Privatisation of Airports

The Indian civil aviation sector has been on an impressive growth trajectory over the last few years and is moving forward to become the third largest globally by 2025

Issue: 02-2019By B.K. PandeyPhoto(s): By AERA
Chennai Airport

Privatisation of airports in India was initiated in September 2003 under the rule of the then National Democratic Alliance government headed by Prime Minister Atal Bihari Vajpayee. The first airports that were taken up for privatisation were those at Delhi and Mumbai, the two largest in the country. As per a directive issued by the government, privatisation of airports was to be based on the public-private-partnership (PPP) model and in the Joint Venture (JV) set up for this purpose, the Airports Authority of India (AAI) would hold 26 per cent stake and the remaining 74 per cent stake would be held by the private company in the JV who would be selected through an open and transparent competitive bidding process. The two major metro airports at the political and financial capitals of the country were privatised only in 2006 after a long and complex privatisation process during which several international companies pulled out as the goalposts were shifted frequently. However, privatisation of Delhi and Mumbai airports has proved to be successful models as evident from the very high rate of growth in passenger traffic at these two airports. Subsequently, new Greenfield airports were developed in the private sector at Bengaluru and Hyderabad that over the years, have also registered impressive growth in passenger traffic. In fact, the second runway with a new terminal at Kempegowda International Airport at Bengaluru is currently under construction as the infrastructure currently available there at present is totally saturated.

The Indian civil aviation sector has been on an impressive growth trajectory over the last few years and is moving forward resolutely to become the third largest in the world by 2025. In order to cope with the rapid growth in passenger traffic and the need to provide enhanced connectivity under the Regional Connectivity Scheme, the government has initiated a massive project to upgrade existing airports as also build new airports. This would entail a total expenditure of about 2 trillion over the next ten years, the bulk of which as per the expectations of the government, will be contributed by the private sector. In an interview in the recent past, Jayant Sinha, the Minister of State for Civil Aviation stated “India should have 150 to 200 airports in the next 15 to 20 years”. With about 100 airports currently operational in the country, the government has put construction of airports on fast track with no fewer than 31 new airports expected to be completed in the next 12 months.

The government was keen to privatise 15 airports that are being operated by the AAI that were making profits. Unfortunately, for a variety of reasons, efforts by the government at privatisation of airports after those at Delhi, Mumbai, Bengaluru and Hyderabad, have not moved forward at all. The powerful business houses both national and international, who have the potential to invest in airports in India, have not come forward to invest as they perceive a lack of a clear vision on the part of the government regarding a master plan for development of airports in India. One of the major concerns of potential investors is that while the government expects heavy investments by the private sector, the AAI that holds minority stake, continues to exercise overwhelming control. At the end of the tenure of the United Progressive Alliance government, privatisation of airports in Chennai, Kolkata, Ahmedabad, Lucknow and Jaipur were under active consideration, but the proposal never came to fruition. In some cases, the employees unions also proved to be a major hurdle to efforts at privatisation of airports. Besides, the procedures are extremely complex and the whole exercise is highly bureaucratic with terms and conditions rather labile and are revised frequently.

In mid-June 2018, the government initiated a proposal to privatise airports such as Lucknow, Ahmedabad, Chennai, Jaipur, Kolkata, Guwahati and Pune. After a period of inactivity, this was indeed a step forward in the airport privatisation process. In the last week of February this year, in the midst of the confrontation with Pakistan following the air strike against Balakot, the AAI declared that the company owned by the business tycoon Gautam Adani had won the bids to upgrade and operate six airports located in Ahmedabad, Jaipur, Thiruvananthapuram, Lucknow, Mangalore and Guwahati. With a prosperous Indian business house stepping in, it appears that finally the airport privatisation process in India is set to take off!