Wednesday, September 24, 2008

What is Greenfield Airport ? Example kannur airport


Greenfield Airport means a new airport which is built from scratch in a new location because the existing airport is unable to meet the projected requirements of traffic.The word greenfield originates from software engineering, meaning a project which lacks any constraints imposed by prior work. Those projects which are modified or upgraded from existing facilities are called brownfield project

Procedural guidelines for setting up of Greanfield Airport
Policy Framework
1. Airport Infrastructure Policy of 1997 provides the following:-
§ In view of the fact that there are already a sufficient number of airports, many of which are not viable, greenfield airports will
normally not be taken up either in the public or private sector without the prior approval of the Government. In the case of the Other Airport category run by private operators, the approval of the DGCA would suffice as at present.
§ A greenfield airport may be permitted where an existing airport is unable to meet the projected requirements of traffic or a new focal point of traffic emerges with sufficient viability. It can be allowed both as a replacement for an existing airport or for simultaneous operation. This aspect will have to be clearly spelt out in the notice inviting tenders.
§ No greenfield airport will normally be allowed within an aerial distance of 150 kilometers of an existing airport. Where it is allowed as a second airport in the same city or close vicinity, the parameters for distribution of traffic between the two airports will be clearly spelt out.
§ The Government may, while permitting a greenfield airport, decide whether it will be in the public or private sectors or be taken up as a joint venture.
§ Where the Government decides to set up a greenfield airport through the AAI on social considerations even though the same is not economically viable, suitable grant-in-aid will be provided to AAI to cover both the initial capital cost as well as the recurring losses.
2. Promoters
The Central Government, Airports Authority of India, State Government, a local self Government Institution e.g. Municipality,
Corporation etc., a private company, a consortium or a group of individuals can act as the promoter for the greenfield airport either
individually or jointly.
3. Pre-feasibility Study Stage
The promoter, after preliminary clearance of Ministry of Civil Aviation on his proposal in the first instance, will commission a pre-feasibility report to study the overall potential of the project and see whether the project is attractive enough to warrant detailed study. The study should cover demand, technical, manpower, financial, economic and social modules of the project. The study may also utilize secondary research and information. The promoter shall submit the prefeasibility report to the Ministry for further approval. The cost of the pre-feasibility will be borne by the promoter.
4. Detailed Feasibility Study Stage
Based on study of pre-feasibility report, the promoter shall again approach the Central Govt. for preliminary clearance of undertaking a detailed Techno-Economic Feasibility Study (TEFS). The Central Govt. after due examination of all modules of pre-feasibility study will determine whether the project shows promise of meeting the financial, economic and social criteria which have been set for public investment expenditure. In case, the Govt. find it appropriate, it may permit the promoter to take up detailed TEFS. Approval Based on the TEFS and State Government/Promoters’ recommendations, the Central Government will consider giving approval for the airport project as per the extant policy. The approval will be given by the Union Cabinet as per the Civil Aviation Policy. The Central Government after approval will then go ahead to develop detailed design of the project which should then result in formulation of operational plan. At this stage, the project can once again be reviewed whether it shall meet required criteria.
9. Project Implementation Stage
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A Steering Committee is set up by State Govt. / promoter comprising of officials of the State Govt. and the Ministry of Civil Aviation as this stage involves coordination and allocation of resources. This Committee will oversee the implementation of the project, funding proposal, preparation of tender and other documents, bidding and selection of the preferred investor. The State Govt./ promoter will designate an agency preferably a PSU to coordinate the activities and assumes responsibilities and authority for moving ahead in areas related to the above.
10. Setting up a Special Purpose Vehicle (SPV) The State Govt./ promoter shall set up a SPV wholly owned buy it to begin with. Later, on the selection of successful bidders, the private investor will be inducted in the SPV with 74% equity shares 11.Public Private Partnership (PPP) Model
The State Government as a primary promoter may consider joint venture (JV) with private investors through Public Private Partnership Model (PPP). In case it proposes to have a joint venture with private promoters, it shall be the primary responsibility of the State Government to choose private sector partners through a transparent competitive bidding process subject to the guidelines on foreign equity participation. 12.State Govt./ AAI may also participate in the JV with equity which will be limited to 13% each (Rs. 50 crores cap or 13%, whichever is lower in case of AAI)
13. Bidding Process
The Joint Venture Partner / Greenfield Operator shall be selected by the State Govt. through a transparent competitive bidding process based on technical and financial criteria. While inviting bids from prospective bidders by the State Govt./ promoters, the draft Concession Agreement (CA), Shareholder Agreement (SHA), State Support Agreement (SSA), Land Lease Agreement (LLA), (CNS/ATM) Agreement, principles of Finance Agreement, principles of Airport Operator Agreement along with format of commitment from lenders regarding debt/ equity will be furnished to the pre-qualified bidders. Before inviting technical and financial bids, these documents will be frozen in consultation with Pre- Qualified Bidders (PQBs).
14. Selection Criteria
It may be divided into technical and financial criteria. The technical criteria may include financial, development and management abilities. A broad list of these will be made part of the bid documents. The financial criteria could be the minimum bid for State Support and viability gap funding or maximum concession fee.
15. The successful bidder inducted into SPV through SHA shall use the Detailed Project Report (DPR) for realizing and operationalizing the project implementation.
16. Viability Enhancement :- The greenfield airport project can be made
viable by following means:-(i) Land and external infrastructure provided by the State Government for the airport on lease through Land Lease Agreement with variety of combinations such as token lease, moratorium on lease, deferred payment of lease etc.
(ii) The State Government may enter into a State Support Agreement in addition to Land Lease Agreement with the greenfield airport operator providing for State Support such as grant, infrastructure loan, interest free loan etc.
(iii) Central Government may levy an Advance Development Fee (ADF) from embarking passengers at the existing airport or for the development of new airport on terms and conditions as per ADF rules framed by the Ministry.
(iv) The Greenfield airport operator may be allowed to levy a User Development Fee (UDF) at the new airport, subject to the Regulatory regime in force.
(v) Aeronautical Charges may be leviable at the airport shall be as approved by the Govt./ Regulator.
(vi) The Passenger Service Fees (PSF) levied at all airports would be applicable to the Greenfield airports also. ADF / UDF would be charged in addition to the PSF. PSF being levied through passenger tickets will have two components viz. (a) Security charges, (b) levy for Airport Maintenance and Upkeep. The PSF components collected through airline passenger tickets will be passed on by the airline to AAI as far as security component is concerned and the Greenfield operator for service component.
(vii) Concessions have also been given by the Union Govt. through budget pronouncement from time to time.
17. While Security will be the responsibility of the Central Govt. {through AAI / Bureau of Civil Aviation Security (BCAS)}, the airport operator will be required to provide security equipments, operate and maintain as per standards laid down by the Bureau of Civil Aviation Security (BCAS),and meet the costs thereof.
18. Communication, Navigation and Surveillance (CNS) / Air Traffic Management (ATM) equipment along with allied infrastructure required for Greenfield airport will be provided by Airports Authority of India (AAI) at its cost and the revenue from (RNFC)/ (TNLC) accrue to AAI directly. The greenfield operator will provide ATC tower, required buildings/ office accommodation, utilities on payment of rental on mutually agreed terms. The State Govt./ Operator will also earmark land for a residential colony for CNS/ATM personnel. The colony will be developed by AAI at its own cost. The Greenfield airport operator will sign a CNS / ATM agreement with AAI in this regard wherein AAI will commit performance standards also in terms of aircraft movement per hour.
19. If the selected Greenfield airport operator wants to take initiative in developing business strategies through traffic building at the airport, the Central Government may consider giving positive support keeping in view the overall bilateral requirements also as per the Civil Aviation Policy.
20. The airport operator would be allowed to optimize the use of land subject to the applicable land rules and regulations of the State Government on land use and encouraging non-aeronautical revenues. In this context, the concept of developing the entire area with an integrated approach, may be encouraged. While the land given by State Govt. may be used to raise non-aero revenue, the JVC and the State Govt. will ensure that the airport does not assume real estate . Hence, the land leased out will be first used for full length aero development over the concession period. Only the residual land will be subject to non-aero exploitation for those activities which are directly related with passengers, cargo, air transport industry/ services etc.
21. Landing, parking, housing charges will accrue to the airport operator.
22. The airport operator will provide requisite space and facilities for regulatory agencies like Customs, Immigration, Health, Plant and Animal Quarantine, Security and State Governments on terms and conditions as per CA.
23. The JVC while providing healthy corporate governance, will ensure that major contracts are awarded through a competitive bidding process, arm length method for related parties transaction and achieve the best value
of money for JVC through a mechanism of independent engineer, auditors etc. The EPC Contract of the JVC shall also be awarded
through transparent and competitive procedures by the JVC.
24. The Center/ State Governments in due course will evolve following model agreements for the purposes of selection of JV partner through a competitive bidding process:-
(i) CA (ii) SHA (iii) SSA (iv) LLA (v) CNS-ATM
25. The sequence of signing agreements will generally be as follows:-
(i) SHA amongst shareholders at the time of induction in SPV
(ii) stands deleted
(iii) EPC contract process to firm up costs by SPV
(iv) Selection of financial arranger and finalization of landing conditions by SPV
(v) Financing Agreements
(vi) Direct Agreements of lenders with GOI
(vii) The work begins

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