Privatisation of Civil Airports in India

In the first week of November this year, the Government of India accorded approval for the privatisation of six airports in the country namely Lucknow, Ahmedabad, Jaipur, Mangaluru, Thiruvananthapuram and Guwahati. Further development of these airports as well as their management and operation will be carried out through a well established public-private partnership (PPP) model in which the Airport Authority of India (AAI) will be holding a minor stake with the major share holding by the private company selected through a process of tendering. The last time such a step was taken by the Government was in 2006 when the decision to privatise the two major airports in the country, namely those at Delhi and Mumbai were taken.

With the aim of introducing better professional management of civil airports in the country, the government was in favour of introducing the public-private partnership model. The airports at Delhi, Mumbai, Hyderabad and Bengaluru that operate on the PPP model, have consistently been ranked high.

Although the first flight in the domain of civil aviation in India was undertaken as an airmail service eight years after the Wright Brothers took to the air in 1903, the first private airport in India came up only in 1998 in Kochi in Kerala. The AAI was constituted on April 1, 1995 by merging the International Airports Authority of India and the National Airports Authority with a view to accelerate the integrated development, expansion and modernisation of the operational, terminal and cargo facilities at the airports in the country. The aim was to ensure that the airports in the country and the facilities these offer, conform to international standards. Today, the AAI is a major airport operator with control over 126 airports across the country. With the implementation of the regional connectivity scheme in the recent past, the number of airports in the country especially in the hitherto unconnected towns and cities as well as in remote areas especially in the North East region, is expected to go up significantly. The total number of civil airports in the country is thus expected to more than double in the years to come.

During the tenure of the UPA Government prior to 2014, a tender was floated to privatise the five of the airports listed above as also those at Chennai and Kolkata. Although as many as 11 companies submitted their bids in response to the tender, the process of privatisation encountered insurmountable impediments on account of a standoff between the Ministry of Civil Aviation and the Planning Commission over the terms and conditions of awarding the contract. The efforts of the UPA Government to privatise civil airports in the country thus ran aground and was therefore abandoned.

The complexities of the tendering process and innumerable bureaucratic impediments are not the only problems that have been militating against the efforts of the Government at privatisation of civil airports in the country. Any move by the Government in this direction invariably ruffles feathers of the employee unions at these state-run airports. In January 2015, when the Minister of Civil Aviation, P. Ashok Gajapathi Raju stated that the Government was moving forward with a plan to privatise four major civil airports located at Chennai, Kolkata, Ahmedabad and Jaipur, there was immediate reaction from the airport employees. On February 15, 2015, members of the Airports Authority Employees Union (AAEU) staged a protest against the move by the Government to privatise the four major civil airports and even called for a nationwide strike on March 11 that year.

Not only the AAEU, but most of the Indian carriers had expressed apprehensions that privatisation of the civil airports in the country would lead to significant increase in their cost of operations on account of higher tariffs that the private companies operating the airport would charge and aggravate their financial difficulties. Surprisingly, support for the opposition to the move to privatise civil airports came from the International Air Transport Association (IATA) that represents over 250 airline operators across the world. IATA advised the Government not to regard privatisation as a “panacea” for all the infirmities that are afflicting the civil airports in the country. Financially too, the Government would not stand to gain.

However, despite the opposition from several quarters and the numerous impediments, with the latest announcement, it appears that the scheme for privatisation of civil airports in the country is finally moving forward.