An Airport At Navi Mumbai Is Urgently Needed; What Exactly Is Causing The Delay?

  • After being in the planning and execution stages for 12 years by 2018, the Navi-Mumbai airport project had cleared all the initial hurdles.
  • But financing issues are now coming to haunt the project.
  • Satyendra PandeySaturday, August 8, 2020 1:02 pm IST
    Navi Mumbai International Airport (Facebook)
    Navi Mumbai International Airport (Facebook)

    Mumbai, India’s commercial capital, contributes over 20 per cent of Maharashtra’s Gross Domestic Product.

    An important city by many measures, it accounts for 16 per cent of India’s total airport passenger flows, 28 per cent of total air-cargo flows and 15 per cent of total aircraft movements.

    The connectivity is critical given the confluence of service and trade oriented industries.

    Yet, it is a city that is constrained on airport capacity and the second airport has been in the planning and execution stages since 2008.

    Twelve years later, what is the status of the second airport?

    The Navi-Mumbai airport, a complex project on all fronts

    The airport project traces its roots back to 1997 when the central government constituted a committee to examine a site.

    The proposed site was Eastwards in an area called Navi-Mumbai and after an extensive feasibility study, the project received in-principle approval from the Union Cabinet in 2007.

    Approvals from the state government soon followed and by the end of 2010, most approvals were in place.

    Yet, the largest hurdles were still to come. These included land acquisition, the diversion of a river, which otherwise would flow right across the airport runways, and also relocation of high-voltage lines — to name a few.

    There was also the challenge of environmental clearances given that the site was in marsh land and close to mangroves.

    Given the overall sentiment, stakeholders were optimistic that they would be able to drive consensus and take the project forward.

    However, the challenges had just begun.

    Socio-political realities almost ended the project, challenges are ongoing

    The Ministry of Environment and Forests (MoEF) gave its clearance for the Navi Mumbai airport project in 2008.

    Several objections were put up and the project awaited further clearances, which only came in 2010.

    At which time, new objections were put up.

    The challenge was, perhaps, compounded, given the complexity of the project.

    Given the nature of the land that included wetlands and mangroves in and around the airport site, even to get the land ready would include a host of measures.

    Starting from flattening of a hill from 90 metres to 10 metres, land reclamation, diverting a river (the Ulwe river), widening the channel and making sure that the land does not settle upon construction (for which it needed to be raised by 3–5 metres), much needed to be done.

    Much of this work has now been completed, but each step posed new hurdles.

    Ironically, in a country that likes to debate all things, this engineering success was never celebrated.

    Perhaps the greatest challenge that was faced was land acquisition — something common with most infrastructure projects.

    Mostly because of the social and political consequences and timelines. In an environment where there is always an election looming, the agendas simply don't align.

    And a diverse political base translates into very different promises made to segments.

    Infrastructure projects often get caught up in narrative distortion, where micro-narratives are built including how the project is detrimental for one or more citizen groups.

    In the case of Navi-Mumbai, this was no different.

    Initially, there were challenges on resettlement and quantum of payments.

    Then there were issues around livelihood and skill development.

    And then there was political posturing. As a result, several villages and inhabitants have held out until the last moment.

    One by one, this was and is being tackled. Interestingly, one village was right in the centre of the runways and without this, the project would have stalled.

    Fast forward to today and different parties claim different figures for the available land-bank.

    These range from 80 per cent to 97 per cent. Satellite imagery shows that most of the land bank has been levelled (thus presumably acquired).

    That said, some structures do remain and it is imperative these be removed, planned around or relocated.

    In between all this, the project slowly crawls forward.

    Attracting private bidders was a challenging proposition

    The airport was proposed as a Private Public Partnership venture with the Maharashtra Government holding 26 per cent stake, while the private developer would be given 74 per cent.

    Global tenders were invited in 2014. Nine were received and four were shortlisted.

    The four bidders included Tata Realty and Infrastructure Ltd, Hiranandani Developers Pvt, GVK and GMR.

    The first two did not provide financial bids and thus did not make the final list.

    GVK, which ran the Chatrapati Shivaji Maharaj International Airport in Mumbai, offered to share 12.60 per cent of the revenue of the new airport with City and Industrial Development Corp. of Maharashtra (CIDCO) as opposed to GMR Infrastructure, which offered 10.44 per cent.

    GVK was awarded the bid.

    With the bids complete, Prime Minister Modi was invited for the ground breaking ceremony for the Navi Mumbai International airport in Mumbai on 18 February 2018.

    The project had come to a stage where it could, at the very least, make its way to the runway.

    However, the clearance for takeoff still had challenges.

    After being in the planning and execution stages for 12 years by 2018, the Navi-Mumbai airport project had cleared all the initial hurdles.

    Or so it was believed anyway.

    The next step was arranging the financing for the airport.

    Despite being the most expensive airport project till date estimated at USD 2.2 billion dollars, the cash-flows for the most part were secured against Mumbai’s growing traffic numbers and also its geo-strategic location as a key commercial capital.

    But this, too, would change in ways unimagined.

    Project financing: from guaranteed success to now-in-question

    Any airport project requires huge capital commitments. For the most part, investors are not wary. This, because regulated costs are recovered via pass-through charges to the passengers, while other costs are recovered via items such as retail outlets, parking charges, commercial property development et cetera.

    It is a model that has provided for handsome returns to airport operators even while being misaligned to market demand and putting the burden of cost overruns and largesse squarely on passengers.

    In the case of Navi-Mumbai airport, fairly certain of success, financiers were comfortable with the associated risks.

    The GVK group that, at the time, was operating both Mumbai and Bengaluru’s airports, had a good credit rating.

    Overall, there was no cause for concern.

    By July 2018, the project had achieved financial closure via a consortium of banks.

    The initial phase would require Rs 10,000 crore.

    The lead arranger was Yes Bank. Ironically in 2010, when Yes Bank ran into liquidity constraints, the State Bank of India had to step in to take over as the lead arranger.

    This also resulted in further delay to the project.

    As of now, the 26 per cent equity holder (CIDCO), a Maharashtra-owned corporation, has raised concerns about breach of certain agreements.

    This is delaying the financial closure that is critical to the new airport.

    While the new arranger, namely SBI, has taken over the loan portfolio, however, it has put preconditions.

    Critical amongst these is that the full land-bank of 1,160 hectares should be put up as collateral so that the bank can take a first-charge and structure the financing accordingly.

    Overall, given the broader outlook, both for aviation and infrastructure, it is likely that bankers will revisit all the projections.

    Further delays on account of financing cannot be ruled out.

    Parallel infrastructure, critical to the project, is also delayed

    The Navi-Mumbai project was, and is, dependent on transportation links being developed in other parts of the city.

    These included extending the Bandra-Worli Sealink via a 42km costal road; the construction of a trans harbour link connecting Mumbai and Navi-Mumbai; a proposed 7.5–10 km bridge connecting Mumbai with Navi Mumbai; widening the existing highway; building waterways and related infrastructure connecting Navi-Mumbai; and a metro-link direct to the airport.

    These above links are critical for project success, given that airport traffic flows have destinations that include large parts of the primary and secondary business districts, majority of the hotels and most of the sites of historic and cultural importance.

    Thus, without these, many segments of demand will simply default to the current airport (impacting project viability).

    That said, many of the planned infrastructure upgrades find themselves delayed and awaiting decisions.

    And with cumulative costs in excess of USD 12bn (by conservative estimates), the jury is out on how soon these will see the light of day.

    Each passing day impacts project returns and thus, it is in the best interests of all parties to come to a consensus and take binary decisions.

    Yet, that is easier said than done, and much like earlier, socio-political realities continue to impact progress.

    Whether Mumbai needs a second airport is not even a question

    Given the challenges and delays, and now the pandemic, a question that is coming up is whether the second airport is even needed.

    To understand why this is not even a question, one has to examine the city and trends that have seen the emergence of secondary business districts.

    These are emerging as important centres of growth due to the presence of well-maintained spaces, rental and fixed costs being less than 45-60 per cent as compared to primary business districts, incentives and subsidies being offered, as well as proposed proximity and connectivity to the upcoming airport.

    Residential real-estate prices have also led to much of the population spreading to outward areas, which includes first-time homebuyers, young families, students and the growing middle class.

    In addition to real-estate prices, transport is a key determinant of where populations reside.

    This because 45 per cent of Mumbai’s working population uses public transit.

    It is said that Mumbai is a city that operates on a handful of train-tracks.

    Thus, it is imperative that, to leverage these dynamics, connectivity links also evolve.

    An airport forms part of the overall key value proposition of the city, which then translates into growth and jobs.

    This has already been witnessed in cities like Delhi and Mumbai. In Delhi, the National Capital Region (NCR) has seen disproportionate growth in Gurugram in the state of Haryana, which is in proximity to the airport.

    Similar growth has not been seen in areas such as Noida in the state of Uttar Pradesh, which earlier had the same level of development including proximity to a Special Economic Zone.

    The new airport in Jewar is an attempt to correct this imbalance.

    For Mumbai, real-estate prices coupled with connectivity woes, have already started to impact decisions taken on where to locate business.

    Technically, Mumbai airport is fully saturated and not able to accommodate any new flights.

    And real-estate prices, while depressed, continue to be unviable for folks that choose not to move out to the greater metropolitan region.

    Finally, Navi-Mumbai, as it stands, will be the costliest airport project the country has seen thus far.

    Which also means, it will likely have high user charges.

    These would, otherwise, have been managed, as the owner of both airports was common, but the industry is now factoring in a presumable change in ownership of Navi-Mumbai airport.

    This is based on a letter written by an entity of the Maharashtra State government (CIDCO) to the promoters of the Navi-Mumbai airport, asking for proof of financial capability, to see the project till completion within the stipulated deadline.

    As of this writing, the story of the second airport in Mumbai remains unfinished.

    (This piece was originally published here on

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