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India’s Airport Privatization Plan

India’s Airport Privatization Plan

Relevance

  • GS 3 || Economy || Infrastructure || Transportation

Why in News?

  • has proposed a plan to privatize 6 Airports of India in order to improve the air travel scenarios and to invite investments.

 Six Airports Privatization

  • Six Airports
    • Ahmedabad,
    • Jaipur,
    • Lucknow,
    • Guwahati,
    • Thiruvananthapuram
    • Mangaluru
  • are currently run by the Airports Authority of India (AAI) are up for bidding for the privatization.
  • Last date for submission of bids is 14 February and the letter of award will be issued on 28 February.
  • Redevelopment of these airports may attract investments worth $1.4 billion, according to JagannarayanPadmanabhan, director and practice leader, transport and logistics, Crisil Infrastructure Advisory.
  • Each of the six airports roughly needs private investment of $200 million.
  • It will be in the range of $1.2-1.4 billion that will come into the airport sector
  • Interested Entities:
    • Flughafen Zurich AG – Switzerland
    • Changi – Singapore
    • AviAlliance – German
    • GIP – USA financial investors
    • AMP Capital – Sydney, Australia Based
  • Among Indian companies,
    • Anil Ambani’s Reliance Infrastructure,
    • National Investment and Infrastructure Fund
    • Adani group,
    • Indian airport operators GVK GMR,
  • are likely to participate in the bidding.

Present Status

  • At present, 5 airports, operate under the PPP model:
  1. Delhi,
  2. Mumbai,
  3. Bengaluru,
  4. Hyderabad,
  5. Kochi,
  • Which helped create world-class airports, but also helped AAI in enhancing its revenues and focusing on developing airports and air navigation infrastructure in the rest of the country

Proposals

  • In the first round of airport privatizationundertaken , a concession period of 50 years to the winning bidder, instead of 30 years.
  • Responsibilities: The concessionaire shall bear the responsibilities for operations and management of existing airport assets as well as for designing, engineering, financing, construction and development of the additional air-side, terminal, city-side and land-side infrastructure for the airport.
  • The winning bid will be decided on the basis of the highest monthly per-passenger fee to AAI, again a departure from the much-contested revenue-sharing model that AAI adopted in the existing privatized airports.

So far with Privatization in Airport Industry

  • India’s experience so far with airport privatization has been mostly positive.
  • Delhi, Mumbai, Bengaluru and Hyderabad are making a positive output in their private sector owners.
  • Even the six that are now up for privatization are all profitable and have been giving more than 10% compound annual growth rate over the last 4-5 years. Besides this, Jaipur and Ahmedabad are in need for capacity elevation.
  • Given the rapid airline passenger growth in India, capacity is being breached in multiple airports. So there is a definite business case for multiple airport developers and investors to take a positive view on the privatization proposal.
  • Privatization plan will depend on how much freedom operators get in managing airports, something that has often been a bone of contention.
  • Private investors are supposed to seek more clarity on whether the government will make land available for expansion, the exit process and how favourable it is to them, ease of operations and the freedom that private party is given in operations and the fitness and transparency of data on current health of the airports that is given to them.