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Suniti Kaur (Ms), Radhika Goyal (Ms), Samridhi Gandhi (Ms) and Ashwini Panwar (Mr)

airport-infrastructure
Reference Date |  Version September 28, 2023 | 1.0
Keywords PPP, Concession Agreements, Operation and Maintenance, Airport Sustainability, Risks and Liabilities
Legislation(s)
  1. Airport Economic Regulatory Authority Act, 2008
  2. National Civil Aviation Policy, 2016
  3. Policy on Airport Infrastructure, 1997
  4. Airports Authority of India Act, 1994
  5. Convention on International Civil Aviation, 1994
  6. Greenfield Airport Policy, 2008
  7. Biological Diversity Act, 2002
Jurisdiction India

Introduction

Across the globe, nations have been engaging in the development of infrastructure and utilities. Public-Private Partnerships (‘PPP’) have emerged as a means to build capacity for such development, especially in non-developed nations. PPP involves the pooling of government and private company resources to achieve development goals, which have transformed into Sustainable Development Goals over the years.

The World Bank has explained PPPs as “Public-private partnerships (PPPs) are a mechanism for the government to procure and implement public infrastructure and/or services using the resources and expertise of the private sector.”[1]

PPP as explained by the Department of Economic Affairs, Ministry of Finance (India):

Is an arrangement between a government/statutory entity/government-owned entity on one side and a private sector entity on the other, for the provision of public assets and/ or public services,  through investments being made and/ or management being undertaken by the private sector entity,  for a specified period of time,  where there is well-defined allocation of risk between the private sector and the public entity  and the private entity receives performance-linked payments that conform to specified and predetermined performance standards, measurable by the public entity or its representative.[2]

With respect to the airport infrastructure in India, the implementation of PPPs has been happening since the 1990s. Cochin International Airport was the first Airport built on the PPP model in 1994; over the years, the PPP model has visibly evolved.

This article examines the PPP scenario in India in the Airport sector from a legal perspective and considers the Concession agreements in respect of Kempegowda International Airport (Bangalore), Indira Gandhi International Airport (Delhi), Mumbai Chhatrapati Shivaji International Airport, and Jewar International Airport (Greater Noida).

Need for Public-Private Partnership

  • In the 1990s, substantial resources were invested to develop airport infrastructure and navigation services. Such investment strained the finances of the Government significantly since the aviation sector did not take off. The massive gap in demand and supply compelled the Government to explore the options to infuse private capital to build capacity and drive traffic.
  • The transfer of commercial activities to the private sector reduces the burden on the Government, allowing it to focus its energy and resources on essential public services and welfare programmes. Privatisation also helps address the budgetary constraints India experienced in the 1990s and promotes fiscal sustainability.
  • Article 79 of the Convention on International Civil Aviation of 1944 states, “A State may participate in joint operating organisations or in pooling arrangements, either through its Government or through an airline company or companies designated by its Government. The companies may, at the sole discretion of the State concerned, be state-owned or partly state-owned or privately owned.” 193 States are Party to the Convention on International Civil Aviation, 1944. India ratified it on March 1, 1947.
  • The Policy of Airport Infrastructure 1997 (India) highlighted an increasing scarcity of public funds to develop facilities like airports. Private-party intervention was needed to meet the standards set forth by the International Civil Aviation Organization.
  • Partnering with the Government allows the private party access to new markets and business opportunities that may have been inaccessible otherwise. It allows the private sector to diversify their portfolios and expand their client base. Additionally, the private sector earns revenue from these contracts, which are typically stable and long-term, ensuring a steady income stream. Private parties are also funded, sometimes directly with user fees like tolls, which can help them generate high profits.
  • Perception of the Government and private players is likely to vary, for each has its goal, and it is the very reason which could be a catalyst for change in the development and operation of the infrastructure. For example, while the necessity for ‘sustainable’ development and operation of infrastructure is accepted by both – the Government and private players, the perspective for achieving ‘sustainability’, a multi-dimensional concept, is likely to vary.

The need for PPP, particularly in the case of the development of infrastructure, is not in debate. The questions are primarily about optimising the PPP model for the benefit of all stakeholders. Carefully identifying and allocating risks, among other issues, is essential.

Public-Private Partnership in the Airport Sector in India

India first witnessed PPP in the airport sector in 1994. Cochin International Airport, operated by Cochin International Airport Ltd. (‘CIAL’), was founded in 1994. It is the first greenfield airport in the Country, built ground up in a public-private partnership model. CIAL is unique in its ownership pattern, with equity participation from the Government of Kerala, NRIs, Industrialists, Financial Institutions and Airport Service Providers, with around 18,000 shareholders from 29 countries as of 2023.

In 2004, the Concession Agreement was signed for the Hyderabad Rajiv Gandhi International Airport and, in 2006, for the Indira Gandhi International Airport (Delhi) and the Chhatrapati Shivaji International Airport (‘CSIA’). Since then, several concession agreements have been signed in respect of airport infrastructure, and recently, in 2020, the concession agreement was signed regarding the development of greenfield JEWAR International Airport (Greater NOIDA).

The following facts and figures[3] are relevant for a holistic perspective:

  • India is the third-largest aviation market in the world.
  • By 2036, India is projected to have 480 million flyers, more than Japan (just under 225 million) and Germany (just over 200 million) combined.
  • India is expected to overtake China and the United States as the world’s third-largest air passenger market in the next ten years by 2030.
  • In FY 2023, Airports in India pegged the domestic passenger traffic to be 270.34 million at 62.1% YoY growth and international passenger traffic to be 56.94 million, a 157.7% YoY growth.
  • Expected investments worth US$ 25 billion are to be witnessed by the PPP Sector by 2027.
  • Under the Greenfield Airport Policy 2008, the project proponent- an airport developer or the respective State Government willing to establish a Greenfield airport is required to send a proposal to the Ministry of Civil Aviation (‘MoCA’) in the prescribed format for a two-stage approval process, i.e., ‘Site Clearance’ followed by ‘In-Principle’ approval. In 2023, the Government has accorded ‘In-Principle’ approval for setting up 21 Greenfield Airports across the Country. Out of these, 11 Greenfield airports have become operationalised.

Legal Framework for Civil Aviation in India

1. Airports Authority of India Act, 1994 (‘AAI Act’)

The AAI Act provides a general framework under which airports in India are governed. Prior to the enactment of the AAI Act, the Directorate General of Civil Aviation (‘DGCA’) undertook the governance of activities relating to the construction and management of airports.

Under Section 2(nn) of the AAI Act, “ ‘private airport’ means an airport owned, developed or managed by –

(i) any person or agency other than the Authority or any State Government or

(ii) any person or agency jointly with the Authority or any State Government or both where the share of such person or agency as the case may be in the assets of the private Airport is more than fifty per cent.”

The AAI Act, among other things, lays down the function of the Airports Authority of India (‘AAI’). Primary functions of the AA include –

a. construction, modification and management of passenger and cargo terminals

b. development and maintenance of infrastructure, including runways, parallel taxiways, and aprons; establish airports or assist in the establishment of  private airports  by rendering such   technical, financial or  other   assistance which the Central Government may consider necessary for such purpose;

c. management of air traffic services;

d. preservation of safety and order at airport premises and civil enclaves; and

e. establish airports or assist in the establishment of private airports by rendering such technical, financial or other assistance which the Central Government may consider necessary for such purpose.

The AAI may, after seeking prior approval of the Central Government, levy and collect from the embarking passengers at an airport the development fees at the rate as may be prescribed, and such fees shall be credited to the AA and shall be regulated and utilised, for the purposes of –

a. funding or financing the costs of upgradation, expansion or development of the Airport at which the fee is collected;

b. establishment or development of a new airport in lieu of the Airport referred to in clause (a)

c. investment in the equity in respect of shares to be subscribed by the AA in companies engaged in establishing, owning, developing, operating or maintaining a private airport in lieu of the Airport or advancement of loans to such companies or other persons engaged in such activities

2. Airports Economic Regulatory Authority of India Act, 2008 (‘AERA’)

Particularly with the participation of private players and the growth of the aviation sector in India, it was considered necessary to have an independent economic regulator. Thus, the Airports Economic Regulatory Authority (AERA) was established with the aim of creating a level playing field, fostering healthy competition among all major airports, encouraging investment in airport facilities and regulating tariffs for aeronautical services.

The objective of AERA, established under the AERA Act as stated in the preamble to the legislation, is to regulate tariff and other charges for the aeronautical services rendered at airports and to monitor performance standards of airports and for matters connected therewith or incidental thereto.

The provisions of the AERA Act apply to:

(a) all airports where air transport services are operated or are intended to be operated, other than airports and airfields belonging to or subject to the control of the Armed Forces or paramilitary Forces of the Union;

(b) all private airports and leased airports;

(c) all civil enclaves;

(d) all major airports,

The AERA Act empowers AERA to perform functions given under the AERA Act in respect of major airports. The AERA Act defines a major airport as ‘any airport which has, or is designated to have, annual passenger throughout in excess of three and a half million or any other airport as the Central Government may, by notification, specify as such’.

The Telecom Disputes Settlement and Appellate Tribunal serves as the Appellate Tribunal under AERA to adjudicate disputes between service providers and consumer groups. It also hears appeals brought against any order or direction of AERA.

3. National Civil Aviation Policy, 2016 (‘NCAP’)

The National Civil Aviation Policy 2016 focuses on creating safe, secure, affordable and sustainable air travel accessible by the masses across India.

The NCAP covers the following policy areas:

a. Introduction of Regional Connectivity Scheme (‘RCS’)

  • Under the RCS, the Ministry of Civil Aviation targets an estimated airfare of INR 2,500 per passenger for flights travelling on RCS-specified routes for a distance of approximately 500 – 600 km.
  • Intention to achieve the reduced airfare of INR 2,500 per passenger through a revival of under–served airports/routes and the development of new No-Frills Airports (costing INR 50 – 100 crore each) through the combined contribution of Central and State Governments. Development of these airports may also be undertaken through a public-private partnership with State Governments.
  • The Viability Gap Funding (‘VGF’) required to support the RCS shall be provided jointly by the Central (through the Ministry of Civil Aviation) and State Governments.
  • The Ministry of Civil Aviation’s share of the VGF shall be provided to the airline operator by establishing a Regional Connectivity Fund (‘RCF’), which the Airports Authority of India shall operate.

b. 5/20 Requirement for International Operations

  • All domestic airline operators to fly international routes provided that they deploy 20 aircraft or 20% of their total capacity (determined in terms of the average number of seats on all departures), whichever is higher for domestic operations.

c. Maintenance, Repair and Overhaul (‘MRO’)

In order to incentivise this sector, the NCAP introduced the following changes:

  • Foreign MRO experts will be provided visas promptly;
  • Foreign pilots operating an aircraft to and from India for the purpose of servicing at an Indian MRO entity will be issued Temporary Landing Permits, subject to the conditions;
  • Airport Entry Passes for MROs will be need-based and not restricted if required conditions are met;
  • The MoCA will try to ensure that State Governments notify MRO activities as ‘zero-rated’’;
  • Adequate land for MRO service providers will be made in all future airport/heliport projects, where possible, and
  • Airport royalty and additional charges will not be levied on MRO service providers for a period of five years.

d. Ground Handling

The NCAP 2016 provides that all domestic scheduled operators will be permitted to self-handle at all airports by engaging their subsidiary or a third-party ground handling service provider like Air India, Aviaxpert, Celebi/NAS, etc. Foreign airlines continue to be prohibited from self-handling such services.[4]

Airport operators must ensure that at least three ground-handling service providers are available at all major airports to ensure fair competition.

Contractual Matrix: Airport Concessions in Mumbai, Delhi, Bangalore and Greater Noida

The information in the table below is taken from the Articles of Association of the company in question as obtained from online records available with the MoCA and concession agreements as available in the public domain.

I. Grant of concession

(i) Parties to the concession: Grantor and Concessionaire.

(ii) Relationship matrix between Grantor and Concessionaire: Grantor exercises control over the Concessionaire as set forth in the concession and also in relation to the management of the Concessionaire by way of participation in the equity capital of the Concessionaire.

(iii) The AOAs of the concessionaires in Delhi and Mumbai contain the following beneficial provisions in favour of AAI:

a. If any shareholder is unable to fulfil its obligation to capitalise the Company in the manner provided in the AOA, then the defaulting shareholder shall be liable to pay an interest of the then State Bank of India Prime Lending Rate plus an additional 10 % per annum from the aforesaid due date upto the date of rectification (in full) of such default by the Defaulting Shareholder except for AAI and AAI Nominees.

b. If the shareholder transferring the Equity Shares is a Private participant, he must obtain the consent of AAI to transfer such shares. (as per Article 35)

c. After expiry of 7 years from the Effective Date, Equity Shares of the Company held by any Prime Member or its transferred shareholder shall not be transferred to any entity without the prior written permission of the AAI, which permission shall be given unless AAI reasonably believes that the technical, financial or operational capability of the Company pursuant to such transfer of Equity Shares.

d. Where any business/transaction of the Company relates to the Reserved Shareholders Matters as set out in Article 68, the requisite quorum of a General Meeting shall constitute two Members present in person (at least one of which shall be AAI).

e. Till AAI, along with AAI Nominees, in the aggregate, hold at least 10 per cent Equity Shares in the Company, the Company shall not give effect to any decision or resolution in respect of identified matters unless the same is approved by the affirmative vote of AAI at the General Meeting.

f. AAI shall have the right to nominate such number of Directors out of maximum strength of the Board (15), as is proportionate to its equity shareholding in the Company subject to a minimum of one director. The aforesaid right of AAI to nominate one director to the Board shall subsist and survive irrespective of AAI not being a Shareholder in the Company.

g. If the aggregate equity shareholding of Private Participants is less than or equal to 50% of the total paid-up and outstanding equity share capital of the Company, AAI shall have the right to nominate the Chairman.

h. AAI shall have the right to examine the books, records, and accounts to be kept by the Company and shall be entitled to receive all information, including monthly management accounts and, operating statistics and other trading and financial information.

(iv) Arguably, direct participation by the Grantor holding equity in the Concessionaire might create a situation of potential conflict and uncertainty for investors. The Grantor may seek to achieve dual objectives, such as, for example, increasing employment and lowering prices for end users.

Conflict of interest can arise between the Grantor and the Concessionaire as the Concessionaire is at one pole, where it seeks to maximise the profit and value of the Concessionaire, while the Grantor is at the other pole, where it seeks to promote social well-being.

Bangalore (Greenfield)(July 5, 2004) Delhi & Mumbai (Brownfield)(April 4, 2006) Greater Noida (Greenfield)(October 7, 2020)
– Concession Agreement for the Development, Construction, Operation and Maintenance  of the Bangalore International Airport  -Grantor: MoCA, GoI-Concessionaire: Bangalore International Private Limited. – Operation, Management and Development Agreement.-Grantor: AAI Concessionaire: Delhi International Airport Private Limited/Mumbai International Airport Private Limited. – Development of Greenfield Noida International Airport on Design, Build, Finance, Operate and Transfer.- Grantor: Governor of Uttar Pradesh represented by Noida International Airport Limited (‘NIAL’).- Concessionaire: Yamuna International Airport Private Limited.
– AAI holds 13%, KSIIDC holds 13% in BIAl, i.e. Concessionaire. – AAI and its nominees hold  26%.– As long as AAI and its nominees hold 10%, Grantor has veto rights in respect of all matters requiring a special resolution under the Companies Act, 2013. – Government of Uttar Pradesh, New Delhi Okhla Industrial Development Authority, and Greater Noida Industrial Development Authority collectively own NIAL.- NIAL has one non-transferable Golden Share in YIAPL.- Grantor has veto rights in respect of all matters requiring a special resolution under the Companies Act 2013.
II. Concession structure in respect of immovable property

(i) The debate between lease versus licence occurs almost in every instance, and typically, the Grantor would prefer a license while the Concessionaire would prefer a lease.

(ii) A lease grants an interest in the immovable property, and use or enjoyment of such immovable property in violation of the terms of the lease would amount to a breach and be liable to consequences set forth thereunder.

In the case of a license, the Grantor grants a right to do or continue to do something in respect of its immovable property, which would otherwise, but for the grant, be unlawful. It follows that the grant should spell out each and every right in favour of the licensee, or else it would be considered unlawful.

The Hon’ble Supreme Court of India in Pradeep Oil Corporation v. Municipal Corporation of Delhi and Ors.[5] has observed that:

“A license, inter alia, (a) is not assignable; (b) does not entitle the licensee to sue the stranger in his own name; (c) it is revocable and (d) it is determined when the grantor makes subsequent assignment.”

Bangalore (Greenfield)(July 5, 2004) Delhi & Mumbai (Brownfield)(April 4, 2006) Greater Noida (Greenfield)(October 7, 2020)
– Concession Agreement and Lease Agreement- A Land Lease Agreement is entered between Karnataka State Industrial Investment andDevelopment Corporation Limited (as the lessor) and Concessionaire (as lessee) for granting leasehold rights and interests in the Site.- Authority recognises that the Concessionaire may carry out any activity or business in connection with or related to the development of the Site. – OMDA and Lease Deed- Grantor, in the interest of the better management of the Airport and/or the overall public interest, is desirous of granting some of its functions, being the functions of operating, maintaining, developing, designing, constructing,  upgrading, modernising, financing and managing the Airport to the Concessionaire and for this purpose to lease the premises constituting the Airport Site.- A separate lease deed is entered between the Grantor and the Concessionaire. – Concession Agreement and leave and licence rights in respect of all the land.- The ‘Concession granted shall oblige or entitle’ the Concessionaire to ‘Right of Way, access and licence to the Site.’
III. Concession Model

(i) Exclusive grant to design, build, finance, operate and transfer constitute the fundamental elements of each concession in respect of the airport infrastructure.

(ii) Development of the Airport is pursuant to a Master Plan to be implemented in a phased manner based on timeline (in Bangalore) or achievement of traffic triggers (in other cases). Expansion triggers linked to air traffic are logical. The Master Plan is subject to periodic review by the Concessionaire.

(iii) Change in scope of works is envisaged in Greater NOIDA concession, for which the Grantor will reimburse costs.

(iv) Provision of services or facilities other than aeronautical

Bangalore:  Non-Airport Activities

a. Concessionaire to undertake Non-Airport Activities (such as Airport shuttle transport services, Business parks, Industrial parks, Hi-tech parks, Golf course).

b. Non-Airport Activities require prior GoI consent if such activities are to be considered for the calculation of termination payment.

c. Upon Termination, GoI is not bound to accept the terms and conditions of such Non-Airport Activities contracts. Such a provision is not attractive from an investor perspective.

Delhi/Mumbai: Non-Aeronautical Services

a. Non-Aeronautical Services (are defined under Part I and Part II. Part I includes Cargo handling and hangar. Part II includes duty-free sales, Hotels and motels, Tourist information services and Locker rental) to the extent they form part of the Master Plan.

b. Transfer Assets include Non-Aeronautical Services falling in Part I and forming. Transfer Assets are considered for the determination of Termination Payment.

c. Upon Termination, GoI is not bound to accept the terms and conditions of Non-Aeronautical Services contracts. Such a provision is not attractive from the investor’s perspective.

Greater NOIDA: City Side Development (‘CSD’)

a. Concessionaire is entitled to undertake CSD for commercial purposes through Project Agreements. Authority may step into such agreements at its discretion.

b. CSD assets form part of Specified Assets, which are considered for calculating Termination Payment.

c. Project Assets comprising City Side Development may be sub-licensed by the Concessionaire. Upon termination of the Concession, such sub-license shall continue till the agreed term under the sub-license or till the concession term, whichever is earlier.

d. Upon Termination, GoI is not bound to accept the terms and conditions of such Project Agreements. Such a provision is not attractive from an investor perspective.

Bangalore (Greenfield)(July 5, 2004) Delhi & Mumbai (Brownfield)(April 4, 2006) Greater Noida (Greenfield)(October 7, 2020)
Scope:- development, design, financing, construction, commissioning,maintenance, operation and management of the Airport.- the development and construction of the Airport on the Site.

– the operation and maintenance of the Airport and performance of the  Airport Activities and Non-Airport Activities.

– To the extent that the Concessionaire incurs any capital investments, amounts or costs in relation

to the provision of Non-Airport Activities and requires such investments, amounts or

costs to be included in the calculation of the Termination Amount, Debt or Settlement

Amount, the Concessionaire shall seek the prior written consent of the Grantor.

– Concessionaire will be allowed to levy a User Development Fee, subject to escalation as per the inflation index.

– Under the State Support Agreement-

The Airport will grow according to the actual demand. The initiation of the phase follows the development of air traffic.

Phase 1 (Initial phase 2006-2010)

Phase 2 (indicative 2011- 2015)

Phase 3 (indicative 2016 – 2025)

Phase 4: Vision (future)

Scope:- operation, maintenance, development, design, construction, upgradation, modernisation,finance and management of the Airport.- to perform services and activities constituting Aeronautical Services, and Non-Aeronautical Services (but excluding Reserved Activities).

– determine, demand, collect, retain and appropriate charges from the users of the Airport.

– Concessionaire may seek to undertake Non-Aeronautical Services at the Airport Site if included in the Master Plan.

– The Master Plan shall inter alia provide for identifiable traffic triggers for undertaking specific capital expenditure projects and shall provide for traffic-linked capacity expansions

– Non-Aeronautical Services shall form part of the Transfer Assets.

Scope:- design, development, construction and expansion of the Airport.- augmentation of the Aeronautical Assets, Terminal Building and Non-Aeronautical Assets when the Airport achieves the traffic trigger.- procure any additional land that may be required for Aeronautical Assets, Non-Aeronautical Assets or City Side Development or Change of Scope Order.

– Airport is constructed and developed in accordance with the Master Plan.

– Concessionaire may use any area earmarked for future expansion.

– Grantor may require additional works (Change of Scope); costs will be reimbursed by the Grantor.

– expansion not forming part of Change of Scope shall be undertaken at the cost and expense of the Concessionaire.

– Concessionaire shall undertake City Side Development and exploit such development for commercial purposes.

– Concessionaire may sublicense the Project Assets comprising City Side Development; the validity of such sub-license shall not extend beyond the period specified in Clause 28.7.

IV. Concession Period: Term, Termination and Termination Payment

(i) The term for brownfield airports is 30 years, extendable for another 30 years. Niti Aayog, in its Final Report released in May 2019 titled ‘New Approaches to PPP focusing on the Airport Sector’ has recommended an increase to the term for Brownfield Airport Concessions to to 50 years with no extension provisions as 30 years restricts Concessionaire potential to leverage CSD, and earn a return on investment.

(ii) A non-defaulting party may terminate the concession on account of the default of the other Party. In all cases, a cure period is envisaged during which the defaulting Party is given an opportunity to cure the default in order to avoid termination. Typically, prolonged force majeure can be a ground for termination. Notably, the concession agreement in the case of Bangalore is silent in regard.

(iii) Termination Payment provisions would have a bearing on bankability and also tariff determination by AERA. The extent of Termination Payment liability would depend on the trigger for termination, whether on account of default of Grantor or default of Concessionaire or on account of expiration. In some instances, termination on account of Force Majeure is treated separately.

(a)   If termination is triggered on account of default by the Grantor, the Grantor;

Delhi & Mumbai

– shall acquire Transfer Assets [Aeronautical and Part I Non-Aeronautical] being 100% of Debt relatable to Transfer Assets + 120% of the subscribed and paid-up value of the Equity share capital.

– have the right to acquire Non-Transfer Assets  [Part II Non-Aeronautical] at Fair Market Value determined in the manner prescribed.

Bangalore

– shall pay the higher of 100% of Debt (less any insurance received by or due and payable to BIAL) or Settlement Amount being gross fixed assets (as Indexed), net current assets, capital work in progress, intangible assets of BIAL and pre-operating costs and expenses. The Settlement Amount shall exclude costs for Non-Airport activities that were not consented to by GoI. All assets of BIAL would be transferred without additional payment in favour of GoI or its nominee.

Greater NOIDA

– shall pay Debt Due less Insurance Cover;

– shall pay 150% of the Adjusted Equity;

– shall pay 115% of the amount representing the Additional Termination Payment in respect of Specified Assets (Project Assets constructed, acquired or installed between the 5th and 30th anniversary of COD, buildings and immovable structures forming part of CSD and assets forming part of expansion under the Master Plan)

(b)   If termination is triggered on account of default by the Concessionaire, the Grantor;

Delhi & Mumbai

– shall acquire Transfer Assets  [Aeronautical and Part I Non-Aeronautical]  90% of Debt relatable to Transfer Assets

– have the right to acquire Non-Transfer Assets [Part II Non-Aeronautical] at Discounted Fair Value (Lower of Book Value as recorded in the books of the JVC and the Net Present Value) in the manner prescribed.

Bangalore

-shall pay the Termination Amount. Termination Amount shall mean 100% of the Debt (less any insurance received by or due and payable to BIAL). All assets of BIAL would be transferred without payment in favour of GoI or its nominee.

Greater NOIDA

– shall pay 90% (ninety per cent) of the Debt Due less Insurance Cover, and

– shall pay 70% (seventy per cent) of the amount representing the Additional Termination Payment in respect of Specified Assets.

(c)   If termination is triggered on account of the expiry of the Agreement, the Grantor;

Delhi & Mumbai

– or its nominee shall acquire Transfer Assets [Aeronautical and Part I Non-Aeronautical] being 100% of Debt relatable to Transfer Assets + 120% of the subscribed and paid-up value of the Equity share capital.

– have the right to acquire Non-Transfer Assets  [Part II Non-Aeronautical] at Fair Market Value determined in the manner prescribed.

Bangalore

– or its nominee shall acquire all of BIAL’s rights, title and interests in and to the Airport on payment on the Transfer Date to BIAL the aggregate of one hundred per cent (100%) of the par value of the issued, subscribed and paid-up share capital of BIAL and one hundred per cent (100%) of the Debt.

Greater NOIDA

80% of the Adjusted Depreciated Value of Project Assets acquired and installed after the 30th (thirty ) anniversary of the Appointed Date.

Bangalore (Greenfield)(July 5, 2004) Delhi & Mumbai (Brownfield)(April 4, 2006) Greater Noida (Greenfield)(October 7, 2020)
– Initial period of 30 years, Concessionaire has the option to extend for a further period of 30 years.- Termination and Termination Payments provisions are as mentioned above. – Initial period of 30 years, the Concessionaire will have the right to extend it for 30 years.- Termination and Termination Payments provisions are as mentioned above. – Initial period of 40 years.The Concessionaire is entitled to an extension of an additional term of 30 years.- Termination and Termination Payments provisions are as mentioned above.
V. Revenue Model

(i) The revenue model should be able to incentivise the Concessionaire to develop infrastructure other than infrastructure for rendering aeronautical and related services.

(ii) The revenue models under the Concessions reflect a shift from a revenue-sharing model with the Grantor (i.e., revenue from aeronautical and non-aeronautical or non-airport activities) in the case of Bangalore, Mumbai and Delhi to a fee being payable by the Concessionaire to the Grantor for each domestic and foreign passenger in the case of Greater Noida.

(iii) A revenue model similar to that of Greater Noida has also been adopted for six airports – Ahmedabad, Jaipur, Lucknow, Guwahati, Mangalore and Thiruvananthapuram.

Bangalore (Greenfield)(July 5, 2004) Delhi & Mumbai (Brownfield)(April 4, 2006) Greater Noida (Greenfield)(October 7, 2020)
– Concessionaire shall pay GoI a fee amounting to four per cent (4%) of Gross Revenue annually.- Gross Revenue means all pre-tax revenue of the Concessionaire, excluding the following:(a) payments made bythe Concessionaire for the activities undertaken by Relevant Authorities;

(b) Insurance proceeds;

(c) any amount that accrues to Concessionaire from the sale of any capital assets or items;

(d) payments and/or monies received in respect of air navigation and air traffic management

services.

(e) payments and/or monies collected by the Concessionaire for and on behalf of any governmental authorities.

User Fees:

– Concessionaire allowed to levy UDF for passenger amenities and services and facilities. UDF is to be used for the development, management, maintenance, operation and expansion of the Airport.

Passenger service fee:

– The charges to be adopted by Concessionaire at the time of airport opening will be the higher of

a) The AAI tariff effective 2001 duly increased with inflation index, as set out hereunder, up to the airport opening date Or

b) The then prevailing Passenger Service Fee at the other AAI airports

The Passenger Service Fee chargeable by Concessionaire, is inclusive of the cost of

Security Expenditure on Central Industrial Security Force (CISF). This component of cost

towards Security Expenditure on CISF shall be revised upwards by the Concessionaire as and when directed by GOI.

– Concessionaire to pay to Grantor an upfront fee of Rs 150 Cr on or before Effective Date.- Concessionaire to also pay to Grantor annual fee (AF) for each Year during the Term of this Agreement:Delhi:AF = 45.99 % of projected Revenue [includes Revenue from Aeronautical + Non-Aeronautical Services] for the said Year.

Mumbai:

AF = 38.7 % of projected Revenue [includes Revenue from Aeronautical + Non-Aeronautical Services] for the said Year.

Passenger Service Fee:

– The Passenger Service Fee chargeable at the Airport shall be inclusive of the cost of security expenditure on the designated security agency per embarking passenger and the facilitation component payable to the Concessionaire per embarking passenger.

– Concessionaire shall pay a concession fee, a sum of Re.1 per annum, and the Premium.– Concessionaire, from the 6th Year of the occurrence of COD for Phase I, a premium equal to INR X per pax of traffic handled at the Airport multiplied by the total traffic handled at the Airport during that Year.  – For each subsequent Year, the Premium Rate for that Year shall be determined by increasing the Premium Rate of the preceding Year by the Price Index of the preceding Year. The corresponding Premium for the subsequent Year shall be calculated by the Premium Rate of the subsequent Year multiplied by the total traffic handled at the Airport in the subsequent Year.

User Fees:

– Concessionaire shall, for the provision of Aeronautical and Non-Aeronautical Services, be entitled to levy, collect and appropriate the Fee from Users, including airline aircraft, passengers, advertisers and visitors (determined and revised by AERA).

– The Designated GOI Agency shall be entitled to levy, collect and appropriate the Route Navigation Facilities Charges and Terminal Navigation and Landing Charges from airlines in accordance with Applicable Laws.

VI. Development Risk

(i) The development risk to the extent involving critical project approvals should ideally be allocated to the Grantor. Notably, in the case of Greater NOIDA, it is the Grantor’s obligation, as a condition precedent, to secure the Right of Way, Applicable Permits relating to environmental protection, conservation and Forest clearance.

(ii) A single point contact nominated by the Grantor for assistance to the Concessionaire in respect of liaising with various agencies under the control of the Grantor is crucial.

Bangalore (Greenfield)(July 5, 2004) Delhi & Mumbai (Brownfield)(April 4, 2006) Greater Noida (Greenfield)(October 7, 2020)
– Concessionaire to obtain and maintain all Clearances (granted by the GoI)  and Approvals (granted by any authority under Applicable law).- Grantor is to issue Clearances to the Concessionaire that are within its control in a time-bound manner.- Grantor to assist the Concessionaire with the DGCA grant and renewal of an airport licence to Concessionaire.- In order to facilitate the grant of Clearances Grantor shall nominate an officer of the rank of an Under Secretary or above to provide assistance to the Concessionaire in liaising with the relevant agencies. – The Concessionaire must receive all Clearances for the operation and management of the Airport.- Grantor to use all endeavours to grant such Clearances as are within its power to grant.- Grantor will consider the establishment of a single window clearance mechanism/route by means of a single point of contact for providing assistance on a best endeavour basis to the Concessionaire in liaising with the relevant agencies, authorities, departments, inspectorates, and ministries under the control and direction of the Grantor. – Concessionaire to obtain and maintain all applicable approvals except as required to be obtained by the Grantor.- Grantor is to procure:(a) Right of Way,(b) Applicable Permits relating to environmental protection conservation (for 90% of the land)

(c) Forest clearance (for 90% of the land)

– Grantor to provide reasonable assistance and support to the Concessionaire.

– To facilitate the grant of Clearances, the Grantor shall nominate a senior officer to assist the Concessionaire in liaising with the relevant agencies, authorities, departments, inspectorates, and ministries.

VII. Environment and Social and Climate Risks 

(i) A holistic perspective is required when considering environmental, social and climate risks. While there are several legislations, guidelines and standards supporting sustainability in general and sustainability, particularly with respect to airports, it would be relevant to have a ‘Sustainability Plan’ for the development and operation of airports. The following standards support a sustainable airport model:

Body Standard
International Civil Aviation Organization (ICAO) Standards and Recommended Practices –Annex 14: AerodromesAnnex 16: Environmental Protection 2014
ICAO DOC 9184 – Airport Planning Manual-Master Planning 2002
Federal Aviation Administration (FAA) Regulations and Guidelines (Airport Sustainability)
ACRP Oversight Committee (AOC) Airport Cooperative Research Program
Department of Infrastructure, Transport, Cities and Regional Development – Australian Government Airport (Control of On-Airport Activities) Regulations 1997

(ii) Sustainable Airport is a multi-dimensional concept based on the interaction of multiple factors consisting of five dimensions: airport services and quality; energy consumption and generation; CO2 emissions and mitigation planning; environmental management and biodiversity; and low atmospheric emission transportation.

(iii) Given the growing concern regarding the environmental impact of air transport, the green performance of an Airport may be judged on the basis of the following criteria[6]:

(1) air and noise control; (2) green building and infrastructure; (3) waste management and recycling practices; (4) environmental monitoring and control; (5) green operation and transportation; (6) employee green training; and (7) green policies and regulations.

(iv) The green performance forms a subset of the larger sustainability model, which can be mapped against the following indicators[7]:

(1) Noise Reduction; (2) Emission Reduction and Air Quality; (3) Energy Management; (4) Water Management; (5) Waste Management; (6) Biodiversity conservation and land use; (7) Cost and economy; (8) Quality of the internal environment; (9) Transport and vehicle control; (10) Social and Cultural Aspects Indicator.

(v) Notably, the Central Government is required to develop national strategies, plans and programmes for conserving the environment and promoting the sustainable use of biological diversity under the Biodiversity Act, 2002.

In furtherance of this requirement, the Government has laid down action points under the National Biodiversity Action Plan, 2008 (amended by addendum 2014 to NBAP 2008). These action points identify sectors for integration of biodiversity concerns in economic and social development, which include;

“Integrate biodiversity concerns across development sectors (such as industry, infrastructure, power, mining, etc.) and promote use of clean technologies.”

While the Environmental Clearance obtained in respect of the Project takes into account biodiversity concerns, there is a need to ensure effective implementation and monitoring of the action points under the National Biodiversity Action Plan, 2008.

Bangalore (Greenfield)(July 5, 2004) Delhi & Mumbai (Brownfield)(April 4, 2006) Greater Noida (Greenfield)(October 7, 2020)
– Clearances to be obtained from Ministry of Environment and Forest by the Concessionaire.- Approval for use of the forest land for non-forest purposes – Concessionaire to procure an independent expert to undertake a full environment audit of the Airport and develop an Environmental Management Strategy (EMS) based on such audit. EMS is required to set out strategies and actions to manage the environmental condition and an environmental monitoring program that assesses the environmental condition.

– Concessionaire is to review annually progress under the Environmental Management Strategy and update the said Strategy.- Concessionaire shall provide annual reports in relation to progress under the  Strategy to the Grantor.

– Concessionaire shall procure that an independent expert undertakes an environmental audit of the Airport. The Concessionaire shall ensure that, at termination, the environmental condition of the Airport meets all statutory requirements.

– Grantor to assist the Concessionaire in obtaining  Applicable Permits for the felling of trees for purpose if felling is required. The costs and expenses in respect of the felling of trees shall be borne by the Concessionaire, and any revenues shall be paid to the Authority.- Environmental audit: The Independent Engineer shall carry out a check to determine the conformity of the Airport with the environmental requirements.

– The Concessionaire shall undertake the construction of the Airport and City Side Development in conformity with the Specifications and Standards and the Master Plan.

Specifications and Standards include mandatory standards and requirements, such as

a.  Energy Conservation Building Code, 2017

b. Statutory Agency Requirements, including Ministry of Environment, Forests and Climate Change, Pollution Control Board

–  Obligation in respect of O&M: protection and conservation of the environment and provision of equipment and materials thereof

– The Master Plan shall include proposed development through the technical, economic, and environmental investigation of concepts and alternatives;

VIII. Operating Risk

(i) Operating risk may be examined under the following heads:

(a)   Inadequate Performance

(b)   O&M

(c)   Utilities

(d)   Latent Defects and Existing Liabilities

(ii) Typically, operating risks, in the ultimate analysis, are factored in the fee charged to the user. It would serve well for the concession to require risk mitigation measures to be put in place and a matrix to address such risks effectively.

Bangalore (Greenfield)(July 5, 2004) Delhi & Mumbai (Brownfield)(April 4, 2006) Greater Noida (Greenfield)(October 7, 2020)
Inadequate Performance

-IATA Global Airport Monitor service standards are to be followed.The Concessionaire is to participate in IATA surveys on an annual basis.

If the Airport continues to be rated in respect of the service standards under Concessionaire direct control as lower than three and a half (3.5), GoI shall have the right to impose liquidated damages and/or to give directives to Relevant Authorities participating in the joint coordination committee to assist Concessionaire in improving the rating. The quantum of liquidated damages will, taking into account factors leading to the drop in ratings, be discussed and agreed between the Parties.

-If the Airport continues to be rated as lower than three and a half (3.5) (in the current IATA scale of 1 to 5) in respect of the service standards under

Concessionaire direct control due to Concessionaire poor performance in the survey

conducted in respect of the two (2) years following the date that Concessionaire first becomes liable to pay such liquidated damages, GoI shall have the right to terminate this Agreement.

If the Concessionaire ceases operation of the Airport for more than 48 hours, without the written consent of the Grantor, at the request of either Party, the Grantor will meet with the Concessionaire to discuss and agree on a plan and the appointment of a joint operation and management committee to procure that the operation of the Airport recommences as soon as practicable. If the Grantor and Concessionaire are unable to agree on a plan and appoint a joint operation and management committee within 6 hours of the expiry of the period referred to above, the Grantor shall be entitled to operate the Airport until such time as the Concessionaire is able to resume operation of the Airport.

O&M

– As between Concessionaire and Grantor (and their respective employees, servants and agents), Concessionaire alone will bear any responsibility there may be for any cost, expense, loss, liability or damage suffered or incurred by any user(s) at the Airport or any other Person(s) or otherwise and arising out of or in connection with the design, construction, maintenance and operation of the Airport and Non-Airport Activities without recourse to Grantor (or any of its respective employees, agents and/or servants) to the extent that such cost, expense, loss, liability or damage arises as a result of the negligence of Concessionaire (and its employees, servants and agents).

Utilities

– Concessionaire shall be responsible for and promptly pay all expenses incurred by it in respect of the operation of the Airport, including, without limitation, in respect of tax, insurance and the provision of all services or utilities to or at the Airport such as electricity, water, gas, refuse collection,

sewerage, foul water, drainage and telephone.

Inadequate Performance

– IATA/ACI AETRA service standards are to be followed. The Concessionaire is to participate in IATA/ACI AETRA passenger survey quarterly.- Concessionaire has to achieve the Objective Service Quality Requirements and provide Compliance reports to the Grantor. If the Concessionaire fails to achieve these requirements, it shall pay to the Grantor 0.5% of the monthly Revenue every month.

– After the completion of Stage 1, the Airport target rating shall be 3.5; provided, however, that after the completion of Stage 2, the Airport target rating shall be 3.75; if the Concessionaire fails to achieve these, it shall pay to the Grantor 2.5% of the monthly Revenue for every month that the standards are below the Target Rating by more than 0.1 points and 1.25% of the monthly Revenue (prior to default) for every month in the event the standards are below the Target Rating by less than 0.1 points.

– Concessionaire to provide to the Grantor report on each development that is completed in accordance with the development plan. If, on review of these reports, the Independent Engineer certifies that a particular development under progress is below the respective Development Standards and Requirements [which post notification is not rectified], the Concessionaire shall pay to the AAI 2.5% of the monthly Revenue (prior to default) for every month.

O&M

– Concessionaire has to achieve and maintain ISO 9001:2000 certification for all facilities relating to Aeronautical Services. If the Concessionaire fails to achieve or maintain this certification, it shall pay the Grantor 2.5% of the monthly Revenue (prior to default) for every month till it achieves the certification.

Utilities

– Concessionaire to provide the Grantor with a continuous supply of electrical power and water sufficient to enable it to perform the Grantor Services (Communications, Navigation and Surveillance Systems for Air Traffic Management) and the Grantor shall reimburse Concessionaire the costs it incurs in procuring such services.

– Concessionaire to provide Essential Services (which includes water) at the Airport Site.

The Concessionaire shall, at its cost, maintain the airfield lighting system and the main and standby power supply systems in accordance with the relevant standards prescribed in the relevant ICAO Annexes and Documents.

– If the Grantor determines that, as a result of the expansion of the Airport, additional standby supplies of electrical power are required at the Airport, parties will discuss and seek to reach an agreement.

Inadequate Performance

– The Concessionaire shall ensure and procure compliance with each of the Key Performance Indicators. Damages for non-compliance will be determined by AERA and adjusted against Aeronautical Charges.

 O&M

– Maintenance Manual shall include provisions for life cycle maintenance and repair of Project Assets.

– Failure to repair defects in  Maintenance Requirements shall be a breach, and the Authority shall be entitled to recover Damages for each day of delay until the breach is cured at the higher of (a) 0.5% of Average Daily Revenue and (b) 0.1% of the cost of such repair or rectification.

– If the Concessionaire does not maintain the Airport in conformity with the Maintenance Requirements and fails to commence remedial works within 15 days of receipt of the O&M Inspection Report or a notice from the Grantor or the Independent Engineer, the Grantor is entitled to undertake such remedial measures at the risk and cost of the Concessionaire, and a sum equal to 20% of such cost shall be paid by the Concessionaire as Damages.

– In the event that the Airport or any part thereof suffers any loss or damage during the Concession Period from any cause, the Concessionaire shall, at its cost and expense, rectify and remedy such loss or damage forthwith.

If such loss or damage has resulted due to any breach or by the Concessionaire under this Agreement, the costs for the repair or rectification shall not be considered for determination of the Aeronautical Charges.

– O&M Terminal Building: Level of service in the Terminal Building shall, during the Peak Hour, be no inferior to ‘Level of Service optimum or similar standard 69 as specified by IATA.

If it is found to be inferior, the Concessionaire is to pay Damages to the Grantor, which shall be determined at the rate of 1% of the total revenue from Fees of that Accounting Year.

Utilities

– Concessionaire shall procure water and electricity, as may be necessary for the operation of the Airport.

– Concessionaire shall ensure that the respective entities owning the utilities on, under or above the Site are enabled by it to keep such utilities in continuous satisfactory use.

– State Support Agreement- GoUP further confirms that it shall make best endeavours to maintain and develop existing facilities in relation to Utilities (to the extent that these services are generally maintained by the GoUP or its departments/ agencies/ entities substantially owned or controlled by the GoUP).

IX. Impact of Change in Law

(i) ‘Change in law’ typically refers to any change in the provisions of law or imposition of any requirement by an authority having the force of law. The following aspects, among other things, would require careful consideration in relation to a ‘change in law’ definition and use case:

  1. Categories of exclusions. For example, the definition may exclude ‘environmental laws’ or tax laws’.
  2. Jurisdiction to which the Change in Law applies.
  3. The cut-off period beyond which ‘change in law’ would be considered.
  4. Allocation of risks and costs between the Grantor and the Concessionaire arising due to Change in Law.

Risk emanating from Change in Law requires careful consideration as it would have an impact on the bankability of the Project.

(ii) The ‘Change in Law’ meaning and use case appears well designed in the case of Greater Noida where the foregoing aspects have been documented:

“Change in Law” means the occurrence of any of the following after the Bid Date: a) the enactment of any new Indian law; b) the repeal, modification or re-enactment of any existing Indian law; c) the commencement of any Indian law which has not entered into effect until the Bid Date; d) a change in the interpretation or application of any Indian law by a judgement of a court of record which has become final, conclusive and binding, as compared to such interpretation or application by a court of record prior to the Bid Date; or e) any change in the rates of any of the Taxes that have a direct effect on the Project;

Bangalore:

‘Change in Law’ means the occurrence of any of the following (other than in respect of any laws of GoK, any Tax laws (except for those that relate to any Tax benefits provided to BIAL and/or the Airport pursuant to GoIs infrastructure policy and as more specifically set out in Schedule 12) or any environmental laws or Labour Laws) after the date of this Agreement: (i) the modification, amendment, variation, alteration or repeal of any existing Indian law or the enactment of any new Indian law; (ii) the commencement of any Indian law which has not yet entered into effect except to the extent where such Indian law was enacted prior to the date hereof with a commencement date after the date hereof and such Indian law takes effect on that commencement date without any material amendment or a change in the interpretation, application or enforcement of any Indian law by the Supreme Court of India or GoI; (iii) after the date of grant of any Clearance a material change in the terms and conditions attaching to such Clearance or the attachment of any new material terms or conditions or such Clearance ceasing in part or in whole to remain in full force and effect. Provided that the creation or introduction of an Independent Regulatory Authority (including the framing of rules and regulations in relation thereto or thereunder but, for the avoidance of doubt, shall exclude any amendments and/or changes relating to the Regulated Charges) having jurisdiction over all Major Airports shall not constitute a Change in Law.

Delhi & Mumbai:

“Change in Law” means the occurrence of any of the following (other than in respect of any tax laws or any environmental laws) after the last date of submission of a binding offer or bid for the Airport by the Private Participants during the competitive bidding process initiated by the AAI for the purposes of selection of the Private Participants (the “Bid Date”); (a) the modification, amendment, variation, alteration or repeal of any existing Indian Law or the enactment of any new Indian Law; (b) the commencement of any Indian Law, which has not yet come into effect except to the extent where such Indian Law was introduced in the central legislature (as a bill) or enacted, prior to the Bid Date, with a commencement date after the date hereof and such Indian Law takes effect on that commencement date without any material amendment; (c) a change in the interpretation, application or enforcement of any Indian Law by the Supreme Court of India; (d) after the date of grant of any Clearance a change in the terms and conditions attaching to such Clearance or the attachment of any new terms or conditions or such Clearance ceasing in part or in whole to remain in full force and effect otherwise than on account of any action or inaction of the JVC; Provided however that the creation or introduction of a Regulatory Authority (including the framing of rules and regulations in relation thereto or thereunder) having jurisdiction over the Airport shall not constitute a Change in Law. Provided further an event, the adverse effect of which has been insured against or could have been insured against in accordance with Good Industry Practice shall not constitute a Change in Law.

Bangalore (Greenfield)(July 5, 2004) Delhi & Mumbai (Brownfield)(April 4, 2006) Greater Noida (Greenfield)(October 7, 2020)
– If the Concessionaire suffers an increase in costs or reduction in net after-tax return or other financial burdens, loss, liability or damage in connection with its development or operation of the Airport, the aggregate financial effect of which exceeds Rupees 10,000,000 in any year, the Concessionaire is entitled to propose amendments to the Concession so as to put Concessionaire in the same financial position as it would have occupied had there been no such Change in Law.- If no agreement is reached by the Parties within the specified timeline, the Concessionaire may require GoI to pay an amount that would put the Concessionaire in the same financial position as before. – Relief for Change in Law is mentioned in the state support agreement. If, due to a Change in Law, Concessionaire suffers a loss with its development or operation of Aeronautical Services and Aeronautical Assets at the Airport, the aggregate financial effect of which exceeds Rupees ten crores (Rs 10,00,00,000) in any financial year, the Concessionaire may notify GoI and propose amendments to the OMDA so as to put the Concessionaire in the same financial position as it would have occupied had there been no such Change in Law.- If, due to a Change in Law, the Concessionaire incurs a reduction in costs, the aggregate financial effect of which exceeds Rupees ten crores (Rs 10,00,00,000) in any financial year, the Concessionaire shall notify GoI and pay to GoI an amount that would put the Concessionaire in the same financial position it would have occupied had there been no such Change in Law.- If the costs incurred on account of Change in Law are recoverable from the Users, the Grantor shall not be liable to reimburse the Concessionaire. – If the Concessionaire suffers an increase in costs/reduction in net after-tax return the aggregate or benefits from a reduction in costs or increase in net after-tax return financial effect of which exceeds the higher of Rs. 1 crore and 0.5% of the Aeronautical Charges, the Concessionaire may notify the Grantor and propose amendments to the Concession.- If no agreement is reached within 90 days, the Concessionaire may require the Grantor to pay an amount that would place the Concessionaire in the same financial position that it would have enjoyed had there been no such Change in Law, and within 15 days of receipt of such notice, the Grantor shall pay the amount.- Parties shall rely on the Financial Model to establish a net present value of the net cash flow and make necessary adjustments in costs, revenues, compensation or other relevant parameters to procure that the NPV of the net cash flow is the same as it would have been if no Change in Law had occurred.- Grantor shall not be liable to reimburse Concessionaire any sums if they can be recovered from the Users.
X. Force Majeure

(i) ‘Force Majeure’ typically refers to events which are reasonably beyond the control of a Party upon the occurrence of which such Party is excused from discharging its obligation which is affected on account of such force majeure event.

(ii) The following aspects, among other things, would require careful consideration in relation to a ‘force majeure’ definition and use case:

a. Categories of exclusions. For example, in almost all cases, economic hardship is an exception to the ‘force majeure’ definition. At times, ‘Change in Law’ may be expressly included or excluded.

b. Steps to be taken by the Party affected by the occurrence of a force majeure event and the timeline to undertake such steps.

c. Effect of prolonged force majeure

d. Consequences of force majeure

(iii) Risk emanating from Force Majeure requires careful consideration as it would have an impact on the bankability of the project.

(iv) The concessions typically provide for termination as an option in case of prolonged force majeure. The relevant provisions are as under:

If termination is triggered on account of the occurrence of a Force Majeure event, the Grantor;

Delhi & Mumbai

– shall acquire Transfer Assets [Aeronautical and Part I Non-Aeronautical] 100% of Debt relatable to Transfer Assets.

– have the right to acquire Non-Transfer Assets [Part II Non-Aeronautical] at Discounted Fair Value (Lower of Book Value as recorded in the books of the JVC and the Net Present Value) in the manner prescribed.

Bangalore

-Neither Party is to be liable for failure to comply with obligation and must not be required to perform obligations if such is prevented by force majeure, and time shall also be extended to perform such obligations.

Greater NOIDA

– Force Majeure means the occurrence in India of any or all Non-Political Event, Indirect Political Event and Political Events.

a. For a Non-Political Event

– Shall pay 90% of Debt Due less Insurance Cover.

b. For an Indirect Political Event

– Shall Pay Debt Due less Insurance Cover.

– 110% of Adjusted Equity

–  Additional Termination Payment less Insurance Cover

c. For a Political Event

– Shall Pay the same amount as on the account of default by Grantor

 

Bangalore (Greenfield)(July 5, 2004) Delhi & Mumbai (Brownfield)(April 4, 2006) Greater Noida (Greenfield)(October 7, 2020)
– Neither Party is liable for failure to comply with obligation and must not be required to perform obligations if such is prevented by force majeure, and time shall also be extended to perform such obligations.- Not more than 72 hours following any event of force majeure, if either Party desires to invoke such event of force majeure as a cause for delay or failure, it shall notify the other Party in writing of such date. Within a reasonable time following the date of such notice, the Party, having invoked such event of force majeure as a cause for such delay, shall submit to the other Party sufficient proof of the nature of such delay and its anticipated effect upon the time for performance. – Concessionaire, or Grantor, shall be entitled to suspend the performance of its obligations to the extent that it is unable to perform.- If a Party claims relief for the force majeure event, it  shall give notice of
(i) the force majeure event(ii) the obligation affected(iii) the dates of commencement and estimated cessation

(iv) the manner in which the event affects the party’s obligation.

-Time for performance by the affected Party of any obligation with any time limit affected by force majeure and for the exercise of any right affected shall be extended by the period during which such FM continues and by such additional period as is necessary.

– The Party receiving the claim for relief shall, if it is to dispute the claim, give written notice of dispute to the Party making the claim within 15 days of receiving the notice. Not contesting the validity of the notice of claim within 15 days shall be deemed acceptance.

– If the force majeure event continues for more than 365 days, either Party shall have the right to terminate by giving a notice of termination.

– In the event of any such termination, Grantor shall-

a. acquire all of the Concessionaire’s rights, title and interests in and to the Transfer Assets on payment within six months of the Transfer Date of 100% of Debt in respect of the Transfer Assets as recorded in the books of the Concessionaire.

b. have the right to acquire all of Concessionaire’s rights, title and interests in and to all or any of the Non-Transfer Assets on payment within six months of the Transfer Date of Discounted Fair Value and the Net Present Value of such Non-Transfer Assets.

– The Affected Party shall, by notice, report such occurrence to the other Party, which will include (a) the nature and extent of each force majeure Event
(b) the estimated duration and the effect, and
(c) the measures which the Affected Party is taking.- Affected Party is not entitled to any relief for a force majeure Event unless it has notified the other Party within seven days.- The period for achieving Financial Close and the Construction Period shall be extended by a period equal in length to the duration of the force majeure Event.- After the COD of Phase I, where the Concessionaire is unable to collect Aeronautical Charges, AERA shall consider the impact of any such force majeure Event.

Costs:

– In case of a Non-Political Event, the Parties shall bear their respective force majeure Costs.

In case of an Indirect Political Event, all force majeure Costs attributable to such Indirect Political Event, not exceeding the Insurance Cover, shall be borne by the Concessionaire, and to the extent force majeure Costs exceed such Insurance Cover, one-half of such excess amount shall be reimbursed by the Authority to the Concessionaire.

In case of a Political Event, all force majeure Costs attributable to such Political Event shall be reimbursed by the Authority to the Concessionaire.

Termination:

– If force majeure event subsists for a  period of 180 days or more within a year, either party may, in its discretion, terminate this agreement by issuing a Termination Notice to the other Party.

Termination Payment:

a. If Termination is because of a Non-Political Event, the Grantor shall pay equal to 90% of the Debt Due less Insurance Cover.

If Termination is because of an Indirect Political Event, the Grantor shall pay an amount equal to

(a) Debt Due less Insurance Cover, provided that if any insurance claims forming part of the Insurance Cover are not admitted and paid, then 80% of such unpaid claims shall be included in the computation of Debt Due;
(b) 110% of the Adjusted Equity;

(c) an amount equivalent to the Additional Termination Payment less Insurance Cover; provided that if any insurance claims forming part of the Insurance Cover are not admitted and paid, then 80% of such unpaid claims shall be included in the computation of the amount payable.

XI. Ultimate control over operation: Step in/Requisition

(i) Step-in right of the Grantor cannot be argued with as such a right is essential given the critical nature of airport infrastructure. However, such right should be exercisable under specified and limited circumstances, for example, in case of an occurrence of an event affecting national security and safety.

Bangalore (Greenfield)(July 5, 2004) Delhi & Mumbai (Brownfield)(April 4, 2006) Greater Noida (Greenfield)(October 7, 2020)
– Except as otherwise provided in this Agreement and/or except in the case of national emergency and/or as provided in any law existing at the date of this Agreement Grantor shall not intervene in or interrupt the design, construction, completion, commissioning, maintenance, financing,operation, management and/or development of the Airport by or on behalf of Concessionaire.- In case of any other emergency or for reasons of public safety, the Grantor shall be entitled to intervene in or interrupt the construction or operation of the Airport for a period to be mutually agreed between the Parties. – In an emergency, the Grantor has the right to temporarily assume control of the Airport as per the State Support Agreement.- If, after the Effective Date, the Concessionaire ceases the operation of the Airport for more than 12 hours, the Grantor will meet with Concessionaire to discuss the plan and appointment of  a joint operation management committee to recommence Airport operations.Concessionaire shall reimburse and indemnify the Grantor for any costs and expenses incurred by the Grantor related to the operation and maintenance of the Airport, which costs and expenses may be set off by the Grantor from the amounts payable by the Grantor to the Concessionaire.In the event the period of step-in exceeds three months, the same shall be treated as an event of force majeure. – Concessionaire shall procure that Project Agreements contain provisions that entitle the Authority to step into such agreement.- The Concessionaire, upon notice, fails to rectify any hardship, the Authority may exercise overriding powers and take over the performance of obligations of the Concessionaire and costs and expenses incurred by the Authority in the discharge of its obligations shall be deemed to be O&M Expenses which Authority shall be entitled to recover from the Concessionaire- In a national emergency, the Grantor may take over the performance of any or all the obligations of the Concessionaire to the extent deemed necessary.

Thoughts and Views

  1. As per Niti Aayog, 36-45 billion USD of investment is required in the Aviation Sector by 2030. At the same time, the NCAP mentions the intention to achieve the reduced airfare of INR 2,500 per passenger. The question of economic sustainability is inescapable, and it follows if such a situation is conducive to private investment.
  2. The Ude Desh ka Aam Nagrik scheme under the NCAP refers to VGF for improving air connectivity to regional and rural areas of the Country. While VGF presents immediate relief, it would not necessarily be the solution. Possibly,  the assessment of air travel requirements may be subject to review upon achieving sustainable development across the Country, or significant steps are taken to achieve the same, eventually leading to sustainable development.
  3. Historically, the concessions granted by the Government have shifted all risks on the Concessionaires. In order to attract investments and implement projects successfully, risks and obligations should be allocated based on the Party who is best placed to address such risks and obligations. One example of such allocation is noticed in the case of Greater Noida, where, as a condition precedent, it is the obligation of the Grantor to obtain the right of way, forest clearances and environmental permits (Refer ‘VI. Development Risk’ under Contractual Matrix).
  4. Is there enough emphasis on the sustainable development of airports? Sustainability is a multi-dimensional and contextual concept, while various legislations and policies support sustainability, it needs to be evaluated if a sustainability framework is required which takes into consideration green performance and sustainability model of the Airport.

[3] Aviation Report of 2023, released by the India Brand Equity Foundation,
[4] As per the Airports Authority of India (Ground Handling Services) Regulations, 2018,
A foreign airline may undertake self-handling in respect of passenger and baggage handling activities excluding security functions listed in paragraph 1 of AVSEC Order No. 03/2009 dated the 21st August, 2009 at the airport terminals restricted to the passenger check-in at pre security hold area, at all the airports except civil enclaves.
Provided that, the full self-handling, including security functions, shall be allowed to be undertaken by the designated airline of a country having a bilateral Air Transport Agreement or Air Services Agreement with India containing a clause permitting self-handling by the designated airlines, at any airport in India available to such airline(s) as a point of call under the bilateral Agreement, except at civil enclaves of defence airports, subject to the condition of compliance with additional security measures as may be made by the Ministry of Civil Aviation from time to time and implemented under oversight of Bureau of Civil Aviation Security.”
[5] MANU/SC/0414/2011
[6] Kumar, A., Alora, A., & Gupta, H. (2019). Evaluating green performance of the airports using hybrid BWM and VIKOR methodology. Tourism Management, 76, 103941.
[7] Stephane Louise Boca Santa, João Marcelo Pereira Ribeiro, Gisele Mazon, Jonas Schneider, Ricardo Luis Barcelos, José Baltazar Salgueirinho Osório de Andrade Guerra, A Green Airport model: Proposition based on social and environmental management systems, Sustainable Cities and Society, 59, 2020.
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Suniti Kaur (Ms), Radhika Goyal (Ms), Samridhi Gandhi (Ms) and Ashwini Panwar (Mr)

Co-Founder &  Managing Partner at Alaya Legal
Associate at Alaya Legal
Associate at Alaya Legal
Associate at Alaya Legal

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Alaya Legal shall in no way be responsible for any technical inaccuracies in the website, or for any actions taken or not taken for reasons attributable to the information contained in this website or accessed through this website. Readers are advised to seek counsel from a qualified professional while dealing with specific issues.The views appearing under various heads, including ‘Trending’, are those of the author. The author may be reached at by writing to Alaya Legal at contact@alayalegal.com Nothing herein is or may be construed as legal advice.