PPP model for Tier-II airports 55,687
In what seems the beginning of second wave of building airport infrastructure under the PPP model, the government has set the ball rolling for partprivatise airports in smaller cities and towns.
Four major airports in Delhi, Mumbai, Bangalore and Hyderabad had been handed out to private developers by the UPA-I government led by Manmohan Singh.
The Budget has also focused on airport upgradation and creation of resources for it through permitting monetisation of land assets of the state-run Airports Authority of India (AAI). The AAI has a massive 55,687 acres across the country.
Monetisation of land assets is understood to mean commercial exploitation through lease of land but it is unclear whether this could include any sale of excess land which the AAI does not require.
With exponential growth seen in domestic air traffic requiring additional airport infrastructure, the government has decided to offer more airports to private parties for operation and management (O&M).
This will be done on the lines of Ahmedabad and Jaipur airports for which AAI recently invited bids for O&M contracts.
“Select airports in Tier-II cities will be taken up for operation and maintenance in the PPP mode. The AAI Act will be amended to enable effective monetisation of land assets. The resources, so raised, will be utilised for airport upgradation,” finance minister Arun Jaitley said in on Wednesday.
Aviation experts welcomed the move but cited lukewarm response from investors to such projects due to low revenue potential at these airports.
“While private sector has been involved in airport infrastructure development under the PPP model, however, their interest has been restricted to major airports. This is on account of low revenue generation potential of other airports,” said Harsh Jagnani, sector head and VP (corporate ratings) at ICRA.
Aviation consultancy Centre for Asia Pacific Aviation has estimated that the total passenger throughput would grow from 190 million in FY15 to 556 million in FY25. This three-times increase in traffic is set to put pressure on existing airports.
Given the air traffic projections, the national civil aviation policy (NCAP2016) pegs it at 300 million by 2022, India needs to scale up its airport infrastructure.
As many as 300 airports needs to be revived and upgraded in coming years to support the double-digit growth in the sector. This would require huge private investment as public funds are limited for infrastructure development.
While government has announced several airports, the progress has been dismal.
“It (monetising AAI land to raise funds) does not mean anything. Last year, the government said more greenfield airports would be taken up for development but other than Goa no other major project has taken off. Bids for Navi Mumbai airport have been extended many times either due to developers backing out,” Mark Martin, the founder and CEO of aviation advisory Martin Consulting said.