Podcast: The Story of G.M. Rao

by Cuckoo Paul | Jun 4, 2011

The story of Indian Infrastructure (Podcast produced in association with theindicast.com)

Post Your Comment

Comment

Shailesh June 21, 2011

Many thanks for responding Cuckoo.

GMR bid for the project after taking into a/c the returns. Unfortunately, its calculations went wrong and it probably began to suffer losses.

Bringing in the UDF later to compensate GMR for its own mistake is clearly unfair to passengers and the aviation sector.

Its not clear if the UDF was a direct result of some other factor like increase in the scope of work required from GMR.

Cuckoo Paul June 21, 2011

Hi Shailesh,
thanks for your comment on the podcast. You are absolutely on the dot on UDF, it is currently the most hotly debated part of airport revenues. We have discussed this in detail in our magazine story. The Aera is expected to rule soon on whether, and for how long, GMR should be allowed to collect the charge.
The two rulings on UDF and how revenue from real estate will be treated, will have a crucial bearing on how much time it takes GMR to breakeven.
Whether passengers should pay for infrastructure has been a big debate in the past. It is clear that the government cannot afford to build the projects the country needs and companies will only build it if returns are attractive.

Shailesh June 4, 2011

The story misses a key point regarding user development fees (UDF). GMR, GVK, etc. bid for these airports taking into account the expected revenues from land development, etc. Much later when the recession kicked in and their revenue estimates proved too high, they allegedly bribed Praful Patel and got themselves a new revenue stream (UDF) sanctioned.

They bid too aggressively and would have suffered losses because the recession kicked in but isn't that fair? Passengers have been unnecessarily paying this UDF. Its bad for the aviation sector because every addition to the overall fare reduces air traffic.

Recent Comments

see all

Shailesh :
June 21, 2011
Many thanks for responding Cuckoo. GMR bid for the project after taking into a/c the returns. Unfortunately, its calculations went wrong and it probably began to suffer losses. Bringing in the UDF later to compensate GMR for its own mistake is clearly unfair to passengers and the aviation sector. Its not clear if the UDF was a direct result of some other factor like increase in the scope of work required from GMR.

Cuckoo Paul :
June 21, 2011
Hi Shailesh, thanks for your comment on the podcast. You are absolutely on the dot on UDF, it is currently the most hotly debated part of airport revenues. We have discussed this in detail in our magazine story. The Aera is expected to rule soon on whether, and for how long, GMR should be allowed to collect the charge. The two rulings on UDF and how revenue from real estate will be treated, will have a crucial bearing on how much time it takes GMR to breakeven. Whether passengers should pay for infrastructure has been a big debate in the past. It is clear that the government cannot afford to build the projects the country needs and companies will only build it if returns are attractive.

Shailesh :
June 4, 2011
The story misses a key point regarding user development fees (UDF). GMR, GVK, etc. bid for these airports taking into account the expected revenues from land development, etc. Much later when the recession kicked in and their revenue estimates proved too high, they allegedly bribed Praful Patel and got themselves a new revenue stream (UDF) sanctioned. They bid too aggressively and would have suffered losses because the recession kicked in but isn't that fair? Passengers have been unnecessarily paying this UDF. Its bad for the aviation sector because every addition to the overall fare reduces air traffic.