Govt okays 49% FDI in airports

Kicks off privatisation and modernisation process of Delhi & Mumbai airports.

The government on Monday allowed 74 per cent private equity with a 49 per cent ceiling on foreign direct investment (FDI) in the Delhi and Mumbai airports. This sets in motion the process of privatisation and modernisation of the country's two largest airports.

In a departure from earlier policy, the empowered group of ministers headed by Defence Minister Pranab Mukherjee has also allowed Indian scheduled carriers and their group entities to hold up to 10 per cent equity in the two airports. Private domestic carriers like Jet Airways and Air Sahara have been pushing for this.

"We are interested in participating in these two airport ventures. We are studying the policy and will take an appropriate decision soon," said a Jet Airways executive. Aviation industry sources also said the government's decision to allow domestic airlines to be part of the venture would help generate greater interest in the ventures.

The remaining 26 per cent will be held by the Airports Authority of India (AAI) and other public sector undertakings, including Indian Airlines and Air-India. The government, however, has stuck to the July 20, 2004, deadline for submitting expressions of interest.

The 25 per cent Indian private holding in the venture will have to be held by a 100 per cent Indian owned company. However, Indian financial institutions will be allowed to be part of the consortium of the successful bidders after the bid process is completed.

To prevent a monopoly, the government has decided not to allow one company to operate both airports. There is, however, no bar on bidding for both.

The ministerial group also approved the civil aviation ministry's proposal to appoint Air Plan of Australia as the global technical adviser and Amarchand Mangaldas and Suresh A Shroff & Company as the legal consultants for the restructuring of the two airports.

However, even after privatisation, some of the major revenue-earning functions like air traffic control, will not be handled by the private and foreign partners in the venture, helping the AAI to retain its major sources of revenue from these airports.

The other members of the ministerial group are Finance Minister P Chidambaram, Law Minister H R Bhardwaj, and Civil Aviation Minister Praful Patel.

On the tricky question of job security of AAI employees, who have been agitating over the issue, the meeting decided to increase the period of mandatory deputation to the joint venture companies from two to three years.

At least 40 per cent of the AAI's employees in the two airports will be absorbed in the new joint venture companies for three years on deputation while the remaining employees will stay on government rolls.

The bidders will be asked to submit a human resource plan for absorption of the maximum number of AAI employees in these two airports in the joint venture companies. The human resource plans will be given suitable weight in the evaluation at the request for proposal stage.