Govt plans to privatise 6 more airports, invest revenue in remote areas

Govt may tweak rule to cap number of airports an investor can bid for

The Centre has decided to privatise six more airports – Bhubaneswar, Indore, Trichy, Amritsar, Raipur, and Varanasi – as early as January next year. A draft cabinet note proposing to put up the airports for sale has been circulated and the Cabinet is likely to approve it by the first week of December.

“The board of Airports Authority of India (AAI) has approved the proposal and sent it to the finance ministry. A draft cabinet note has been prepared, which will be put up for approval after the go-ahead from law ministry,” said an official aware of the development.

The government may, however, tweak a rule to cap the number of airports an investor can bid for. A finance ministry recommendation not to award the same player more than two airports, out of six to be privatised by the Centre, was among key suggestions brushed aside by the government panel for public-private partnerships — the PPP Appraisal Committee (PPPAC) — effectively leading to Adani Enterprises emerging the winning bidder for all airports.

“The group of ministers will take a call on this but there are deliberations that awarding so many airports to a single entity may slow down the process of the airports’ development, which is the purpose of privatising them,” the official said.

A group of secretaries from the Ministry of Civil Aviation and departments of economic affairs and expenditure, headed by NITI Aayog Chief Executive Officer Amitabh Kant, will decide the contours of the sale. 

 

This is the first wave of airport privatisation in India in 12 years. When Delhi and Mumbai airports were privatised in 2006, airport operation experience, either standalone or in a consortium, was a mandatory condition for bidders. In the new round, airports would be bid for a period of 50 years with freedom on land usage of airports for non-aeronautical purposes. 

The process is being initiated even though awarding airports to Adani group from the previous round is yet to be completed. 

In February, after a bidding process, six airports — Ahmedabad, Lucknow, Jaipur, Guwahati, Thiruvananthapuram, and Mangalore — were awarded to the company. Legal cases have, however, delayed the process of transfer of the airports. The Union Cabinet in June approved leasing out three airport projects to the company.

The airports will be bid out according to the revenue-per-passenger model, which is different from the model that was followed for privatisation of Delhi and Mumbai airports. 

Under this model, airport developers compete to win contracts based on the amount of revenue per passenger to be shared with the authority that gives the contract, instead of the current norm of developers sharing a part of the profit from the venture.

The government has envisaged that airports are better managed by private entities and the process helps in generating big revenue for AAI. The revenue can be used to develop airports in remote areas. 

In FY19, more than 25 per cent of AAI’s revenue was generated from private operators at Delhi and Mumbai airports. In the previous round, too, Adani group bid aggressively in terms of revenue share to AAI. According to an estimate, AAI will earn more than Rs 3,000 crore as upfront payment from Adani group.