Sources told CNBC-TV18 that the CAG held a meeting with senior officials of the Ministry of Civil Aviation and DIAL officials about a month back where it sought a special audit.

New Delhi: The Comptroller & Auditor General (CAG) has sought a special audit of Delhi airport operator DIAL, according to sources. These sources say the CAG has alleged diversion of revenues by DIAL since it formed joint venture companies for non-aeronautical functions with third parties with minority stakes. DIAL was formed in 2007 with GMR-led consortia holding majority 74 percent stake and AAI holding the remaining 26 percent. The concession agreement for the Delhi airport mandates that with 26 percent equity participation, AAI gets 46 percent share in airport revenues.

The CAG had made scathing observations on the same issue in its 2012-13 report too, where it had termed these JVs a "violation" of the terms of the airport concession agreement. The auditor had also alleged then that there was no way of knowing how much revenue from these subsidiaries was actually flowing to DIAL (and therefore coming to AAI as per the revenue share formula).

Once again, the CAG seems to have found something amiss with DIAL's 11 joint venture companies - these were formed for outsourcing various non-core operations at the airport like parking, food and beverages, cargo etc. The CAG perhaps believes that through these JVs, a part of the revenue which should have accrued to AAI is being diverted since the government does not audit these JVs and what they share as revenue with DIAL.

Sources told CNBC-TV18 that the CAG held a meeting with senior officials of the Ministry of Civil Aviation and DIAL officials about a month back where it sought a special audit. "The meeting happened about a month back. Then, the ministry issued minutes of the meeting but the CAG objected to some points in these minutes. These were then amended and the minutes of the meeting were issued again. But till date, the ministry has not written to the CAG on whether it agrees with its wish to audit the JVs formed by DIAL or not," said this source.

A DIAL spokesperson said that AAI has never objected to DIAL making any investment in JVs.

"OMDA (concession agreement) also allows DIAL to make investment in JVs of non-aeronautical businesses. These JVs are in accordance with the provisions of Companies Act, where after the approval from the board of directors, investments in JVs as a minority share-holder can be made," the spokesperson said.

He added that DIAL has not given any commitment to the CAG on divestment of its stake in any of these JVs and the "issue of divestment was never raised by the CAG".

Out of 11 JVs formed, DIAL has now divested its stake in two JVs but all others continue to be operational.

So is DIAL diverting revenues away from AAI? To answer this question, we must first understand that nowhere is the formation of JVs barred under the airport concession agreement. And it is well known that no airport operator performs all non-aeronautical functions by itself - these are usually outsourced to competent parties. So by merely forming JVs, DIAL is not violating the concession agreement.

An industry veteran pointed out that in initial years, when these JVs were formed, it is possible that AAI's revenue share was impacted because "instead of getting Rs 46 from every Rs 100 earned by these JVs, AAI would have been given Rs 46 from every Rs 100 shared by these companies with DIAL. But this shortfall should have been overlooked since the airport has done really well and overall revenues have been increasing. A third of AAI's total revenue last fiscal came from DIAL".

Also, someone has to manage services like parking at the airport - a company which is competent to do so - since DIAL cannot.

It is now for the Ministry of Civil Aviation to take a call on whether the CAG needs to conduct the special audit. Since the AAI, a party to this entire issue, does not seem to have objected to the formation of JVs by DIAL, it may really not be suffering any significant revenue loss on their account. Besides, the purpose of awarding this airport project to private developers was to build and operate a world class airport. In fact, the Delhi and Mumbai PPP models for airport modernisation and development were used as showpieces for future PPP projects. So perhaps the CAG would do well to let GMR-led consortia and AAI slug it out among themselves. Or wait for the ministry's decision on the matter.