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Friday, July 19, 2024

SriLanka: Mattala International Airport: Russia-India JV under fire

  • Sudden shift from specific operations EOIs to single operator RFP
  • No transfer of around $ 7 m quarterly payments for debt
  • 90% of MRIA employees to transfer back to BIA
  • AASL Chair denies allegations
  • JV for 30 years; AASL leasing 198 ha to same company

The decision to hand over the management of the Mattala Rajapaksa International Airport (MRIA) to a Joint Venture (JV) between Indian and Russian firms has sparked controversy with the emergence of allegations of a ‘rogue deal’ and concerns about transparency in the selection process, raising questions about the airport’s future.

Last year, the Ministry of Ports, Shipping, and Aviation, on behalf of Airport and Aviation Services (Sri Lanka) Ltd. (AASL), called for Expressions of Interest (EOIs) from prospective investors to develop both direct and indirect aviation-related business ventures at MRIA.

As per the EOI document published by AASL, the EOIs targeted ventures such as Maintenance, Repair, and Overhaul (MRO) services, flying schools, aerospace engineering schools, aircraft spares manufacturing, renewable energy projects, resort hotels, industrial parks, and logistics services.

Successful operators were promised space within a 198 hectare area to build the necessary infrastructure, contingent on Government approvals.

However, according to a senior official who spoke to The Sunday Morning under the condition of anonymity, the process has taken a concerning turn.

“Initially, EOIs were solicited for four separate categories of operations. Yet, for reasons unknown, the management decided to request proposals from the bidders to operate the entire MRIA, effectively transforming the tender into a limited and potentially biased process,” the official claimed.

“They have made a very rogue deal. It is very wrong. It should have been an open tender as this is an international airport. They did something in a drastic way,” the official alleged.

“There were several companies that bid for these separate operations. But somewhere down the line, discussions happened with one particular company out of all other companies, and they suddenly decided to call a limited tender between these few companies which participated.”

The official emphasised that if a single company wished to manage all operations, the process should have been an open tender to ensure fairness and competition.

Instead, the sudden shift to a limited tender excluded many potential large-scale management companies capable of handling such a significant project.

“Initially it was to give out four areas of the airport separately; now the tender is to give out the operations of the entire airport. If you’re sending an EOI to give the entire airport, there are so many other large-scale management companies which can bid for something like this,” the official said.

“They did this without providing that opportunity. Those who submitted the EOIs for separate operations obviously did not have the intention of taking over an airport.”

Furthermore, the urgency of the deal has added to the controversy. The agreements are expected to be signed within one or two weeks, following a Cabinet decision. The terms of the deal have also raised significant concerns.

The official pointed out that the airport would not generate any income under the new management. Despite promises that the company would cover the MRIA’s losses, the airport still has a loan of about $ 7 million every quarter that it must continue to pay.

Additionally, 90% of MRIA employees will be transferred back to the Bandaranaike International Airport (BIA), with AASL shouldering their payments, further exacerbating the financial burden.

“There is no benefit. The losses will keep mounting,” the official warned. “The new company plans to take the MRIA and market it to other investors. This could have been done by a local company.”

Meanwhile, Minister of Ports, Shipping, and Aviation Nimal Siripala de Silva announced last week that MRIA’s management would be handed over to a JV between Indian and Russian firms soon, with India providing $ 69 million for the development of Kankesanthurai Port as part of the broader deal.

Responding to inquiries from The Sunday Morning, AASL Chairman Athula Galketiya refuted allegations of irregularities in the selection process, stating: “It was an EOI. We floated the Request for Proposal (RFP) after selecting the prospective bidders with the necessary qualifications. There has been no irregularity in any way. After shortlisting, we called for EOIs to develop the MRIA, selected those who are capable, and then floated the RFP.”

Galketiya also affirmed that the selected company’s previous experience had been taken into consideration during the EOI process.

Speaking on the management of airport staff, he assured: “The MRIA staff is our staff. They will be handled as per the prevailing labour laws. We have consulted the Labour Department. Those who are selected for the new company will be allowed to join it. We can’t forcibly place them in the new company.”

Regarding investments, Galketiya emphasised: “We are handing over only the operations of the airport. We are holding back the air traffic navigation system, security, and fire rescue and fire fighting. We will be doing that and they will reimburse the cost. There will be no security risk. We are getting a revenue share after three years.”

Explaining the lease details, he stated: “We have 700 hectares; out of that, 500 hectares are needed for airport operations. The balance can be invested in hotels. We will be giving 198 acres on lease, and they will bring down investors for various projects.”

Since its establishment, MRIA has been mired in controversy and allegations of corruption. These issues, stemming from its construction and subsequent financial struggles, have branded it a white elephant, burdening State coffers unnecessarily. As a result, factions in both the current and past administrations have strongly advocated for its privatisation.




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