INDIA. The duty free tenders for ten airports issued by the Airports Authority of India will close on Wednesday.
Shop concessions at Kolkata, Chennai, Trivandrum, Goa, Ahmedabad, Bangalore, Hyderabad, Calicut, Amritsar and Gaya are on offer.
Interested parties can bid for any or all of the airport retail opportunities. Flemingo International operates stores at Chennai, Trivandrum, Goa, Ahmedabad, Bangalore, Hyderabad, Calicut and Amritsar. Kolkata and Gaya are operated by India Tourism Development Corp.
It can take a private operator up to half a year to get the Foreign Investments Promotion Board’s approval and an additional three months to get the customs licence |
Only retailers with a minimum of five years’ experience of duty free stores are eligible to bid. Bidders must also have a minimum annual duty free retail turnover of not less than US$16,666,667.
The duration of each contract is five years, except for Bangalore and Hyderabad airports. For these two locations the tenure will end on 31 March 2008 as they have been privatised, with new airports being built.
The successful bidder(s) will be required to take over the possession of the space and commence operation of the facilities within 90 days from the date of award by the Airports Authority of India. The concession will commence from the date of handover or on expiry of 90 days, whichever is earlier.
While any opportunity to enter the Indian duty free market is certain to attract interest from many of the world’s leading retailers, the situation is riddled with complexities. For instance, if a successful bidder fails to start operations within 90 days from the award, the deposit will be forfeited, and the bidder barred from taking part in other bids for the next three years.
However, as one industry player pointed out, it can take a private operator up to half a year to get approval from the Foreign Investments Promotion Board (FIPB) and an additional three months to get the Customs licence. Both are mandatory. Guarantees are also likely to be high, especially as the Airports Authority of India requires successful bidders to pay a service tax on their gross turnover. This tax is currently set at 12.2%, but could rise to 20% in coming months.
But another executive preparing to finalise his company’s bid dismissed such criticisms. “Yes, it could take time to get approval from the FIPB, but once the results of the bids are open it’s easy to know whether you have won or not. There is sufficient time to work out the necessary approvals. These are things that happen everywhere, so why is it becoming such an issue in India? In places such as Singapore, too, there is sometimes very little time given to start operations after an award, and the meter starts running whether operations begin or not – yet people bid and do not complain.”
On the question of the service tax he commented: “There is a tax, which could go up, even though this is not certain yet. I suppose people will factor these into their calculations and decide what is the right amount to bid, and whether it is worthwhile at all. The Indian business sometimes is too much hype and too little dollars.”
SNAPSHOT PROFILE OF EACH AIRPORT
Kolkata (additional store)
Total space: 65q m in Arrivals
Space licence fee applicable during first year of the licence (per sq m per month):US$57.00
Minimum guaranteed royalty applicable during the first year of the licence (per sq m per month): US$6,375.00
Total international passenger movement during 2004-2005 (including embarked/disembarked and transit) 637,355
Chennai
Total space: 36sq m in Arrivals and 98sq m in Departures
Space licence fee applicable during first year of the licence (per sq m per month):US$57.00
Minimum guaranteed royalty applicable during the first year of the licence (per sq m per month): US$6,375.00
Total international passenger movement during 2004/05 (including embarked/disembarked and transit): 2,400,670
Potential challenges: Expected to come up for privatisation. As a result, the duration of operations could be disrupted. Flemingo India is battling the State of Tamil Nadu’s demands for sales taxes on duty free sales here.
Trivandrum
Total space: 18.9sq m in Arrivals and 23.5sq m in Departures
Space licence fee applicable during first year of the licence (per sq m per month):US$57.00
Minimum guaranteed royalty applicable during the first year of the licence (per sq m per month): US$6,375.00
Total international passenger movement during 2004/05 (including embarked/disembarked and transit): 872,516
Potential challenges: Flemingo India is battling the State of Kerala’s demands for sales taxes on duty free sales here.
Goa
Total space: 43.5sq m in Arrivals and 28.2sq m in Departures
Space licence fee applicable during first year of the licence (per sq m per month): US$33.00
Minimum guaranteed royalty applicable during the first year of the licence (per sq m per month): US$2,601.00
Total international passenger movement during 2004/05 (including embarked/disembarked and transit): 359,866
Potential challenges: Very much a seasonal business only – the tourist season lasts for only about five months in a year, between November and March
Ahmedabad
Total space: 12.9sq m in Arrivals and 48.8sq m in Departures
Space licence fee applicable during first year of the licence (per sq m per month): US$33.00
Minimum guaranteed royalty applicable during the first year of the licence (per sq m per month): US$2,086.00
Total international passenger movement during 2004/05 (including embarked/disembarked and transit): 373,199
Potential challenges: Gujrat is a dry state, thus liquor cannot be sold at the arrivals store
Bangalore:
Total space: 44.4sq m in Arrivals and 35sq m in Departures
Space licence fee applicable during first year of the licence (per sq m per month): US$33.00
Minimum guaranteed royalty applicable during the first year of the licence (per sq m per month): US$2,229.00
Total international passenger movement during 2004/05 (including embarked/disembarked and transit): 678,206
Potential challenges: Has been privatised, thus the contract tenure will last only to 31 March 2008. Any decent return on investment is therefore difficult.
Hyderabad
Total space: 24.6sq m in Arrivals and 44.3sq m in Departures
Space licence fee applicable during first year of the licence (per sq m per month): US$33.00
Minimum guaranteed royalty applicable during the first year of the licence (per sq m per month): US$2,457.00
Total international passenger movement during 2004-2005 (including embarked/disembarked and transit) 749,072
Potential challenges: As with Bangalore, Hyderabad has been privatised. Again the contract will only run until 31 March 2008 with the same constraints on return on investment.
Calicut
Total space: 114.8sq m in Arrivals and 74.2sq m in Departures
Space licence fee applicable during first year of the licence (per sq m per month): US$33.00
Minimum guaranteed royalty applicable during the first year of the licence (per sq m per month): US$2,601.00
Total international passenger movement during 2004/05 (including embarked/disembarked and transit): 639,920
Potential challenges: Flemingo India is battling the State of Kerala’s demands for sales taxes on duty free sales here
Gaya
Total space: 50sq m in Arrivals and 50sq m in Departures
Space licence fee applicable during first year of the licence (per sq m per month): US$33.00
Minimum guaranteed royalty applicable during the first year of the licence (per sq m per month): US$1,787.00
Total international passenger movement during 2004/05 (including embarked/disembarked and transit): 26,174
Potential challenges: Lack of passengers – currently only one flight a week
Amritsar
Total space: 18.5sq m in arrivals and 18sq m in departures
Space licence fee applicable during first year of the licence (per sq m per month): US$33.00
Minimum guaranteed royalty applicable during the first year of the licence (per sq m per month): US$1,787.00
Total international passenger movement during 2004-2005 (including embarked/disembarked and transit) 316,613
MORE STORIES ON INDIAN DUTY FREE
Mumbai devises enhanced airport retail strategy – 15/07/06
Airport Authority of India amends retail tenders; requires operators to pay service tax – 13/07/06
Airports Authority of India extends tender deadlines for ten airport duty free contracts – 29/06/06
Nuance creates landmark airport joint venture in India – 09/06/06
