DVB privatisation, the CAG later pointed to huge under-valuation of DVB’s assets, but there was little point since the report came in long after the event.

 

 

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