‘Delhi’s T3 shows Rs 1k-cr overspend’

The swanky new terminal at Delhi airport, widely referred to as Terminal 3 , or T3, may have
evoked widespread admiration but two consultants appointed by a body that regulates the
country’s airports have said that some of the spending on it was not justified.

The external consultants, KPMG, an auditor, and public sector company, Engineers India Ltd.
(EIL), have found that spending of around Rs 1,000 crore appears to be excessive, say people
familiar with the contents of reports submitted by them to the Airports Economic Regulatory
Authority (AERA). The two firms have submitted separate reports. The overspending comes to
around 8% of the project cost, the reports say.

The plush terminal built over a period of five years has seen spending of Rs 12,700 crore. The
company described this news story as speculative. “This news is entirely speculative and as per
company policy we would not want to comment on any speculative news at this stage,” the
company’s spokesman said in an SMS response.

The reports are also not in favour of including what it referred to as “unincurred costs” in the
total project cost. “There are unincurred costs of around Rs 350 crore towards facilities that have
not yet come up. They should not be a part of the project cost,” the person said, citing the
example of an ATC tower, which is yet to come up and whose cost is added into the Rs 12,700
crore.

One of the reports has also said that the new terminal has been “overbuilt” to handle the
projected traffic.

“If GMR is not able to justify the total project cost, then it will have to suffer losses on that
investment,” a person familiar with the airport regulator’s thinking said.

AERA had appointed the two firms earlier this year to review the cost of T3 when costs exceeded
the estimated Rs 9,800 crore. The two firms carried out the review over three months, during
which KPMG alone sent about nine questionnaires to GMR. It submitted its report to the
authority in mid-October, while EIL did so a month before that.

While KPMG has examined the costs concerned with project management and processes, EIL
has probed the technical aspects, including engineering and design of the terminal.

Currently, AERA is awaiting the comments of the Airports Authority of India (AAI), which
holds 26% stake in the new terminal, and has also leased 250 acres to Delhi International Airport
(DIAL), the GMR-led consortium that is modernizing the airport. AAI will also get 46% revenue
share from DIAL for a lease period of 30 years, extendible by 30 more.

T3 has been built to handle 34 million passengers, which can be expanded in the future to handle
60 million. The total traffic projected for T3 in ‘09-10 is about 26 million passengers. As of now,
the overall funding shortfall for modernization of Delhi Airport stands at Rs 2,600 crore, but of
this, Rs 1,800 crore would be bridged through the Airport Development Fee being collected since
last year. After GMR said it faced a funding shortfall, the government permitted it to charge
every departing domestic passenger Rs 200 and international passenger Rs 1,300.

In May this year, DIAL sought permission to extend the period of this levy by a year, which is
when AERA decided to appoint cost auditors.