MAHARASHTRA'S GRAND VISION FOR THE NAGPUR AIRPORT

UNCLAS SECTION 01 OF 03 MUMBAI 002090

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SUBJECT: MAHARASHTRA'S GRAND VISION FOR THE NAGPUR AIRPORT

REF: MUMBAI 1707

Summary
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1. (SBU) The Government of Maharashtra (GOM) has ambitious plans
to convert Nagpur into a major regional transportation hub.
During our recent trip to the city, located at the geographic
heart of India, the Maharashtra Airport Development Corporation
(MADC) explained its plans to build an integrated cargo facility
for air, rail and road freight at the existing airport. A 3,700
acre special economic zone (SEZ) is also planned at the site.
The MADC hopes the SEZ will blossom into a self-contained
international city complete with a "health city" targeting
foreign medical tourists. At the small Nagpur airport, which
currently services ten flights a day, the state plans to build a
second runway suitable for large jets. It also plans to
construct a gigantic passenger terminal capable of servicing 14
million passengers yearly. The MADC says Nagpur could capture
much of the transcontinental air traffic between Europe, Africa
and Asia that now that crosses over India without landing. When
questioned, however, MADC officials admit that the glittery
plans for the passenger terminal will take a back seat to the
SEZ and cargo hub, both of which appear to be more viable in the
coming years. Boeing will locate its planned maintenance,
repair and overhaul facility at the Nagpur airport, but was
careful to avoid integration into either the SEZ or the cargo
hub. End summary.

Ambitious Plans for Nagpur's Small Airport
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2. (U) The Government of Maharashtra (GOM) has embarked on an
ambitious plan to convert Nagpur, a city of 2.2 million located
in the geographical center of India, into a major transportation
hub. The center of the vast project will be the Nagpur airport.
At present, the Nagpur airport has one runway and serves around
ten flights a day. Important national highways and key rail
lines already meet near the city, we heard from the Maharashtra
Airport Development Corporation (MADC) representatives who head
the project. The MADC feels that the city's strategic position
and the existing flows of truck and rail traffic will allow it
to blossom into a significant integrated cargo hub. The
airport's existing runway will be extended and a new, parallel
runway constructed. A new, integrated road and rail terminus
will allow reloading of cargo between trucks, railway freight
cars and cargo planes.

Plans for SEZ
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3. (SBU) A special economic zone (SEZ) will be built adjacent to
the airport. Nearly 3,700 acres are allocated for the SEZ.
During a visit to the site, Congenoffs saw vast areas of flat
grazing lands that were surprisingly empty and undeveloped
despite being in close proximity to the city. Of all the
projects that are envisaged at the Nagpur site, the planning for
the SEZ appeared to be the most advanced. MADC has targeted IT
companies and manufacturers for the SEZ. Infosys, Tata
Consultancy Services, Satyam, Dell, Larson and Toubro and
clothing manufacturer Raymond have already announced their
intentions to establish facilities within the SEZ.


4. (U) The Maharashtra state government also hopes to create a
"health city" in the SEZ. It envisages that Indian and foreign
health care providers will establish state-of-the-art clinics to
attract foreign medical tourists. R.C. Sinha, vice-chairman and
managing director of MADC, claimed that the cost of treatment in
India was roughly one-tenth that of countries like the U.S. and
believed that this huge cost differential and the modern,
sophisticated medical facilities available in the health city
would draw in foreign medical tourists. Sinha said he envisaged
creating a customs and immigration "envelope" of SEZ and
international airport to allow medical tourists to come for
treatment without obtaining a visa.


5. (U) Sinha told us that the MADC hopes to create a complete,
self-contained city within the SEZ. A stand-alone power plant
will provide uninterrupted electricity to the SEZ (Nagpur, like
much of India, faces power shortages.) New housing communities
will offer homes that cater to the expectations of both Indian
and expatriate corporate managers. International schools, a

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golf course/country club and shopping centers will create an
environment that will attract top level corporate leaders to
Nagpur, Sinha believed.


6. (U) The cost of the entire project, including the expansion
of the existing airport, development of the integrated cargo
terminal, and land acquisition and infrastructure support
development for the SEZ and adjoining facilities is estimated at
$685 million. Banks have already loaned around $65 million to
the MADC for the initial phase of the project. The GOM has
provided around $17 million and 200 hectares of land free of
cost. About 90 percent of the project work should be completed
by May 2009.


7. (SBU) Only about 600 families in several scattered villages
needed to be relocated, MADC representatives told us. Like
elsewhere in India, however, the fate of farmers losing their
land to SEZ development has hit a political nerve.
Chandrashekhar Bawankude, a BJP politician and member of the
Maharashtra Legislative Assembly, told us that he was fighting
the MADC to obtain greater compensation for the farmers being
resettled. He and the BJP were not against the project, he
emphasized, but wanted to ensure that the farmers received more
than what the MADC was currently offering.

Glittery Plans for International Air Terminal
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8. (SBU) The MADC also hopes to make the small domestic airport
into a major international hub. Sinha told us that over 250
transcontinental flights -- between Europe and Southeast
Asia/Australia and between southern Africa, the Gulf and
northeast Asia -- cross over Nagpur each day. A modern
international airport with amenities such as shopping malls,
restaurants and top tier hotels would entice many international
airlines to make a stop in Nagpur, Sinha believes, or even lure
them into establishing a major international hub at the airport.
A new terminal with docks for up to 50 aircraft and hangers for
another 50 is planned, according to MADC officials, which would
allow the airport to handle up to 14 million passengers a year.

Boeing Avoids SEZ, Cargo Hub
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9. (SBU) Boeing recently identified a site for its planned
maintenance, repair and overhaul (MRO) facility at the Nagpur
airport (ref a). Dinesh Keskar, the company's Seattle-based
senior VP for commercial aircraft sales, told us that the GOM
wanted to locate the MRO within the SEZ to the south of the
existing airport. Boeing refused, Keskar said, since it did not
want its facility to be integrated into the complicated planning
and construction activities of the SEZ. The GOM ultimately
relented and gave Boeing a site to the north of the airport.
Although physically detached from the rest of the SEZ, the GMO
will grant the MRO the status of a SEZ and view it as part of
the larger SEZ to the south of the airport. While initially
only servicing planes from Indian carriers, Boeing ultimately
plans to make its Nagpur operation into a service center for
planes throughout south and southeast Asia, Keskar said.

Comment
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10. (SBU) It remains to be seen how much of the MADC's vision
will actually become reality in the medium to long term. At the
very least, the SEZ will clearly go operational in the coming
years if the regulatory environment remains in place, since
demand by Indian and selected foreign firms is clearly visible.
The integrated cargo hub at the Nagpur airport should also
attract freight traffic on account of the air- and land-based
cargo transport that will grow in tandem with the modernization
of the Indian economy in the coming years. The vision for an
international passenger airport may remain a pipe dream,
however. The MADC could not give us a plausible reason why
foreign airlines or their passengers that are already flying
over Indian territory non-stop would want to stop in the
heartland of the country. The role of the airport in the
domestic aviation market is bound to grow, but nowhere along the
lines of the capacity foreseen in the state government's plans.
In candid discussions MADC officials have admitted to us that
the plans for the dramatic expansion of the passenger airport

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will take a back seat to all other plans for the hub. The
MADC's glossy image campaign for the international air terminal
may in fact be primarily a marketing tool to secure continued
political support and funding for the SEZ and the cargo hub.
End comment.
OWEN