Privatisation of Civil Airports

After independence in 1947, due to the limited financial capabilities of the private sector, the government was compelled to place much greater reliance on the public sector for development in all major segments of industry that required heavy investments especially infrastructure development. So was it with the Indian civil aviation industry in which all Greenfield airports were developed by the state-owned Airports Authority of India (AAI). However, with all-round growth of the private sector over the years accompanied by higher levels of prosperity attained, it is only natural that the government would like to relinquish the responsibility of not only creating new airport infrastructure; but handing over ownership and management of existing civil airports to companies in the private sector. The Indian civil aviation industry is one segment of business that has registered an impressive growth since its liberalisation.

In 2004, in a move towards partial privatisation of airports, the UPA government had formulated a rule for the management of selected airports through partnership between the AAI and private sector companies. This rule was known as Operations, Maintenance and Development Agreement (OMDA). The two airports that came under the purview of this new rule initially were those at New Delhi and Mumbai. Later, Hyderabad and Bengaluru airports were also included. However, Indian carriers as well as passenger bodies were severely critical of the move by the government towards privatisation of state-owned airports. The main complaint was that the rules formulated for airport privatisation had resulted in high airport charges at Delhi, Mumbai, Hyderabad and Bengaluru.

In December 2014, in a review of the state of infrastructure, the NITI Aayog had stated that the few airports in the country that had been privatised, when compared with those operated by the AAI, had recorded higher levels of performance with regard to customer satisfaction. However, experience of the government so far in its attempts at privatisation of behemoths in the public sector has not been very encouraging. The most recent case is that of the attempt by the government at disinvestment in Air India which does not seem to be succeeding at all.

During the last tenure of the UPA government, bids were invited for the privatisation of the airports at Chennai, Kolkata, Ahmedabad, Guwahati, Jaipur and Lucknow. While a number of private companies had responded to the tender, the privatisation process itself had to be deferred on account of a standoff between the Ministry of Civil Aviation and the Planning Commission over the terms and conditions of awarding the project. While the concept of privatisation would certainly be appealing to the travelling public, it does ruffle feathers of the employee unions at these state-run airports. In February 2015, members of the Airports Authority Employees Union (AAEU) resorted to an agitation as also called for an all-India strike in the following month. The contention of the AAEU was that as the government had spent enormous sums drawn from public funds for the modernisation and upgrade of these airports, it would not be financially appropriate to relinquish control of these airports to the private sector. But the real reason is that the employees who are used to the easy-going lifestyle while working in a public sector company including state run airports, would not like to change over to a private employer where life would be less comfortable and highly demanding on account of stringent control. The Centre of Indian Trade Unions (CITU) had also come out in support of the AAEU opposing the move by the government to privatise airports.

So far, all attempts by the government to privatise only maintenance of airport terminals has not elicited enthusiastic response from the likely investors. The NDA government is now moving forward on a plan for total privatisation of selected airports. Such a plan was initiated by the UPA government, but had been abandoned not only by them, but by the NDA government as well during the initial years after coming to power in 2014. In a fresh move announced recently, the NDA government appears determined to privatise at least eight airports under the AAI located at Chennai, Kolkata, Kochi, Pune, Ahmedabad, Jaipur, Lucknow and Guwahati. It appears that there is finally some hope for this long-awaited and urgently required reform in the Indian civil aviation industry to become a reality.