State government forms SPV to develop Trivandrum airport

THIRUVANANTHAPURAM: State government has decided to form a special purpose vehicle (SPV) — Trivandrum International Airport Limited (TIAL) — to take over the operation and management of Trivandrum International Airport, which is among six airports in the country to be developed via PPP (public-private partnership) mode.
The government, after acquiring 26% stake or more direct equity in the SPV, will also offer shares to Kannur and Kochi airports, Kerala State Industrial Development Corporation (KSIDC), Kerala Infrastructure Investment Fund Board, National Investment and Infrastructure Fund and other institutions as technical partner, investor or as financial institution.

As per a government order dated December 15, the managing director of KSIDC has been directed to register Tial as a private limited company with an initial authorized share capital of Rs 10 lakh and paid up capital of Rs 5 lakh. The SPV will have the chief secretary as its chairman and principal secretaries of transport and finance departments as members of the first board of directors.

Raising concerns over the Union government’s decision to privatise Trivandrum International Airport, the state government had put forth two options – to hand over the airport without any bidding for operation, management and development to the government of Kerala, which will form an SPV and tie up with a strategic partner who is a proven operator at international level, or to offer ‘right of first refusal’ (RoFR) to the SPV if it was required to take part in the bid.

The options were presented by the chief secretary and the transport secretary before the empowered group of secretaries (EGoS) headed by the CEO of Niti Aayog. EGoS decided to offer either participation of the state government as a special invitee in the selection of the PPP partner, or to provide RoFR for an SPV with 26% or more direct equity for state government if the SPV’s bid falls within the range of 10% of the highest bid (plus or minus).

The state government then reiterated that its prime demand was to get the airport handed over without any bidding process ‘considering the demonstrated experience the state government has in building, maintaining and operating airports of international standards’, and said it still agreed to the RoFR offer, but ‘without any range parameters for matching the highest bidder’.

In its letter dated December 12, the Centre informed that the RoFR option was the most practical option, ‘which is acceptable to both the central and state governments’.

The subsequent state government order with regard to formation of the SPV has also directed to ensure its shareholding patterns as per the terms and conditions in the RFP (request for proposal) in case the Centre goes ahead with the bidding.