Sri Lanka and India fail to reach agreement on Mattala airport
The Government has halted plans for a management deal with India for the Mattala Rajapaksa International Airport ( MRIA), official sources said.
Aviation Minister Prasanna Ranatunga has told the relevant authorities that his administration was no longer interested. India, too, has not responded to a draft agreement Sri Lanka floated proposing a share division of 49 percent to the Indians and 51 percent to the Sri Lankans.
In March last year, the Cabinet gave the go-ahead to start formal negotiations with the Indian Government towards a final agreement for operation of MRIA, including rights to supply catering and ground handling services.
The Prime Minister, the Finance Minister and the Civil Aviation Minister jointly submitted a Cabinet paper titled ‘ Implementation of the Proposal Submitted by Airports Authority of India ( AAI) for the Operation of Matt ala Rajapaksa
Inter national Air port (MRIA)’.
The AAI proposals were already on the table by then. A Cabinet appointed negotiating committee was mandated to start formal talks with designated Indian officials. It was agreed that any agreement reached could include the right to provide catering and ground handling services under the definition of ‘commercial aviation’, but not the right to provide aviation fuel and lubricants to aircraft.
It was clear that India was happy with the share breakdown as AAI would absorb a greater part of the risk. Their proposal, dated May 2017, envisaged a joint venture in which the Indian Government, or its assigned entity, would hold 70 percent of equity and the Sri Lankan Government, or its assigned entity, would have 30 percent.
It also suggested that the company would perform activities mentioned under commercial aviation; aircraft maintenance repair overhaul (MRO) facility; flying training school; emergency response, including search and rescue; humanitarian assistance and disaster relief activities; meteorological services; and any other use, as mutually agreed.
It was revealed in the Cabinet paper that MRIA did not generate revenue to sustain even its day-to-day operations. There was no demand from commercial airlines to operate there “in the foreseeable future”. But it predicted that the growing Indian air transport market offered a valuable opportunity to resurrect MRIA.
The administration of P r e s i d e n t G o t a b aya Rajapaksa is taking a different approach, officials said. On February 27, Cabinet approved a programme of action aimed at attracting airlines (particularly scheduled airline flight operation) to MRIA and Colombo International Airport in Ratmalana.
The embarkation levy of US$60 at MRIA was waived for two years. A discount on charges was introduced for migrant workers who depart the airport. There is also a discount rate for ground handling charges. Fuel will be supplied for airlines at a concessionary p r i c e. Landing and parking charges for scheduled international airlines have been waived for one year.
The construction of MRIA started in 2009 at a total estimated cost of US$ 209mn. The Exim Bank of China granted a loan of US$190mn, for repayment within 15 years, at two percent interest after a grace period of five years. The balance US$19mn was from Airport and Aviation Services Ltd of Sri Lanka (AASL).
After project completion, the GoSL had to pay the contractor a further US$38.7mn on account of price escalations, cost variations and interest on delayed payments. The investment on MRIA i s, t h e r e f o r e, US$252mn.
The running of MRIA is now under AASL. The average operating cost, including loan interest, for a year is around US$20mn. The average revenue generation per year, however, is US$0.6mn, says the project committee report obtained by the Sunday Times.
The debt incurred by MRIA is being paid off by AASL out of its own funds, generated mainly through the operation of Bandaranaike International Airport (BIA). Repayment is done on installment basis of US$8.3mn each, twice a year.