India set to lose $29b in airport land scam

India's government was hit by a fresh scandal after an official audit accused it of forgoing $29 billion in potential revenues by awarding a long-term airport land lease to a private company at a bargain rate. A report by India's Comptroller and Auditor-General (CAG) said that Delhi International Airport, which runs the capital's main terminal, could earn up to Rs1.636 trillion ($29 billion, Dh109 billion) over 60 years from using government land leased at an annual ground rent of just Rs100, on top of a one-time payment of $324 million. The scandal is only the latest in a series that has tarnished the Congress-led coalition government, paralysed decision-making in parliament and thrown a shadow over India's vibrant democracy. The new accusations, which have been confirmed by senior officials at the CAG in New Delhi, suggest India is developing a Russian-style form of crony capitalism dominated by powerful businesspeople with political connections. The airport company, DIAL, said it could not comment on the story. However, a person close to the group told the Financial Times that "[DIAL does] not fall under the purview of CAG." News of the airport scandal emerged as Indian state-owned oil companies said they were raising petrol prices by as much as Rs7.5 per litre in an effort to curtail the country's ballooning trade deficit. The steep price hike comes at a time when India's economy is suffering a severe slowdown due to the European debt crisis, which has not only hammered industrial output and exports, but also the rupee, which has fallen to an all-time low of 56 against the dollar last week. Indian Oil Corp said that due to the weak rupee — which has fallen more than 10 per cent against the dollar in the past month — the price of crude had risen to an unsustainable level. Despite the government decision to deregulate oil prices in 2010, Indian oil companies continue to sell petrol at a loss. Petrol hikes are politically sensitive in a country where inflation remains above 7 per cent. "There has been a lot of talk about policy paralysis and the government not taking any steps to manage the fiscal burden," said Anubhuti Sahay, economist at Standard Chartered. "So after a lull, this move [to increase prices] will at least be seen as a welcome change." However, the price rise is facing strong protests from the opposition, as well as from within the coalition government itself. There are fears it could be rolled back, as recently happened when railway fares were increased. Mamata Banerjee, the chief minister of the eastern state of West Bengal, and a coalition member, whose protests forced the government to roll back the railway hike and foreign investment in India's lucrative retail sector, told a local news channel that she was concerned about the hike. "I don't think such a hike is good, it is painful for people," she told CNN-IBN. However, she added it was not in her interest to pull the plug on the coalition government.