Govt seeks pie in airport revenue

Companies that win the bids for privatising and modernising the Delhi and Mumbai airports may have to share a part of their non-aeronautical revenues with the government.

Also being mulled over is an increase in the minimum revenue-share component airport operators are required to pay the government. At present, this component is pegged at five per cent.

This is to ensure that the revenue flow for the government from the airports venture will not be hit in a major way. Sources said the government was likely to allow bidding consortiums to change partners in the venture for bidding purpose.

"Some of the consortiums have shown interest in changing partners. We may allow them to do so and they will be given a deadline for that," said a government source.

At the same time, the minimum mandatory seven-year lock-in period for partners in a consortium may also be relaxed. Companies winning the bids for Delhi and Mumbai airports are not likely to be allowed to use more than 5 per cent of earmarked land for commercial real estate development.

This is expected to be a part of the revised transaction document for handing over the two airports to private companies.

This condition may dampen private sector hopes as it would have preferred a larger pie of land for commercial development, sources said. A larger share of land would have given them a chance to earn higher non-aeronautical revenues, the sources added.

In other countries, non-aeronautical revenue constitutes about 50 to 60 per cent of the total revenue of an airport and operators are not bound by such stringent norms.

In India, the non-aeronautical revenue is about 20 per cent and companies fear this will come down with the proposed condition.

According to officials, this condition will ensure that airport operators do not just reduce the modernisation project to a real estate venture.

Of the remaining 95 per cent of land, 80 per cent will be reserved for developing runways and other aircraft service facilities.

The remaining will have to be reserved for building passenger facilities and terminal buildings. The government last week had decided to redraft transaction documents as several of its sections had raised objections to bid conditions.

It had also postponed the last date for submitting the bids, delaying the overall privatisation process.