Duty free shopping at BIA in danger of becoming monopoly?

Untitled-5
  • Only two bids for second shop space, both offering same concession fee
  • Dufry duty free bids for second time
  • Second bid’s DFS India owned by Flemingo Duty Free International, holding company of Flemingo Duty Free Sri Lanka
logoBy Chathuri Dissanayake-Tuesday, 9 May 2017

Duty free shopping at the Bandaranaike International Airport (BIA) is in danger of becoming a monopoly, industry analysts warned.

Following the retendering process for bids to operate the second space allocated for a Core Category Duty Free Shop at BIA despite protests by interested parties, operators now claim that the decisions taken may create a monopoly in the market as one of the bidders, DFS India, is a fully-owned company under Flemingo Duty Free International, which won the first tender to operate space 1 at both the departure restricted area and arrival restricted area.

According to reliable sources there were only two bidders in the second round of bidding for shop space 2, in both the departure restricted area and arrival restricted area with 3,060 sq. ft and 2,665 sq. ft respectively.

Although the first tender announcement listed two spaces in the departure restricted area concession, the bidder, offering to pay the second-highest concession fee following technical evaluation, was awarded the tender as per tender conditions. During the retender, Dufry AG a Swiss-based company which operated World Duty Free in BIA and DFS India Ltd. with B&S Holdings bid for the second shop space.

Both bidders offered a concession fee of 43%, following a clause put in the second tender stating that the fee has to be more than 40%. The tender team is now required to make a selection based on the technical evaluation of the bids presented.

However, interested parties are claiming the situation may lead to a monopoly by Flemingo Duty Free as the holding company of Flemingo Duty Free Sri Lanka also owns DFS India Ltd. A rating conducted by ICRA Ltd, Moody’s investor company, states that “on February 27, 2017, the Flemingo Group bought out 51% stake of DFS Venture Singapore Pte. Ltd.

Hence, effective February 27, 2017, DFSI is fully owned by Flemingo Group.”

Further, Flemingo Duty Free Director Athul Ahuja is also a Director of DFS India Ltd.

“The situation may lead to a complete monopoly if DFS’ joint bid is awarded the contract,” said one operator who wished to remain anonymous.

During the first tender process, DFS submitted a “protest bid”, although no clarification was offered on the grounds for protest. This has led industry players to believe that certain players are vying to fix the tender process to benefit one bidder.

The first tender process awarded the much larger shop space at both the arrival and departure lounge to Flemingo at a concession fee of 40%. The ministry then decided to retender a second smaller shop space, slapping a clause for the minimum concession fee at 40% despite operators crying foul over the decision.

World Duty Free (WDF), which employs about 300 individuals and has maintained a presence in the country for the last 21 years, was asked to clear the space for Flemingo Duty Free. However, WDF later filed legal action against the decision.

When contacted, the DFS Group told Daily FT that the company no longer holds any stake in DFS India.

“DFS India, to our knowledge, is fully controlled by Flemingo, as DFS Group exited our previous JV partnership and is now simply a supplier to Flemingo,” a statement sent by the DFS Group said.

Flemingo Duty Free Sri Lanka CEO P.K. Thimaya refused to comment on the matter.

If DFS India Ltd. is owned by Flemingo Duty Free, the bid submitted by the latter has violated the tender condition which allows only one bid proposal to be submitted per bidder.

Transportation and Civil Aviation Ministry Secretary Nihal Somaweera told Daily FT that the Technical Evaluation Committee is evaluating the two bid proposals and will submit a report.

“The Technical Evaluation Committee is now handling it. The Tender Board is to meet on the 16th. They may be able to give the report by then. Till then we are unable to say anything. We will look into all tender conditions and financial stability and other qualifications before awarding it,” Somaweera said.

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