Southern States - Karnataka-Bangalore   

Accord reached on funding for international airport

By Our Special Correspondent

Bangalore Nov. 11. The promoters behind the Bangalore International Airport are now certain of funding from the State Government. The project is estimated to cost Rs. 1,300 crore and take up to seven years to be completed.

The State Government is reported to have agreed to provide a `subordinate debt' of Rs. 350 crore, including a contingency fund of Rs. 75 crore. Provided cost escalation is within limits, the State Government may not have to spare more than Rs. 275 crore as a soft loan for the airport project. The Bangalore International Airport Ltd. (BIAL), the consortium behind the project, has to start servicing the debt after a preset time limit. The promoters had initially expected larger funding from the Government.

According to Government sources, around 30 per cent of the cost of the airport project will be treated as equity participation and the rest will be debt, including the funding from the State Government. In the equity component will be Rs. 100 crore from the Karnataka State Industrial and Investment Development Corporation (KSIIDC) and the Airports Authority of India (AAI), representing the Karnataka and Union Governments. The two Governments each hold a 13 per cent stake in the airport project. The consortium of promoters holds 74 per cent.

The largest portion of the debt component, around Rs. 550 crore, is expected to be raised by an ICICI-led consortium. The challenge before BIAL is to stick to the predetermined cost structure. For this purpose, the company has `frozen' the related engineering procurement contracts.

Successful completion of the international airport project is important to the State Government. The information technology and IT-enabled services sectors have been pressing for more direct flights from Bangalore to boost exports. To promote the IT hardware segment, land has been reserved around the airport for a hardware park.

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