Turbulence ahead

Given the traffic jams at India's major airports, and with the situation certain to get worse in Delhi once the winter fog rolls in, it can be no one's case that the airport privatisation (and investment in fresh capacity) being planned is a day too soon. Even so, there are reports coming in with regard to the process of privatisation that create some discomfort. To begin with, the projects in both Delhi and Mumbai had a large real estate component, which got removed following objections from the Planning Commission and lengthy confabulations that included the Attorney General. After this, some bidding consortia, which included companies that run prestigious international airports, walked out. Now, it appears, there are only two bidders that meet the technical specifications. Two bidders for two airports means each will get one airport, or one will get both. While there will be a regulator whose job will be to get cost details from each player and fix reasonable tariffs, the history of such regulation has shown that it is susceptible to capture when there is no competitive pressure. In any case, it is difficult for even the best regulators to isolate padding in costs. The privatisation of power in Delhi is an example to keep in mind. In that case, too, there were two bidders for each circle, a regulator to ensure that consumers got the best deal, and what happened is there for all to see""with the loss level reductions agreed to being quite low, tariffs have gone up.

If that provides a lesson, it is about the importance of providing competitive pressure from the beginning so that natural monopolies do not develop with all the attendant dangers. This means planning for a second airport in each metropolis. In any case, it is painfully obvious that the airport in Mumbai cannot meet the city's traffic needs for long since it has only one regular runway and there is no consensus on whether the new protocols being planned for the smaller criss-crossing runway in Mumbai will do the trick as far as increasing the airport's traffic handling is concerned.

There is a demand from some bidders who didn't make the cut as far as the technical evaluation is concerned that the qualification criteria be lowered. While there is some traction for this proposal since it has the advantage of increasing the number of bidders in the fray, any change in specifications or cut-off points is certain to be arbitrary and should therefore be avoided. Needless to say, the system of assessment that has been used, and which has allowed two bidders to make the cut, are not publicly available. If the process were more transparent and those knocked out are unsatisfied with the marks given to them on any count, they will at least be in a position to say so. Alternatively, it may be a good idea to go along with the Planning Commission's suggestion that since one round of technical evaluations was done over a year ago, all those who cleared that round and went on to make financial bids should be considered for the final round (and not just those who cleared the second, more recent technical evaluation as well). Provided the first technical evaluation was competently done (again, no one has the details), this will increase the scope for competitive financial bids. Either way, however, new airports for both metros are now a necessity.