Privatisation of Civil Airports in India

Issue: 6 / 2018

On November 08, 2018, the Government of India accorded sanction to privatise six airports. The ones chosen for operation, management and development through a public-private partnership (PPP) model are Lucknow, Ahmedabad, Jaipur, Mangaluru, Thiruvananthapuram, and Guwahati. This comes 12 years after Delhi and Mumbai airports were privatised in 2006. The decision was taken at a meeting of the Union Cabinet. “After the modernisation of airports in Delhi and Mumbai through the PPP model, we saw a great improvement in the quality of the airports. Tourist flows also increased. So we have decided to develop six more airports under this model,” said Minister of Law and Justice Ravi Shankar Prasad. A group of Secretaries from the Ministry of Civil Aviation and Departments of Economic Affairs and Expenditure, headed by NITI Aayog Chief Executive Officer (CEO) Amitabh Kant, will decide the contours of the sale. Sources in the government said the airports would be leased out for 30 years and the chosen private player will be given a controlling stake. “The Airports Authority of India (AAI) will hold a minor stake, just like it does at the Delhi and Mumbai airports. The private player will hold at least 75 per cent stake,” said an official aware of the development. The bidding will be held in a revenuesharing model, where bidders are required to pay a specified share of gross revenue to the AAI. This is known as the concession fee. The bidder who quotes the highest fee wins it. The same model followed was during the privatisation of Delhi and Mumbai airports. Under the agreement, Delhi airport operator GMR has to share 45.99 per cent of its revenue with the AAI every year. GVK, which operates the Mumbai airport, shares 38.7 per cent of the revenue.