Centre sweetens deal for pvt airport developers
For O&M projects, private players will not make any capital investment
To attract more private players in operating Indian airport projects, the government has made a policy change for private parties to participate in projects without making capital investment in them.
Instead, the government-owned airport operator, the Airports Authority of India (AAI), will make the investment and the private player will share revenue with the AAI.
The decision is understood to have been taken after a high-level meeting between the chairman of the AAI and the Prime Minister’s Office after private players were reluctant to participate in the bidding process for the operation and maintenance (O&M) of Ahmedabad and Jaipur airports.
Major airport operators said that the scope for revenue generation by just operating and maintaining airport terminals was too little.
The new model is likely to enforce more discipline among developers. Over the past decade, private airport operators have run up costs in excess of estimates, and then had tariffs increased to compensate them. For instance, the cost of modernising Delhi and Mumbai airports more than doubled to $3 billion each.
“The AAI has informed that the matter has been re-examined with special reference to project financials of these projects. It has stated that for these projects the successful bidder will not be required to make capital investment and all the capital investments will be made by the AAI,” according to a document reviewed by Business Standard.
When asked about this, AAI Chairman Guruprasad Mohapatra said the model would be followed in the case of airports that would be given to private players for operation and maintenance. “We will invite a global tender for O&M of a few more airports, and we will follow the same model there too,” he said.
Officials said following unsuccessful attempts to privatise major airports in the way it had been done in Delhi and Mumbai, the government had decided that private players would be allowed to operate and maintain airports in which the government had made a significant investment.
“Only greenfield airport projects will be given to private players in a concessionary model; for existing airports, the O&M model will be followed,” he said, adding that for major airports like Kolkata, Chennai, and Trivandrum, bids were likely to be called shortly.
In late 2014, the AAI completed a ~2,400-crore upgrade of Chennai and Kolkata airports. Citing the expensive upgrade, the National Democratic Alliance government in 2015 decided to scrap the privatisation of major airports.
The government is trying to attract foreign players to build airports, as it attempts to get up almost 200 airports in the next 10 to 15 years. “We need almost ~2-3 lakh crore to build new airports and most of the investment is going to come from private players,” Minister of State for Civil Aviation Jayant Sinha had said recently.